Hamilton among worst for most indebted local authority globally

Saturday, 22 November 2025

A new report places Hamilton City Council among the most debt-ridden of an international cohort.

The report by international credit ratings agency Standard and Poor’s (S&P) said the council was “among the most indebted subnational governments we rate globally“ in the 2025 fiscal year.

Despite this, the overall outlook for the council was stable.

This was due to high liquidity, strong population growth — and the hidden impact of the new water services company.

S&P predicted Hamilton's total tax-supported debt would spike to 322% of operating revenue in the 2028 fiscal year.

By comparison, debt was about 300% of operating revenue in the 2025 fiscal year.

This placed it among the most indebted local councils in New Zealand, and among the most indebted subnational governments rated globally, the report stated.

“Hamilton's interest expenses have risen rapidly and are very high as a proportion of operating revenue.”

“We estimate interest expenses will average about 12% of operating revenue between 2025 and 2027, up from less than 5% in 2021.”

The tax-supported debt ratio would appear higher in the years after the establishment of the new water services company IAWAI - Flowing Waters.

The organisation would be run jointly by Hamilton City and Waikato District Councils and provide drinking water, stormwater, and wastewater services.

Revenue would shift relatively soon, whereas debt would take longer.

“We expect Hamilton will transfer its water revenue to IAWAI on July 1, 2026, and its related debt over a five-year period.”

“After excluding debt earmarked for transfer to IAWAI, the council's total tax-supported debt ratio would be closer to 270% of operating revenue in fiscal 2028.”

This was a decrease, rather than an increase, on the current 300% figure, but was still “very high” in both a domestic and global context.

The council had very weak financial outcomes in recent years due to costs for infrastructure, the report said.

Debt had roughly doubled over the past five years.

“We believe weaker fiscal outcomes reflect the council's higher tolerance of risk compared with its peers, which weighs on our assessment of its financial management.”

A key factor in assessing the Council as stable was Hamilton’s booming population.

At an estimated 1.4% in the year to June 2025, it was growing at a rate double that of the national average.

“Strong population growth should help to sustain Hamilton's economic strength.”

Large rates increases of about 14.5% between the financial year ending in 2026 and the financial year ending in 2028, along with reduced capital spending, could ease some pressures, the report said.

It gave the council a long-term credit rating of ‘A’ and a short-term rating of “A-1”.

“The outlook on the long-term rating is stable, reflecting our view that the council will maintain its sound liquidity coverage during a period of weak financial outcomes and elevated debt.”

Council chief financial officer Gary Connolly said he recognised the high level of debt raised in the report, which largely told the council what it already knew.

“We're a high growth council, we're investing heavily in infrastructure to support housing and economic development.”

“We'll now go through a phase of transferring our debt across to IAWAI and having the increase of new ratepayers which will bring that percentage down.“

The council had a different funding mechanism than many others, and the Local Government Funding Agency allowed it to borrow higher amounts of up to 350% of revenue.

However the council had chosen not to do so, which reflected a level of caution, he said.

The position was positive compared to a year ago, he said.

“When you understand what's caused debt in Hamilton, then you can have a bit more confidence that long term it will correct itself as we bring on new ratepayers.”

“It is really the story of growth.”

The Government is set to consider introducing a rates cap, and with a policy due to be put to Cabinet by the end of the year.

Asked how this could impact the financial outlook, Connolly said he was waiting with bated breath.

“I definitely hope that there'd be some recognition of the unique challenges faced by high growth councils.”