$1billion of council’s new debt on “bits and bobs” in 12 months

Opinion by Councillor Cameron Brewer
My request to have the extra billion dollars of debt accumulated in the last financial year explained and accounted for has shown nearly $3m a day going towards “bits and bobs” and not on big intergenerational transformational projects that will lift Auckland’s prospects as Mayor Len Brown has promised ratepayers.

At the Governing Body’s 27 September meeting, I successfully moved an amendment seconded by Councillor Dick Quax:

That the Governing Body request that the budgeted increase in total borrowings from $4 billion to $5 billion accumulated during the financial year to 30 June 2012 be fully explained and accounted for and tabled at the Accountability and Performance Committee. CARRIED

The request for greater clarity follows the revelation in the draft 2011/12 annual report that total council group debt had gone from $4.0b to $5.0b in the past financial year. (Excluding CCO debt, the council’s own parent debt has gone from $2.9b to $3.8b in the past 12 months) *1.

Aucklanders will be disappointed to see that $1 billion of new debt was frittered away in 12 months.

Most ratepayers accept the concept of council debt if it’s prudent and spent strategically on big capital intergenerational projects. However in the last year we’ve borrowed nearly $3m a day with the money just being scattered right across the organisation to whoever’s put their hand out.

The next generation of ratepayers, who will be lumped with crippling interest payments, will wonder where all this money was frittered away. So far the Mayor doesn’t have much to show for it. Alarmingly, this debt is not going towards building the likes of big bridges or tunnels to support Auckland’s growth. Rather it’s being spent on the likes of council computer software, motor vehicles, and office furniture.

The Mayor plans to triple council debt this decade and has already lifted the debt ceiling to enable this. However the fact that we’re up another billion dollars in the last twelve months alone shows that debt is blowing out faster than most of us thought.

The worry is when the Government has halved its deficit and household debt is falling, Auckland Council’s borrowing is up 25% in the past year alone and we don’t have much to point to.

What’s more the finance department has advised that debt is projected to grow in the current 2012/13 year by a further $855m in total ($695m parent and $160m group).

This council needs to get more strategic with its debt. It should be about high quality spending which includes getting more prudent and targeted with debt expenditure.

Ratepayers will be disappointed to see the council has blown a billion dollars on bits and bobs. And it’s not as though we’re short of revenue. Every year this council now has a revenue stream of over $3b. We don’t need to borrow so much. The Mayor needs to dial back the spending. Otherwise debt, without the big projects, will be his last legacy.

*1: Page 468, ‘24 – Borrowings’, Part 3, Financial Statements, Auckland Council Draft Annual Report, 1 July 2011 – 30 June 2012.

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