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The Auckland City Council has been told by credit rating agency Standard and Poor's to watch its growing debt or face a downgrade of its AA rating.
The agency says the rating reflects the council's strong cash-operating service and its low-risk operations.
It said the council had a stable outlook based on its financial strength and reduced expenditure on capital expenditure over the next four years.
Mayor John Banks and his Citizens and Ratepayers allies are preparing a 10-year budget with big cuts to an ambitious capital programme inherited from the previous council so they can hold rates to the council rate of inflation.
Standard and Poor's said council forecasts had net debt reaching about 160 per cent of revenue by 2012, but expected the actual figure to be about 100 per cent to 130 per cent because of lower capital spending.
Council debt is expected to rise from $322 million to about $1 billion over the next decade.
The previous council forecast debt to rise to $1.4 billion.
"Downward pressure could be placed on rating if Auckland City's debt rises to levels above that currently expected," said Standard and Poor credit analyst Anna Hughes.
Finance committee chairman Doug Armstrong said the council noted the credit agency's comment about debt and pressure on the council's credit rating.
"We have an obligation to our ratepayers to maintain a strong financial position for the council while also achieving the right balance between rates levels for ratepayers and continuing investment across the city," Mr Armstrong said.
In July this year, Standard and Poor's downgraded the council's credit rating from AA+ to AA after the council guaranteed the debt of the region's bulk water and wastewater company, Watercare Services.
