11 November 2015
Borrowing changes proposed
A proposal to change where the Gore District Council borrows money from will provide considerable savings in interest payments.
The Council is presently seeking public feedback on its proposal to move most of its existing loans and future borrowings to the Local Government Funding Agency (LGFA).
Chief financial officer Luke Blackbeard said the lower interest rates offered by the LGFA, compared to banks, was the main reason for the move.
“For every $10 million the Council borrowed from the LGFA, we would save about $50,000 in interest; savings that potentially could be passed on to our ratepayers.”
Mr Blackbeard said the LGFA was an extremely safe lending agency. It is 20 percent owned by the Government and has the same credit rating of AA+. The remaining 80 percent of shares are held by 30 councils.
The LGFA offers two options to councils to become involved. These are as a guaranteeing local authority, or not as a guaranteeing local authority.
“We have decided to go with the latter option because in the extremely unlikely event of the LGFA defaulting, we would not be liable for the debts of other councils,” Mr Blackbeard said.
It also means the maximum total amount the Council can borrowfrom the LGFA is $20 million.
The Council’s borrowings, up to the end of the 2014/15 financial year, were $11.6 million. The Long Term Plan 2015/2025 predicts it will peak at $24.6 million in 2020/21
Feedback on the proposal is open until Friday 4 December. It was important that people read the Statement of Proposal and supporting information before making a submission, Mr Blackbeard said.
Additional information available here.