Western nations have been increasing debt since the turn of the century in a way which is alarming. Waitakere City Council has also followed a similar path. I am on record as having expressed my concern at Waitakere’s growing debt from 2003 onwards.
At the turn of the century Waitakere City Council had a debt of $64.4m. That represented $370 per head. In the next ten years it increased tenfold.
In the 1998/99 Draft Long Term Plan the debt for 2018 was forecasted to be $156.84m. On p25 it stated “Interest should not exceed 15% of combined total rates revenue, water charges and uniform annual charges.” My how things have changed!
The 2003/13 LTCCP (Long Term Council Community Plan) had a forecasted debt of $289.8m for 2013.
The 2006/16 LTCCP had a forecasted debt of $638m for2013. (more than double the forecast from 3 years earlier.)
To educate myself on how Councillors approve such things I attended a full Council meeting on 26 September 2007. This is what I observed:
Councillors plus the mayor voted 14:1 to endorse Item 12 on the Agenda which Harry O’Rourke, CEO, introduced as “an item to cover a legal technicality.”
Councillor Clews opened the debate by saying there was a lot of nonsense being talked out there by people who didn’t understand.
Councillor Flaunty posed the question as to how it would affect the rates and the ability to borrow.
Councillor Corban referred to the Annual Plan and said we need to borrow for infrastructure for the long-term benefit of the city.
Bob Harvey was keen to move quickly to putting matters to the vote.
Councillor Chan said he would be voting against it. He said he was opposed in principle, to imposing a debt on ratepayers.
Councillor Cooper referred to their previous vote under the LTCCP.
Councillor Hulse was concerned that this could turn into a political debate with “some cheap electioneering.” She said the alternative was to put rates up 200 to 300%. She said it was not possible to reduce rates and reduce debt.
(Clearly she had overlooked the obvious alternative of reducing expenditure.)
Councillor Lawley said it was not helpful to the work of Council if a Councillor changed his vote because he misunderstood the resolution.
Councillor Harding talked about borrowing money to buy a home and said he had made no major capital purchase in private life without borrowing. Borrowing money was to make our future lives easier.
Councillor Clews said she was disappointed to hear about principles on a night like this and referred to the decision they had made in June.
Bob Harvey thanked her for closing the debate well and then put it to the vote.
14 for : 1 (Peter Chan) against
Councillor Clews added the post-script that it was “perfectly legal as it is. This is an extra precaution.”
The gross debt authorised was $466.418m
Well, we’re now into 2009/10 and the latest FOP (Finance and Operational Performance) committee report reveals the 2009/10 Annual Plan provided for new borrowings of $230.585m with provision for total interest of $31.839m. Total approved debt is $635.121m and on current trends the debt would exceed $1billion within the next four years. Servicing interest on debt now uses up 20% of the rates intake. The net debt as a % of income has gone from 144.5% in 2007/08 to 212% in 2009/10.