27 June 2012

AA credit rating welcomed by Palmerston North City Council

Palmerston North City Council has been assigned an AA credit rating by international agency, Standard and Poor’s.

The Council’s rating is the highest the rating agency has assigned to local authorities in New Zealand and is the same as currently assigned to councils in Auckland, Wellington and Christchurch. It is one level higher than Hamilton City Council and two levels higher than Tauranga City Council.

An AA credit rating will provide the Council with a wider range of borrowing options and an ability to borrow at lower interest rates.

In its report, Standard and Poor’s says Council’s strengths include “very high budgetary flexibility”, “strong cash operating surpluses”, a “predictable and supportive institutional framework”, and “positive liquidity”. It says these strengths are partially offset by a “very high debt burden”, and “after-capital account deficits”.

Palmerston North Mayor, Jono Naylor has welcomed the inaugural rating. “I am very happy that we have obtained such a high rating following the comprehensive analysis undertaken by Standard and Poor’s. It is an endorsement of the Council’s approach to the management of its debt.”

During the preparation of the 10 Year Plan the Council placed extra focus on the planned debt levels, says Mr Naylor. “Although the overall debt levels are higher than the Council would like they are well within prudent key financial limits. The 10 Year Plan includes provision for paying off debt at an accelerated rate and provides headroom for the Council to cope with funding unforeseen future high priority capital expenditure if required.”

Now that the Council has received its inaugural credit rating Standard and Poor’s will continually monitor its performance including a formal review each year.
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