Burns Brendon: Local Government Borrowing Bill — Second Reading 
Burns Brendon: Local Government Borrowing Bill — Second Reading 
[Volume:675;Page:20989] 
BRENDON BURNS (Labour—Christchurch Central) 
: 
 As earlier speakers have indicated Labour is supporting the Local Government Borrowing Bill because it makes absolute sense. It is a mechanism to allow the local government authorities of this nation to use their collective power and might to borrow at more sensible rates. That collective approach is something that Labour often endorses as a way to go. This bill predates the Prime Minister’s Job Summit. It goes back to the Capital Market Development Taskforce which the last Labour Government set up in 2008. The task force reported to the new Government at the end of 2009 and proposed the idea of a local government bond bank. This bill has evolved from that. At the heart of the bill in its gestation was a view that Auckland would most especially need a borrowing mechanism such as this and indeed the bill includes a particular reference to Auckland being able to borrow offshore. 
But since this bill began its journey through the officials and into the House we have had the Christchurch earthquakes. My city of Christchurch is facing considerable extra ratings demand upon it as it works through the process of paying for its share of the costs of recovery. In question time in the House today we heard reference from I think Russel Norman about the fact that ratepayers in Christchurch this financial year are seeing an additional 1.75 percent on top of the earlier expected rate that they will pay this year as Christchurch residents pay their share towards the cost of recovery. Every dollar that the Christchurch City Council is able to borrow at a lower rate means another dollar paid off the debt bill that our city must meet as its share of contributions to the cost of the earthquakes and the recovery that is needed. Of course we would much prefer that that was the approach taken and that the council in Christchurch and councils across the country take the opportunity of what this legislation envisages and use it collectively to borrow to press down the interest rates and to save their ratepayers cities towns and local authority entities considerable amounts of money. 
We always have a concern around what the alternatives might be. Obviously one of the things in our mind at this point is that this is a much better mechanism to allow councils to borrow and to use their collective might to borrow at lower rates—it is certainly a much more preferable option—than privatising assets or part-privatising assets. We know that that is certainly on the Government’s agenda. It is stated as being part of the Government’s agenda in respect of the assets that the Crown holds in Air New Zealand and Solid Energy. Of course there are other assets in the wider public domain and there are prospects for such alternatives to borrowing sensibly repaying debts over a longer time period and using this bill to hold down the interest rates that councils and therefore ratepayers would face. 
In my city of Christchurch we have seen a very solid stream of revenue to the ratepayer base of Christchurch from a number of council-owned companies particularly Orion which will be known to many members of this House. Orion did a sterling job through the crises of September last year and February this year and through the 13 June earthquake as well. Orion has just released its annual report. Members will have been sent a copy fairly recently. I note that despite the hellish year that Orion has been through the report says it has still managed to produce a net overall profit of $28.4 million and fully imputed dividends back to its shareholders—namely Christchurch City Council as the most notable shareholder—of $37.5 million. 
Again with members opposite from Canterbury present I raise the concerns that are emerging in Canterbury—and it was referred to in question time in the House today—about the option that the Government may be considering for Christchurch as an alternative to borrowing as provided for by this bill. Sensible borrowing at lower rates is a good mechanism that uses long-term strategies and uses dividend streams from assets such as Orion. The Government may be putting the option to the Christchurch City Council in most forceful terms of selling off assets like Orion. I think members opposite from Canterbury need to comment on that issue. I again raise that question in front of them as I have at every opportunity in the House over the last few months. 
It is an important issue for the ratepayers of Christchurch to know whether the Government is leaning on the Christchurch City Council and saying to the council that it should sell off those assets or part-sell off those assets like Orion the port company the airport company the Enable broadband network and the Red Bus company. Those assets are collectively worth around $2.2 billion. If this Government has a philosophy that it is appropriate to sell down assets to reduce debt I ask whether the Government is leaning on the Christchurch City Council to effectively force it to sell down assets instead of taking up much more sensible options as envisaged in this bill to hold on to assets to use them to leverage and raise capital by way of debt and to use the good effects of this bill to hold down the interest rates that the councils and therefore the ratepayers would pay. That is a much sounder strategy—a much sounder strategy—than the short-term option of realising assets selling them off taking the payments and reducing debt but carrying the long-term costs. 
Going back to the Orion example I note that the latest dividend of around $37.5 million takes Orion’s payments back to its shareholders—notably Christchurch City Council and the people of Christchurch—over the last 20 years to $1 billion of dividends and other payments. One has to ask what sort of madness would inspire any Government to consider selling off assets that return that kind of return to the ratepayers of Christchurch. Again I say that we have members opposite from Canterbury in the House today and I ask them to comment on that issue. 
The reason Labour is supportive of this bill is that it is absolutely just plain common sense to borrow a phrase that a member opposite has been known to use. It provides a mechanism for local authorities to collectively raise capital at the best possible rate. I need to note that local authorities are facing some extra costs as a result of some Government policy changes. For instance at Christmas last year—in fact on 23 December; I had predicted that the Minister of Health would choose that date—the Minister announced the capping of the funding scheme that Labour had put in place to allow small communities within local authorities across New Zealand to access some assistance with improving drinking water. That fund has now been capped at $10 million a year. There is still about $80 million in the fund. It was actually fully funded by the Labour Government—$150 million was put into the pot. About $80 million is still in the pot and the Minister has chosen to cap it. In a situation where one in five New Zealanders is still drinking water that is either not safe or not being tested to assure people that it is safe that is exactly the sort of funding that assists small communities to make their water potable and able to be drunk safely. 
One wonders if behind this bill in some respects the Government has chosen to squeeze back the funding that is available to small communities and their local authorities then gear them up so they can take out loans to pay for some of this. There is nothing wrong with support from the taxpayer especially where the funds are there to assist those small communities. Many of them will continue—even under this bill which provides those slightly lower interest costs—to not be able to afford to improve their drinking water unless they are given some assistance as was provided and envisaged by the last Labour Government. Those funds are still there but are now constrained to $10 million a year. 
I also note that in just the last few weeks we have seen the last payment under the Sanitary Works Subsidy Scheme which the last Labour Government also introduced. So we are seeing two funding schemes disappear. We are seeing this sensible mechanism about lower local government borrowing costs which is commendable but the background to it includes the loss of two schemes that I think have assisted many small communities to upgrade their very basic and most essential services which are also worth supporting. In the meantime this bill proceeds through the House. Labour supports this bill.