Nash Stuart: Local Government Borrowing Bill — In Committee 
Nash Stuart: Local Government Borrowing Bill — In Committee 
[Volume:675;Page:21163] 
STUART NASH (Labour) 
: 
 As Labour’s spokesperson on local government Phil Twyford mentioned we support the Local Government Borrowing Bill. Members heard something before that I thought I would never ever hear in this House. I thought I heard Phil Twyford praise Rodney Hide. I ask Mr Twyford whether I was right. 
Phil Twyford 
: It’s true. 
STUART NASH 
: Gee so it must be good. It must be good. We do support this bill. There are a number of reasons why I support this bill. It makes common sense and it is very pragmatic. In fact it was probably one of ours before it came into the House. But one of the main reasons I support this bill is that I think it provides one of those models that could take the place of State asset sales. This allows people to go out there and invest money without selling equity or it allows local authorities to raise money without having to sell off assets. This is particularly relevant for example to my colleague Brendon Burns who has brought up many times in the media—and I think even in this House in a number of speeches—the concern that he has about the Christchurch City Council selling its assets to fund infrastructural development redevelopment and construction. I have no doubt that Mr Burns will be talking about this matter when he takes a call in a couple of minutes. 
We are talking about Part 1. This part facilitates the operation of the funding agency. As a consequence of that and as a consequence I suppose of the unique nature of this legislation in clause 3(2) a number of things have had to be set up to allow this agency to work in a manner that optimises its mandate. For example paragraph (a) states that Part 1 “exempts the Funding Agency from certain regulatory or taxation criteria that would otherwise apply to it; and (b) applies certain regulatory or taxation criteria to the Funding Agency that would otherwise not apply to it;”. I suppose that that shows the unique nature of this bill and the fact that it is absolutely necessary. 
This agency will issue debt on behalf of all participating local authorities. If the cooperation and support from councils are sufficient the agency will be expected to achieve a credit rating scale specialisation that will yield significant saving for the participating local authorities. I suppose that in the end that will not only save the sale of these council-owned assets but also allow councils to better manage limited resources. Hopefully it may allow councils to drop their rates. I know for example that in the area I am from Napier the council has only about $4 million of debt but the Hastings District Council has about $60 million of debt which is expected to blow out to about $90 million of debt in 3 years. The cost to the ratepayer of financing that debt is extremely high and of course every dollar that is spent on financing debt is money that cannot be spent on improving council infrastructure building council assets and basically making sure that the city is running. But it also means that councils have to levy ratepayers a much higher amount in order to finance their debt. So that is the second reason why I think this is a very good bill. 
Although big is not always better if participating local authorities are brought together that allows economies of scale. This is one area where we can get those synergies that allow the benefits I have talked about. The operation of the funding agency will aid in the development of a liquid market in standardised local authority bonds. These will benefit retail and wholesale investors and be positive for the New Zealand capital markets. 
If there is one thing I have a concern about it is the lack of depth in our capital markets. I also say that the way to get that depth is not to sell our State assets but to sell these sorts of bonds. I suppose if people have a debt bond backed by a local authority that provides opportunity for those sorts of what we call ma and pa investors which I think is a misnomer actually. People who want to invest in the stock market or in our capital markets will be able to invest. I assume that the bond will be quite a low-risk bond and quite a low-returning bond but it will provide another option in the whole suite of options that are required to provide depth in our capital markets which is hugely important. I think that with the collapse of finance companies we are now seeing people becoming more and more risk-averse so this provides another option which is great. 
The bill provides the funding agency with certain legislative entitlements and exemptions that will allow it to be treated as if it were a local authority in terms of how it raises money—