Kedgley Sue: Local Government Borrowing Bill — In Committee 
Kedgley Sue: Local Government Borrowing Bill — In Committee 
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SUE KEDGLEY (Green) 
: 
 I will take up the issues that Stuart Nash was raising. It is absolutely true as the Minister of Local Government has clarified that all participating local councils will be required to guarantee each other’s debts. So if one council were to default all would have to pay. But I notice that the Government would not be liable. The Government may contribute I believe 5 percent for the first 10 years but the Government will not be liable; only the councils will be liable. The Minister has said we should not worry because it is extremely unlikely that councils will default. I agree that it is unlikely that councils would default. It is unlikely because they can always raise the rates to pay for increases in debt if they find themselves in that situation. 
However it is not unimaginable. We have had the situation in Canterbury which was unimaginable. We could have further situations. We could have one right here in Wellington. We could be in a situation where there are defaulting councils. What worries me is that I do not think most ratepayers are aware that their councils are signing up to this new funding agency. Although there is a requirement that councils inform the ratepayers through their financial statement the reality is that most ratepayers do not really look at the fine print of the financial statement. I would expect that a lot of ratepayers have no idea that this is going on and no idea of their joint liability through this new funding agency. 
Do not get me wrong; the Green Party is supporting the Local Government Borrowing Bill but we do have some qualms about it. The other one is that once there is cheaper borrowing which essentially this bill is all about the temptation will be to increase borrowing particularly when we are in a situation where councils do not want to put up the rates. We are in a very tight financial situation and it would be politically unacceptable for most councils to put up the rates in any substantial way. But we have a problem with some councils like the Auckland Council having to make substantial investments—in particular in public transport. Although the Government will pay 100 percent for roads and motorways it will pay only 50 percent for public transport so if a local council wants to develop public transport it has to invest 50 percent of the cost of any major public transport initiative. Substantial investment needs to be made and the temptation will be to do all of it through debt. 
There is an argument that if we come up with some major infrastructure—like say a new rail loop—we can spread the debt over generations. That is fine. But I fear that the temptation will be not to put up the rates because that will be politically unacceptable and the councillors will all be voted out of office but to just keep putting everything off and piling it up into this debt mechanism. In time we could end up with more and more council debt and a blowout of council debt. Down the road—say 10 years hence—we could find this funding agency with huge debts and we could find some councils defaulting. We could find ourselves in a situation where everyone will ask how it happened because no one told them that they had signed up to this entity and no one really consulted them. So we have some real concerns about that. 
We think there needs to be much greater awareness amongst ratepayers and much greater understanding of what we are getting into here of the joint liability and of the fact that if any participating authority defaults the debt will be shared. People need to be going into this with their eyes open. Let us hope this does not end up inadvertently triggering greater and greater amounts of council debt accumulating over the next 10 years because we have made debt cheaper through this mechanism. Thank you.