Auckland mayor 'toast' if credit rating falls

Len Brown. Photo / APN

Accidentally leaked email reveals Auckland Council at risk of downgrade as debt balloons under Brown's watch.

Len Brown's principal policy adviser James Bews-Hair says the Auckland Mayor will be "political toast" if the council's credit rating is lowered.

In an email accidentally sent to the Herald, Mr Bews-Hair said the mayor's office has been advised there is a risk the council's credit rating will be downgraded.

The email was circulated to senior mayoral staff on Sunday following Herald inquiries about council debt, which has soared from $3.9 billion to a projected $7.4 billion in the first four years of Mr Brown's mayoralty.

In a candid email to Mr Brown's chief of staff Phil Wilson, head of communications Dan Lambert and chief press secretary Glyn Jones - and copied to the Herald - Mr Bews-Hair outlined the mayoral position on maintaining the council's AA credit rating.

"We need to keep on using the KPI [key performance indicator] for debt that we set for ourselves in election policy - retaining our rating.

"If we do that right, that can become the basis on which we are judged.

"We are advised that there is a risk that we will be downgraded ... frankly, though, if we get downgraded in an improving economic environment then we are political toast anyway," said Mr Bews-Hair.

Yesterday, the mayor's office refused to give details about the advice it had received on the risk of a credit-rating downgrade.

Robin Clements, a senior economist with UBS Investment Bank, said credit ratings were a risk instrument for investors and a downgrade would raise the cost of borrowing money.

The timing of the email could not be worse for Mr Brown, who today will outline a new 10-year budget with low rate increases, a revised debt programme and tightening the screws on capital works, albeit with the addition of a funding package for the $2.86 billion city rail link.

Yesterday, he called on the Government to conduct a nationwide review of the way councils are funded, saying property rates were complex and unfair.

Labour's finance spokesman, David Parker, said the party had no plans to change the way councils were funded. Finance Minister Bill English did not respond on the issue.

Mayor Brown, who doubles as treasurer of the Super City, has borrowed $875 million on average in his first four budgets. This is nearly three times the average annual borrowings of $355 million by the former eight councils between 1989 and 2010. Debt repayment in the current financial year is $367 million.

Mr Brown has refused to talk to the Herald on debt issues.