Council seeks cheaper borrowing

Kaipara District Council will join the Local Government Funding Agency (LGFA) in order to get access to cheaper loans. 

The decision was made by council and adopted as part of the 10 year plan signed off on Wednesday August 29. 

The LGFA is an organisation owned by local and central government. Its role is to provide more efficient funding from diversified funding sources than what councils might otherwise be able to access. The LGFA only lends to local government. 

Kaipara District Council will join the LGFA as a guaranteeing local authority. If it did not join as a guaranteeing member, it would have been unable to access loans of more than $20 million. Much of the council’s current $80 million debt is currently held by banks.  

Chief Executive Steve Ruru acknowledged that during consultation on the 10 year plan, some people were concerned about the council joining the LGFA as a guaranteeing member. People thought it might put the council at risk from having to bail out other indebted councils.

“There are multiple forms of funding and security in place and these are provided by all local authorities who borrow through the agency.”

He acknowledged that while there was a guarantee being provided the chances of it ever being utilised were minimal. 

 “These arrangements allow the LGFA to draw upon the resources of all local authorities to avoid defaults should a problem ever arise. 

“There is a big difference in the interest rates charged by the bank, and those which are charged by debt provided via the LGFA. We estimate council will save in the order of $250,000 $350,000 a year by having access to this funding source.”