Council bids to borrow $256M

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.