West Coast Regional Council chief executive Darryl Lew. Photo: LDR
The West Coast Regional Council's core debt has risen to $24 million, as it embarks on the largest infrastructure programme in its history.
The council's financial report for the six months to the end of December shows the debt has risen by $6.5m - up from $17.6m in June last year.
But the council's leaders say the borrowing is planned and in line with annual and long-term budgets.
At the council's Corporate Services meeting on Tuesday chief executive Darryl Lew said the report contained no surprises.
"We need to expect that we will be borrowing … increasing sums as we're moving through our capital works programme, for both Westport, our Franz Josef Stage 2 work."
The council must cover the 40 percent ratepayer contribution for the flood protection work, to match the government's co-funding of 60 percent and recover the money over time, in rates from the affected communities.
"So, no surprises there," Lew said.
"We are going to be borrowing more, especially as we head through the Westport project and fully expend the government's $15.2 million, and then we've got to head into our $10.8 million. But this is absolutely expected, fully consistent with our Long Term Plan and projections."
The council had also had to borrow more than expected to fund the TTPP (a new District Plan) hearings in recent months - a cost also landing with ratepayers over time.
The council's strategy was to return to a cash operating surplus in year four of the LTP, when it would begin to start paying down the debt, Lew said.
"At the moment we are on track with that strategy and that's a good position for us. Unlike a lot of local government, we're not mortgaged up - we've got debt headroom and there are no concerns there."
Westport's flood defences are being strengthened as it is vulnerable to flooding. It is pictured here in the July 2021 floods. Photo: Supplied / NZDF
WCRC chair Peter Haddock said to the untrained eye it might appear the council was simply borrowing a heap of money.
"But really, we're borrowing money on behalf of those rating districts to buy the capital works to protect those communities."
The $40m worth of flood protection work would buy security for those towns just as the Greymouth floodwall had done since 1990, Haddock said.
"The council will in turn get that (borrowed) money back in. That's not borrowing for council's operational costs, it's providing security."
On the asset side of the ledger the regional council's investment portfolio was now worth $14.65m, Haddock noted.
The fund performed better than expected in the past six months, posting gains of $1.1m, compared to a budget of $547,000, the report stated.
But finance costs of $627,000 for the period had been $126,000 over budget, because of the increased borrowing - and short term financing between rates instalments.
Lew said the council had been forced to use credit for operational costs a few times in the last couple of years.
"We've had to borrow three times in my tenure (as chief executive) to do with operating cash flow. Unusually, our council puts out a rate demand only twice a year - most councils put out their rate demands quarterly. And of course that improves cash flow."
Work is underway to build up Franz Josef's flood defences, with help from government funding. Photo: RNZ / Nate McKinnon
The financial report showed that rates revenue was $91,000 short of the budget for the first half of the financial year.
"What we are doing is expending our income operationally and then having to borrow to see us through to the next rates demand, and that comes at a cost," Lew told councillors.
If the council had an appetite for it, a system of quarterly rate demands would work better, he said.
"In many regions, the majority of rates are paid by automatic payment online or through direct debit and that's not the case here. The West Coast doesn't seem to fully embrace that."
Having four rate payments a year instead of two big ones could also help to smooth out ratepayers' budgets, Lew said.
Councillor Peter Ewen was quick to support the idea, suggesting the WCRC and district councils could work in together on rate demands.
"Two of our councils put out quarterly demands - we should all be looking at sharing services like this, so you get just one envelope and you can see what all your rates are for the year," he told LDR after the meeting.
LDR is local body journalism co-funded by RNZ and NZ On Air.
