A media release outlining a low-risk arbitrage deal to net a near $400,000 profit was in the interest of transparency and not intended to outline the council’s financial situation, says Waipā District Council deputy chief executive Ken Morris.
He was responding to a story in last week’s edition of The News in which a Cambridge Community Board member, Andrew Myers, said the council was at its debt ceiling and the media release should have focussed on the position of overall debt and the growing debt burden.
Ken Morris
Morris said a $50 million pre-funding deal through to April next year, was a good news story for ratepayers.
“In our Enhanced Annual Plan we are due to take on $106 million of new debt before June 2025, and $50 million is a very reasonable, proportionate amount of pre-funding that fits well with our approved borrowing programme.”
The deal had been advised by the council’s treasury adviser Bancorp and was considered “a well-advised and measured transaction”.
“One of the key things taken into consideration in determining the appropriateness of the deal was the interest rate payable on the borrowing, particularly in a market where the rates are anticipated to fall. The interest rate was in our target range and of course the pricing reflects market expectations of falling interest rates over the period of the loan,” Morris said.
Andrew Myers
He said arbitrage opportunities were not uncommon in the Local Government sector and Local Authorities were offered attractive borrowing rates through Local Government Funding Agency borrowing arrangements, which made such deals profitable.
“In the two to three years leading up to Covid, we entered a number of arbitrage arrangements and netted over $1 million of gain over that period.”
The council was working on its 2025-34 Long Term Plan and reviewing its financial strategy.
“Explanations for increased borrowing and our plans to manage this over time, will be the focus of that financial strategy and we will be consulting with the community on that, in the first half of next year,” Morris said.
Rising debt levels? Photo: Artem Podrez pexels.com
