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Rating change expected
October 11, 2012.
Rating change expected
Council’s Corporate Business Committee chair Ross Church said the change to Council’s long term credit rating was nothing new and had been anticipated.
Credit rating agency Standard & Poors today gave Council an A plus rating. It was previously listed as AA minus.
“To be frank, we were a little surprised when we got the AA minus rating last year – our first year under the rating system. We thought at the time that it would have been A plus, which is what we have ended up with this year.”
The A plus rating for Kapiti puts Council on a par with Tauranga City and the Western Bay of Plenty.
“We had a good look at rating implications at public workshops in February and March this year when we were discussing the 20 year outlook as part of deliberations over the then draft Long Term Plan.
“We factored in the AA minus rating for the 2011/12 financial year and A plus ratings for 2012/13 onwards through to 2018/19, after which the impact of an additional debt repayment reduces Council’s debt levels.
Group Manager Finance Warwick Read said the change in the Standard & Poors rating would have a very minor (0.02% to 0.03%) impact on short term borrowings and only a 0.05% impact on long term borrowings. “To put this in perspective, this is equal to one-twentieth of one percent or $5,000 on $10 million of borrowed money.”
Mr Read said the change in credit rating would have minimal impact on Council’s interest costs for the 2012/13 year as Council had recently secured all of its long term borrowing requirements for the year through the Local Government Funding Agency “while making full use of the higher credit rating.”
He said the increase in interest costs of $5,000 per annum per $10 million of new debt had been factored into Council’s Long Term Plan budgets. These had been freely available to members of the public during the LTP consultation.
Under the 20 year LTP, Council debt will rise from $99 million in June 2012 to $196 million by 2023/24 before it drops off sharply to $77 million by 2031/32.
Mayor Jenny Rowan said this was a sensible use of borrowed money as “much of the work we are undertaking – such as improved water supplies, roads, the Aquatic Centre, economic development investment – is for the long term and intergenerational.
“It makes sense then to spread the costs across those generations that are going to benefit.”
ends
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