Kedgley Sue: Local Government Borrowing Bill Local Government (Auckland Council) Amendment Bill (No 2) — Third Readings 
Kedgley Sue: Local Government Borrowing Bill Local Government (Auckland Council) Amendment Bill (No 2) — Third Readings 
[Volume:675;Page:21299] 
SUE KEDGLEY (Green) 
: 
 The Green Party too is pleased to support the Local Government Borrowing Bill and the Local Government (Auckland Council) Amendment Bill (No 2). We are pleased that the legislation is going to get through in this term of Government—in fact it will be passed today. The Local Government Borrowing Bill will enable local government to set up the Local Government Funding Agency and to become a large-scale borrower on behalf of local councils. We think it does make sense. Borrowing as others have mentioned has been very fragmented and by councils combining in this entity we will hopefully be able to get much cheaper borrowing. That will of course depend on getting a good credit rating but assuming we do borrowing will be cheaper. Treasury has projected that there could be savings of anywhere up to $25 million over time. 
The Green Party supports the bill for the same reasons that Labour has mentioned. We would far prefer that councils raised capital for investment by borrowing rather than by privatising by public-private partnerships or by other things such as 25-year public-private partnerships to own water infrastructure for example. We are also pleased that the Local Government Funding Agency is a voluntary entity so councils will not be forced to join up. I think the Minister of Local Government mentioned that about 35 councils are already signing up. So for all of those reasons we support it. 
But I have mentioned that we have some misgivings about it so just let me share in this House what those misgivings are. No one has yet mentioned the fact that all councils who sign up to the Local Government Funding Agency will be required to guarantee each other’s debts; councils will be jointly liable. So if ever a council were to default all of the councils would be liable and all of them would have to pay for that debt. This may be unlikely but nevertheless it is a possibility particularly when we have scenarios such as the one in Christchurch that a council could in time default. I suspect that most ratepayers of the councils that have signed up will be unaware of this joint liability and that in 10 years’ time they could wake up and find that their council has incurred significant debt that ratepayers were not aware of at the time. 
My second concern is that because the Local Government Funding Agency will enable councils to borrow more cheaply there will be a temptation to borrow more. Treasury has already forecast that council borrowing is likely to increase to $10 billion in the next 5 years. I believe that with this new agency we could see local government debt rise steeply because of the temptation to just borrow rather than put up rates. It is fine to share the debt for some infrastructure over generations particularly for example in public transport where councils are required under our bizarre law to pay for 50 percent of any public transport infrastructure—but if roads are being built councils do not have to pay anything at all. The Government will fund fully State highways and roads but only 50 percent of public transport infrastructure. So in an area like Auckland which has huge vast needs for investment in public transport as we have become acutely aware in the last few days then if we are to see a significant investment in public transport the council—the ratepayers—will have to invest massively. Obviously councils will want to borrow and they will be able to use the Local Government Funding Agency. That example is a very reasonable one of using this agency for cheaper borrowing but I worry that there will be a temptation just to incur more and more borrowing because it puts off the day of having to put up rates which is always politically unpopular. 
But having said that those are our misgivings I repeat that it is far preferable that councils have this ability to borrow and to borrow more cheaply through this agency than to have to sell off their assets. Labour members have been referring to the fact that they believe there is still an agenda to sell off assets. We know there is an agenda to sell off national assets such as power companies but also we expect that in the next term of Government there will be a further push to sell off assets in local government. I just refer to my own experience of a council selling off local government assets. When I first got on the Wellington City Council there was a great push by members—such as Kerry Prendergast and council members Mark Blumsky and others—to sell off a very very satisfactory and efficient local energy company called Capital Power. The argument was that we needed to sell off Capital Power because it would be much more efficient the new private investor would invest better in our local energy infrastructure and furthermore our energy bills would decrease. But despite a vigorous campaign against the sale of Capital Power it was sold. 
It is a sort of sad story of what happens. Immediately the company was transferred to one foreign owner—TransAlta. Then TransAlta sold it on to another entity who sold it on. It has now changed hands about four times and presently our lines company in Wellington is in the ownership of I think the richest man in China. It is really a Chinese company that owns our lines so all of the money goes offshore. Far from our energy bills decreasing as we were promised they have just skyrocketed over the last decade. Money has poured out and there has been a lack of investment in our infrastructure. So exactly what we predicted would happen has happened and it has been a disaster. 
Christchurch by contrast hung on to its very excellent power company. It is a very efficient power company and it has invested in infrastructure. Christchurch has not seen the huge increases in power bills we have experienced in Wellington as a result of having sold off our energy company. There is a very important lesson there and that is why we are so opposed to selling off local council assets and infrastructure. That is also why Wellingtonians will never believe the promises that are made about the advantages of selling off local council infrastructure because we have seen how disastrous it has been for us. The Green Party will be supporting this legislation with misgivings. 
We also have some misgivings about the fact that the Auckland Council will be able to borrow in foreign currency as set out in the Local Government (Auckland Council) Amendment Bill (No 2). Other members have said they think the Auckland Council is capable of managing the risk of borrowing in overseas currencies. We are not quite so sure. People say: “Oh not to worry; they’ll be able to hedge.” etc. We have all heard that before. Let us remember that one of the triggers of the Asian financial crisis in 1998 was that organisations and entities in Asia had borrowed offshore in overseas exchange to finance their domestic activities. When the overseas exchange rates fell the Asian organisations and entities were left insolvent and that precipitated the crisis. So we are still worried about giving this permission for the Auckland Council to borrow in foreign currencies. We are not as sanguine as other members in this House are. 
Having said all of that we still think that making borrowing cheaper makes sense. We support the Local Government Funding Agency and we hope that councils will never be in a position whereby one council defaults and all of the other councils are required to pick up the debt. That is a possibility and all local councils going into this agency need to be aware of that. Thank you very much.