'Bond bank' idea floated to cut council borrowing costs

The Government may help local councils raise finance for roads and pipelines by combining all borrowing needs into a "bond bank".

Finance Minister Bill English said the idea - in which councils could collectively borrow to reduce costs - was one of the Job Summit's Top 20 initiatives. It was also recommended by the Financial Markets Development Task Force.

Councils may spend as much as $30 billion on infrastructure projects over the next 10 years, much of which would be funded by debt.

Borrowing together would mean councils would pay lower interest rates and transaction costs on infrastructure projects.

The Government is awaiting a report into whether the proposal would lower council costs.

The study, to be done by Cameron Partners and Asia-Pacific Risk Management, will also look at how the bank will be run.

"The Government recognises that councils face a big spike in costs over the next decade to provide adequate sewerage, water and roads. Some of this will be appropriately financed by debt," Mr English said.

"Any arrangement that comes out of this process will be entirely voluntary."

Local Government New Zealand president Lawrence Yule said the organisation looked forward to working with the Government on the idea.

- NZPA, BLOOMBERG