Council to reduce interest costs through funding agency

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

“The commissioners see it as important that the Kaipara District Council seeks to minimise the cost of its external borrowing so that we can keep rates down,” said commissioners chair John Robertson. 

“Joining the LGFA is a logical move and could help to reduce our interest costs by up to $410,000 per annum. The LGFA has an AA+ credit rating, which is the same as the New Zealand government.” 

Mr Robertson says becoming a guaranteeing local authority will enable council to access the funds necessary to proactively manage its substantial loans in a low cost, low risk way. 

“More and more local authorities are joining and it is becoming accepted good practice across the local government sector to do so.” 

The LGFA, which is owned exclusively by central government and a number of local authorities, was established specifically to act as a borrowing agency for local government. 

The agency has proved extremely successful and attracted significant investor interest. To date it has raised in excess of $1.5 billion on behalf of the local government sector at interest rates that are significantly below those that might otherwise have been achieved. 

“I acknowledge that some ratepayers have previously raised concerns about council putting itself at risk from having to bail out other indebted councils but the LGFA’s approach to lending and borrowing is very conservative and the risks involved are very low,” adds Mr Robertson. 

“In the unlikely event that a local authority did default the LGFA would immediately be able to appoint a receiver and assess a special rate against all ratepayers in the defaulting local authority’s district.” 

The Kaipara District Council will approach the LGFA to seek approval to join as a guaranteeing authority; this will require LGFA Board approval.