Ratepayers still have serious questions over the South Wairarapa District Council’s (SWDC) approach to borrowing and debt – and the council is struggling to demonstrate full understanding itself.
Last year, SWDC called in Auckland investment bank Bancorp to create a new treasury and liability management policy. This led to the council dropping its extraordinary practice of using some rates income to repay all maturing loans each year, and the new policy is the basis for a planned $20 million leap in total SWDC debt during 2024-25. That increase in borrowing will – if it does occur this year – reflect the SWDC’s intention to greatly expand capital expenditure (Capex) on the district’s water supply infrastructure, community facilities, roading and wastewater treatment.
The 2024-25 plan includes a sum of $29 million for such spending, well up from actual Capex of $11 million last year. But neither the annual plan nor the 2024 council annual report explain with any clarity past or intended-future changes in the district’s critical debt and capital spending numbers. The SWDC has a history of high volatility from year-to-year in borrowing and capex figures, and of capital works being deferred with little or no explanation.
No answers.
When asked recently, SWDC could not state its current debt ceiling – the maximum amount it is allowed to borrow against rates income – or explain why its borrowing fell so much last year.
“We are unable to provide … information regarding this question as further analysis would be required,” the SWDC responded to basic questions from this reporter.
(The council then asked me to pay for it to do such “analysis.”)
Martinborough businessman Dean di Bona, who holds an accounting degree, is one of many ratepayers with serious questions about the council’s performance in this area.
“I am concerned the council doesn’t understand the actual debt it has incurred against each asset it owns, the Waihinga centre being one example,” he says.
“How much interest have we paid, and have we paid off or are we still paying off any principal?
“It’s imperative we get debt under that level of oversight and control so when the assets involved eventually need replacement, they do not still effectively have debt against them.”
Di Bona queries why South Wairarapa needs an Auckland-based investment bank when the council has already been offered guidance free of charge from a local resident with extensive professional expertise in treasury and debt management.
“It’s time the council executive understood they are not their own little island but actually the epicentre of a vibrant community that wants to engage and collaborate with it for everyone’s benefit.”
SWDC drew attention to one extraordinary aspect of its debt management in the 2024 annual report (issued last November), referring to “amendment” of its “unusual long-standing practice“ of repaying all loans as they reach maturity, using some portion of current rates income.
Had the practice continued into 2024-25, it would have bumped the total rates take up by $2.5 million and led to an average hike for ratepayers will above the 14.7% which they actually copped.
Chief Executive Janice Smith arrived at the council in November 2023 and is credited with stopping the practice after she engaged Bancorp Treasury Services.
Past annual reports show substantial debt repayments, supported by rates increases, through a period when New Zealand had historically very low borrowing rates.
