Council bids to borrow $256M

Growth funding options considered risky.

Dire warnings of a massive increase in city debt and huge rates rises were aired in the Tauranga City Council meeting, as councillors voted in favour of a proposal to borrowing $256 million off the government Housing Infrastructure Fund.

Councillors approved the bid saying it had to be made for the council to remain in the debate with the government about how the fund will be repaid.

The warnings were voiced by councillor Steve Morris, who also voted in favour of the bid for the money because it is non-binding, but added that it is dangerous in its present form.

As currently set up it transfers the heat the government is under over the country's housing crisis onto local ratepayers, says Steve.

“As it stands it represents financial suicide, and I'm not over stating that.”

Councillors have to follow the direction of the government or face sacking and replacement by a commissioner - as the minister of local government did to Environment Canterbury, says Steve.

But borrowing $256 million will raise the council's debt from 300 to 800 million by 2021.

“It's just crazy. The directive from wellington is absolutely appalling.”

The council has been warned by the Local Government Association that if the council does breach its debt ceiling of 310 per cent it will not be able to borrow any more money and will face bankruptcy, warns Steve. The load needs to come off the council books

Gail McIntosh say Steve is over reacting and they are all aware of the risks.

“We have got time to work with other growth councils; Queenstown, Hamilton and Auckland,” says Gail.

Tauranga has to bid to be able to continue the discussion and work out a way of taking the loans from the HIF off the councils' books, says Gail.

Larry Baldock blames the situation on former Prime Minister John Key who made the announcement and didn't work it through.

Now the four growth councils are having to work the situation through with the government.

“It's election year, I think they are working pretty hard to solve it,” says Larry. “We have to be there, we have to stay in the process.”

He lays the blame of the government's National Policy Statement on housing land which requires councils to have zoned land available for ten year's growth, serviced land for three years' worth of development.

The staff report states the Smatgrowth partnership has an objective of providing 10 years land supply for development in the Western Bay of Plenty.

Recent higher than predicted growth and the NPS requirement for a 20 per cent buffer has resulted in not enough land being available to meet the NPS srequirements.

The Housing Infrastructure Fund (HIF) is a contestable $1 billion fund to assist high growth councils advance infrastructure projects required to increase housing supply. It is proposed as an interest-free loan to help meet the requirements of the National Policy Statement on Urban Development Capacity for development-ready land.

Tauranga City Council is applying for a total of $256.1m to fund four packages of projects that will allow both city-wide growth and to open new urban growth areas: 

  •   •  Waiari Water Treatment Plant ($114.6m) - city-wide

  •   •  Te Maunga Wastewater Treatment Plant upgrade ($55.9m) – city-wide

  •   •  Infrastructure for Te Tumu urban growth area ($39.8m) – Eastern Corridor

  •   •  Infrastructure for Tauriko West urban growth area ($45.8m) – Western Corridor

Council noted that submitting the HIF application is non-binding and that further assessment of risk, particularly in respect of strategic and financial impact, will be undertaken as part of the 2018-2028 Long Term Plan.



13 Comments

Maths?

Posted on 02-04-2017 21:18 | By morepork

"But borrowing $256 million will raise the council's debt from 300 to 800 million by 2021" I share the bewilderment expressed by others over this. It is interest free, so any increase in debt must come from existing debt interest and other ongoing borrowing. It can only ever increase the final amount by 256 million. if the final amount in 2021 is 800 million, that means there is 800 million - 256 million = 546, million that will be incurred if they DON'T take the loan. if the current level is 300 million then it looks like they will incur 246 million over the 4 years; 61.5 million a year if they do nothing, anyway. Take the loan. Use it to pay the 246 million and give the remaining 10 million to the ratepayers... :-)

Heathcliff

Posted on 30-03-2017 19:17 | By Heathcliff

I don't have an issue with the proposed loan, interest free! We are a strongly growing city and need the infrastructure, it really is a no-brainer.Steve Morris needs to explain his maths. How does $300m +$260m = $800m? No interest remember.

Petition..

Posted on 30-03-2017 11:19 | By Me again

where is this for ratepayers to sign against this idiotic issue from the dumba.. TCC. I am so sorry I voted for this man for our mayor. And he hasn"t got the b...s to run the TCC for the people of Tauranga. Looks like he wants to keep up with Auckland. And look at their mess. Oh sorry we already have a mess, Tauranga Council .

Hang on Steve,

Posted on 29-03-2017 17:05 | By Anbob

$300m + $256.1m interest free doesnt equal $800m. The article headline states $265m borrowed from the govt, the projects add up to $256.1, is the rest slippage. I agree with Mackkas comments about Council spending on wants. The difference being the HIF funded projects will add to the ratepayer base and the wants projects will cost ratepayers annually. I still dont see the urgency to have a museum and new council buildings. Surely, they come when you have saved enough funds! Maybe the commissioner isnt such a bad idea! Had higher hopes the new mayor would improve matters, but same old same old.

What outcomes?

Posted on 29-03-2017 16:00 | By Really

Maybe we should pay the Council CEO and Councilors on an outcome or performance based system .... given the recent performance that should save us a fair amount of money.

Does anyone at Council understand numbers?

Posted on 29-03-2017 15:53 | By Really

Council always says how small the rates increases have been in Tauranga and how lucky we are to have such low rates increases...... but does anyone independent ever audit or check the calculations? The number reported always seems to be around 3%. But mine has increased approx. 308% between 2004 and 2016 or an average of 26% per year.... Would love to know what an average increase really is?

Incompetent in the Extreme

Posted on 29-03-2017 14:58 | By Really

How do we start the process now to get the Councillors sacked and replaced by a commissioner - before they spend all the money on a new palace expecting us to pay for it?

Maccka is right

Posted on 29-03-2017 14:20 | By nerak

but it is not maybe, we do need a Commissioner, and it's becoming more imperative by the week. "Councillors have to follow the direction of the government or face sacking". So whose interest is at heart here? The ratepayers, or councillors' pockets? Wonder how much comparative debt the other 3 councils have, and how much their ratepayers are bleeding. And why doesn't the Mayor speak up, beginning to wonder why he ran.

.

Posted on 29-03-2017 12:57 | By whatsinaname

Unbelievable. Time to sell up and move. Bugga paying our hard earned moneyto the council

Hobson Choice

Posted on 29-03-2017 12:53 | By waiknot

Council had no choice an interest free loan and keep central govt under pressure repayments. In the mean time let's start cutting out the wants but not needed spending.

Council debt desire

Posted on 29-03-2017 12:15 | By Roadkill

Would have thought that this was a grand opportunity to get Government money interest free, all the projects listed are thing TCC have in the plan to do anyway, so are borrowing anyway. The end result here is simply that there will not be any interest, how then does this mean that the HIF will somehow create more debt?

Give us a Commissioner!

Posted on 29-03-2017 12:01 | By Mackka

Maybe we do need the council to be replaced by a Commissioner. Someone who knows how to balance the books. Clearly the council has no idea how to run a business. All our councils have continued for years to spend money they haven't got - and on the most ridiculous, frivolous things.For a start get rid of the 9 TAG members employed just last week to investigate what can be done to attract people to the CBD.! Forget the museum - we don't need a whole new council 'palace'. Then we have the stupid tidal steps and the wish list goes on and on with no account to living within the city's means! ..... it is disgraceful. ..... and still no word from our mayor!! ??

Scandalous

Posted on 29-03-2017 11:50 | By Captain Sensible

Some of us have had NO pay rise for a decade....yet these out-of-touch bumbling bureaucrats tell us what we want to hear before the elections....and then do the opposite.

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