Cost of new pool will put pressure on Hutt City Council debt cap

Monday, 6 May 2019

Hutt City might have to increase debt in order to pay for a $40 million swimming pool.

How much is too much when it comes to council debt?

That is the question Hutt City politicians will soon face as they grapple with rising debt and how to find $40 million to replace the earthquake-prone Naenae Pool.

Lower Hutt Deputy Mayor David Bassett celebrates the opening of the $34.2 million town hall and events centre last year. The council has used debt to fund a number of major projects.

In the five-year period from June 2014 to June 2019, Hutt City debt has risen from $55 million to $172m.

That is $1821 per capita - still considerably less than Wellington ($2975) and Kāpiti ($4256).

The earthquake-prone Naenae Pool is closed indefinitely, as the council decides to rebuild or repair. Financing could be a major challenge for Hutt City Council.

* Lower Hutt gifts developers $29m

* Wellington set to double debt**

New Zealand Local Government Funding (NZLGF) Chief Executive Mark Butcher said Hutt City was one of the few councils (Wellington is another) with a AA+ rating from Standard and Poors.

His agency lends to councils and he was comfortable with how Hutt City was performing. The council had a debt-to-revenue ratio cap of 150 per cent and that was well below the NZLGF limit of 250 per cent.

Debt has funded a massive rejuvenation programme in Lower Hutt that includes an events centre, sporting hub, bowling centre and incentives for developers.

The decision to close the Naenae Pool could, however, have a major impact on debt.

Capping the debt results in a 'choke point' in 2022, where debt is forecast to approach the cap when it reaches $229m.

Chief executive Tony Stallinger was aware of concern about rising debt.

Councillors recently backed new facilities for tennis and cricket, despite acknowledging there was no money.

With the council approaching its debt cap in coming years, one option was to increase it.

Stallinger did not believe that would be necessary but conceded that politicians would have to make some tough decisions.

Without knowing how much a new pool cost, he predicted a decision would have to be delayed beyond June's annual plan round.

Figures comparing debt in Hutt City with other 18 peer councils showed the average net debt per capita forecast for 2108/19 was $2227, Stallinger said. Lower Hutt ($1821) was lower than the average but perhaps the most telling figure was for 10 years.

For Hutt City the 10-year figure is $2262, Wellington $5025, Kāpiti $4381, Upper Hutt $2545 and Porirua $1709.

Butcher said not all debt should be viewed negatively. Intergenerational debt to pay for infrastructure was well justified and the best way to spread the cost. NZLGF also looked at factors like whether or not a city was growing in deciding whether it would lend to a council.

Taxpayers Union spokesperson Joe Ascroft said there was 'no correct' level of debt and it came down to whether it was being spent wisely.

'If a council is using debt to fund inter-generational infrastructure projects which deliver good value for money, then higher levels of debt may well be prudent.'

Nationally debt levels were increasing and 'unfortunately' councils were not always investing the money appropriately, he said.