Received Sun, 21 Apr 2013 14:45:37 +1200
Topic ring a bell? We are using DCC and Kaipara as the salutary case studies.
Larry N. Mitchell
Finance & Policy Analyst (Local Government)
PO Box 404 103, Puhoi 0951, Auckland, New Zealand
Phone: 09 422 0598 Mobile: 027 479 2328
Read here or scroll to end of post to download this paper.
Councils “in stchook”
… their debt is way too high … it matters … so do proper disclosures
Dealing as I do, with matters of New Zealand Council finances, the one area that produces most comment, sometimes heated debate, is Council debt. Public discussion of Council debt is muddled, an often fractious difference of opinion generating more heat than light.
For example, the most recent (March 2013) Office of the Auditor General’s report of their findings from New Zealand Local Government audits concludes that Councils have their debt levels “within a reasonable range”. Recent New Zealand Local Government Association press releases concur.
Compare these reassuring findings to those of the 2013 NZ LG League Table where the lowest ranked 15% (10 in number) of New Zealand Councils are revealed as exhibiting unfavourable financial sustainability and community affordability issues. Both contradictory positions can’t be right. Unfortunately, the debate over Council debt is complicated by unsatisfactory public reporting-disclosures.
Discussions of Council debt are often compounded by current Council practices. These amount to opaque, imprecise Council debt accounting and “smoke and mirrors” disclosures. It is tempting to suggest that these are deliberate attempts to suppress discussion of Council debt on a “don’t scare the horses” basis.
This is particularly evident for use of the term by Councils of “Internal Borrowing”, a meaningless label, better described as “Robbing Peter”, covering as it does Council treasury management dealings involving a clear misuse (some might say misappropriation) of asset replacement funds.
Add to these sleights of hand a motivation for the more highly indebted Councils to keep their heads down when their debt totals soar, along with a tendency toward misinformation.