Waimakariri council may ditch credit rating agency S&P after downgrade

Waimakariri Mayor Dan Gordon. Photo: Supplied / Waimakariri District Council

A Canterbury council ''disappointed'' with having its credit rating downgraded may quit the international credit rating agency S&P Global Ratings.

The Waimakariri District Council was among 18 councils to have its credit rating downgraded in March, with the council moving from AA with a negative outlook to AA- with a stable outlook.

Waimakariri Mayor Dan Gordon said his council has met with the agency to express its frustrations.

''Our full council met with [S&P] to express our disappointment that they look to the sector as a whole rather than the individual performance of councils,'' Gordon said.

''The one-size-fits-all approach, which appears to have been applied here, isn't a reflection of our council's performance.''

Council chief executive Jeff Millward said the council would consider changing rating agencies.

Waimakariri District Council chief executive Jeff Millward. Photo: David Hill / North Canterbury News

''Having worked hard for years to ensure our council's financials are in shape, this change in rating is disappointing.

''We are going to investigate the use of other rating agencies going forward.

''But thankfully, in the interim, this is taking place during a time of easing interest rates, so it is likely there will be little change in our borrowing rates.''

S&P (formerly Standard and Poor's) analyst Rebecca Hrvatin said the agency had lowered its institutional framework for assessments in New Zealand, which resulted in the ratings being lowered.

''There has been no change to our methodology. We continue to assess local governments globally via a combination of the country's institutional framework and the local government's individual credit profile.''

Rising expenses and infrastructure costs were placing pressure on local government finances, while government funding wasn't increasing to cover the increased spending, S&P said at the time of the downgrade.

Government reforms, such as new water policy requirements, could also impact local council finances.

Waimakariri District Council has a debt of around $200 million, which represents a debt-to-revenue ratio of 134 percent.

Council debt-to-revenue ratios, which are an indicator of debt affordability, are monitored by the Local Government Funding Agency (LGFA), with limits on borrowing.

Growth councils like Waimakariri can borrow up to 350 percent of their income, but the Waimakariri District Council has a self-imposed borrowing limit of 250 percent.

The council's is due largely to the recovery from the 2010 and 2011 earthquakes, spending on water infrastructure reforms, roading and the MainPower Stadium, which cost almost $30m.

Waimakariri's debt-to-revenue ratio is likely to climb to nearly 170 percent over the next few years as the council plans several infrastructure projects.

Mayoral hopeful Paul Williams said the revised credit rating is a timely reminder for the council to exercise ''more financial discipline''.

''We're already paying around $30,000 per day in interest, and projections show that figure could rise to $50,000 daily within six years if debt continues to grow unchecked.''

The council could reduce its debt by spending less on ''vanity projects or speculative investments'', Councillor Williams said.

But Bancorp NZ corporate services manager Miles O'Connor, who addressed a council meeting last week, said Waimakariri council's debt levels were low compared to other growth councils.

Queenstown-Lakes District Council, which has a population of around 52,000, less than Waimakariri's 70,000, already has a debt-to-revenue ratio of 270 percent - twice as much as Waimakariri, he said.

It is expected local government credit ratings could improve with changes in the sector, such as completing three waters reforms or changes to funding streams.

LDR is local body journalism co-funded by RNZ and NZ On Air.