WEBVTT - Mahe Drysdale: LGFA increases borrowing capacity for select councils

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<v Speaker 1>You're listening to the Weekend Collective podcast from News Talks be.

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<v Speaker 2>The Local Government Funding Authority has allowed high growth counsels

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<v Speaker 2>I put high growth and quotation marks to borrow more

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<v Speaker 2>the movies and hopes that council will be able the

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<v Speaker 2>councilors will be able to deliver projects more efficiently spread

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<v Speaker 2>the cost. Auckland, Tyrang and Hamilton are just a few

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<v Speaker 2>of the councils thought to be eligible for the increase

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<v Speaker 2>and newly minted I'm not sure we can still say

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<v Speaker 2>that newly minted tyrag Amya Mahi Drysdale is with me now, Mahi, good, good.

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<v Speaker 3>Afternoon, good after knowing, good to talk to you.

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<v Speaker 2>Yes, actually we first spoke when you just won the

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<v Speaker 2>election and you were about to be the new mayor.

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<v Speaker 2>How's how's it going getting your feet under the table?

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<v Speaker 3>Oh pretty good. Yeah, we've had a lot to deal

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<v Speaker 3>with and yeah, a few few sort of challenges as

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<v Speaker 3>we've started, but no, it's it's going well and got

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<v Speaker 3>a good team around the table and starting to make

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<v Speaker 3>some make some good decisions, you know, really really trying

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<v Speaker 3>to look up to the finances, which is a challenge

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<v Speaker 3>for all the councils.

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<v Speaker 2>Any surprises for you when you got on, like, oh,

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<v Speaker 2>didn't realize this was going to happen or whatever.

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<v Speaker 3>Not really, I guess, yeah, it's just trying to get

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<v Speaker 3>up to speed. I think you're a bit more reactionary

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<v Speaker 3>than i'd like to be. And that's sort of where

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<v Speaker 3>we're getting to now that we're starting to be a

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<v Speaker 3>bit more proactive and making future decisions rather than dealing

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<v Speaker 3>with the past.

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<v Speaker 2>So right, let's get onto this announcement of increased borrowing

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<v Speaker 2>capacity for high growth councils. I guess the first thing is,

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<v Speaker 2>are you a high growth counsel.

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<v Speaker 3>Yes we are. We've been one of the fastest growing

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<v Speaker 3>regions in the country the last twenty years, so yeah,

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<v Speaker 3>we're certainly feeling the effects of that and welcome the

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<v Speaker 3>announcement of higher higher debt limits.

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<v Speaker 2>What was the problem that needed addressing from your angle?

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<v Speaker 3>So basically, you know, there's this arbitrary figure that they've

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<v Speaker 3>put on. As you know, I guess times your revenue,

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<v Speaker 3>So at the moment, it's too eighty five about to

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<v Speaker 3>drop down to too eighty And what this does is

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<v Speaker 3>it says it's up to three fifty So what.

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<v Speaker 2>Three fifty three fifty one per.

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<v Speaker 3>Sorry, it's three fifty times your income. So if you

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<v Speaker 3>if you think about we've we've heard a lot about

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<v Speaker 3>debt to income ratios and the reserve banks talking you

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<v Speaker 3>know six to seven which is six hundred to seven

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<v Speaker 3>hundred percent, and councils are limited to to eighty and

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<v Speaker 3>now the High Growth Council is up to three fifty.

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<v Speaker 3>So it's three fifty percent of your income.

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<v Speaker 2>Oh good. Sorry for a minute there, I thought you

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<v Speaker 2>meant three hundred and fifty dollars for every dollar, which

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<v Speaker 2>would have been that was righten the horses a bit, hey,

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<v Speaker 2>So what does it change for you?

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<v Speaker 3>It just gives us a bit more headroom. And you know,

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<v Speaker 3>I guess what I found is going into local politics

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<v Speaker 3>is is you know there's there's just ways around that.

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<v Speaker 3>And you know, there's this thing called the i f F,

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<v Speaker 3>which is the Infrastructure Financing and Funding Act, which has

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<v Speaker 3>has a way of borrowing which doesn't count on your

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<v Speaker 3>balance sheet, but it's more expensive and you know, really

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<v Speaker 3>you'd be better to have, you know, us to be

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<v Speaker 3>able to borrow through ol GFA, which is the Local

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<v Speaker 3>Government Funding Agency, which is cheaper debt. It's on your

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<v Speaker 3>balance sheet. It's visible to everyone. But you know, so

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<v Speaker 3>they sort of put this arbitrary figure in the place

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<v Speaker 3>and then they give you ways around it, and this

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<v Speaker 3>just just brings it much more transparent to everyone can

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<v Speaker 3>see what's happening.

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<v Speaker 2>So, is there something that is on your horizon that

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<v Speaker 2>you're going to be able to fund that you might

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<v Speaker 2>have been under in doubt now that you're going to

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<v Speaker 2>be able to get the sextra funding?

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<v Speaker 3>Not really, Like, we want to be prudent with our spending,

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<v Speaker 3>so we're going to try to stay inside our limit.

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<v Speaker 3>But what this gives us is it gives us some flexibility.

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<v Speaker 3>And you know, we are able to not watch every

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<v Speaker 3>single dollar. You know, at the moment, every single dollar

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<v Speaker 3>we spend we have to to take out somewhere else.

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<v Speaker 3>And this just gives us a little bit more flexibility.

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<v Speaker 3>You know, if we had a disaster, it would give

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<v Speaker 3>us some headroom. Right now, we've got about twenty five

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<v Speaker 3>million dollars that we can borrow, so obviously, as a counsel,

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<v Speaker 3>you know that's that's not a lot of a lot

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<v Speaker 3>of headroom if if something goes wrong.

