Public debt level needs to be raised
Saturday, 1 March 2008
By Marianne Gillingham

The District Council has adopted a finance committee recommendation to raise the district's public debt level to 95 percent of income.

This would take the public debt from $1000 to $1700 for every man, woman and child in the Gisborne rating district.

The decision this week to adopt this level was not without further angst among councillors. But short of abandoning the Wainui reticulation project or the wastewater treatment project, there was little the council could do to stop the blowout.

Gary Hope, Pat Seymour and Graeme Thomson continued their strong opposition to the debt extension.

Mr Hope said he realised the council was in a Catch-22 situation, but he was not happy to pass it without strong evidence of a repayment programme.

Brian Wilson said councillors had to realise that there was going to be a peak in debt, because of the wastewater treatment and Wainui reticulation project. In the longer term, the council's level of public debt would fall.

But Pat Seymour said the jump from a 70 to 95 percent parameter showed that there were really no constraints on council spending.

She also wondered what the banking sector would have to say -- one bank had already rejected the council's borrowing plans in the past.

Roger Haisman said the figure was just an enabling statement that would allow the council to proceed with the two projects it had committed to in the LTCCP.

Pat Seymour said it might be only an "enabling" figure until alternative funding was found, but the same councillors might not be around in future, and their intentions to reduce the new parameter might be lost.

She feared the debt would just continue to creep up.

Atareta Poananga said the debt facility was necessary if the council was to meet the community's aspirations.

Gary Hope said he had fears the debt would be extended further. There were always unforseen costs such as lawsuits over buildings and other things going wrong. There appeared to be no contingencies for this and they had the potential to have a compounding effect.

Management accountant Marianne Gillies said the council had known since 2000 that there would be a peak in rate rises this year.

"We have always known we were going to get this peak and that it was going to get better," she said.

As far as Mr Hope's comments were concerned, she said the council had sometimes had an overspend in one area but it was invariably matched by an underspend in another.

"Generally we keep well within the overall budget."

Things that could blow out the budget were items like a flood or council decisions over a major item such as a landfill.

Costs projected for the two big projects under way were based on the best estimates of what had to be done. These figures would be refined as more information became available.

Engineering and works manager Peter Higgs said a report on the costings for the wastewater plant would come back to the council at the end of March after the preliminary design phase.

Firm costings would not be known until after tenders were let.

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