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<v Speaker 2>What do you say to for people who want reassurance

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<v Speaker 2>Obviously with central government, there's always arguments about how much

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<v Speaker 2>indebtedness we've got. Would there be some you can understand

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<v Speaker 2>there be some ratepayers who be nervous about the license

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<v Speaker 2>for some counsels to borrow more. What would you say

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<v Speaker 2>to those rate payers?

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<v Speaker 3>Absolutely, we have to be prudent with spending. And you know,

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<v Speaker 3>I think it's it's about what this does and if

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<v Speaker 3>you use it for the right things, I think there's

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<v Speaker 3>going to be some govenance on on that money that

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<v Speaker 3>it's it's being spent on the right things, and you know,

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<v Speaker 3>that's that sort of growth and things like that. And

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<v Speaker 3>what debt does is it spreads the the assets that

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<v Speaker 3>you're purchasing or you know, creating over the lifetime that

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<v Speaker 3>they're used. So it's sort of it's much fairer way

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<v Speaker 3>to to then make the rate payers of today pay

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<v Speaker 3>for all the infrastructure, et cetera that you're building today.

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<v Speaker 3>So that's that's what debt does, and you know, it

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<v Speaker 3>just just makes it a lot fairer. So so that's

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<v Speaker 3>very much. I guess what we're trying to do is

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<v Speaker 3>be prudent. But if we are building for the future,

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<v Speaker 3>that will be spread on the on the rate payer

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<v Speaker 3>of the next thirty odd years.

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<v Speaker 2>What about rates? Will it have any effect on pushing

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<v Speaker 2>the rates up?

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<v Speaker 3>Obviously, if you if you borrow, you have to service

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<v Speaker 3>that debt. It's like a mortgage, you know, the more

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<v Speaker 3>you borrow, the bigger the interest bill. So that's why

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<v Speaker 3>I say it's it's got to You've got to be

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<v Speaker 3>careful where you spend that. And you know, you don't

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<v Speaker 3>want to be borrowing for your everyday living. You want

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<v Speaker 3>to be borrowing for creating something, you know, and obviously

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<v Speaker 3>with growth, you know the the idea of that, if

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<v Speaker 3>you're building infrastructure for growth, you're going to have more

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<v Speaker 3>people to pay in the future, and so so that

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<v Speaker 3>sort of spreads that burden. So yes, you do have

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<v Speaker 3>to be very careful because the more you borrow, the

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<v Speaker 3>more you have to pay, so you have to ensure

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<v Speaker 3>that that is enabling more people to help pay in future.

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<v Speaker 2>It's a little bit of talk from time to time

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<v Speaker 2>about capping rights. What's your response to that.

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<v Speaker 3>I think it's a terrible idea. You know, we've heard,

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<v Speaker 3>we've heard the you know how it works in Australia

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<v Speaker 3>and all it does is both basically drive councils into

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<v Speaker 3>the ground. It doesn't, it doesn't help anyone. You're much

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<v Speaker 3>better to elect people that are financially savvy and and

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<v Speaker 3>you know, don't don't spend your money willy nilly, make

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<v Speaker 3>good financial decisions. That's that's a much better way than

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<v Speaker 3>than capping rates. I think you'll all you'll see is

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<v Speaker 3>counsels effectively go bust if they do it.

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<v Speaker 2>How soon is it's going to make a difference to

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<v Speaker 2>those councils who are desperate to get more funding.

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<v Speaker 3>Well, for us, it's it's huge. But again, you know,

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<v Speaker 3>we've we've got to assess every single dollar we spend,

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<v Speaker 3>you know, to to ensure that we're getting good value

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<v Speaker 3>for money and that you know, it's making sense to

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<v Speaker 3>to our rate payers. So you know, we're not We're

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<v Speaker 3>not going to go on a spending spree, I can

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<v Speaker 3>tell you that much.

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<v Speaker 2>Sorry, I mean how soon, how soonders are all kick and.

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<v Speaker 3>Well how soon? I think, yeah, Like so basically we're

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<v Speaker 3>we're just waiting now on the covenants and and figuring

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<v Speaker 3>out what that what we can spend it on. But

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<v Speaker 3>I would expect that this is sort of in play

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<v Speaker 3>in the next next couple of.

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<v Speaker 2>Months just just on other I don't know how much

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<v Speaker 2>you talk to other mayors and other counsels, but they're

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<v Speaker 2>probably the big thing is demonstrate your high growth council.

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<v Speaker 2>Are the sort of records around council's growth rates and

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<v Speaker 2>all that? Is it going to be accurate? Are there

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<v Speaker 2>going to be some councils who deserve it who might

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<v Speaker 2>miss out any Have you got any insight into that?

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<v Speaker 1>Not?

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<v Speaker 3>Yeah, again, haven't seen the detail, but it's it's pretty

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<v Speaker 3>clear you know who is growing and who is not.

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<v Speaker 3>Yet all those figures are available. I think you know

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<v Speaker 3>people like Selwyn and Queenstown and Hamilton and Auckland and

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<v Speaker 3>towering Are and Wiper you know that those are the

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<v Speaker 3>there's there's a whole lot more, but you know that's

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<v Speaker 3>that's the sort of the highest highest growth councils. And

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<v Speaker 3>it'll be interesting to see where they where they cap that,

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<v Speaker 3>and you know there might be you've got to you've

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<v Speaker 3>got to show an x amount of growth rate or

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<v Speaker 3>whether it's historic. I'm not sure what they'll they'll do

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<v Speaker 3>for that, but yeah, I suspect it will be on

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<v Speaker 3>on what you're actually using them. The extra money for

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<v Speaker 3>is where the covenants will come in.

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<v Speaker 2>Yeah, good stuff. Hey Mahia, I really appreciate your time

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<v Speaker 2>this afternoon.

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