Wagner Nicky: Local Government Borrowing Bill — Second Reading 
Wagner Nicky: Local Government Borrowing Bill — Second Reading 
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NICKY WAGNER (National) 
: 
 I rise to support the Local Government Borrowing Bill at its second reading. This bill is all about better cheaper more cost-effective borrowing for local councils. It is a way for local government to coordinate its borrowing to obtain economies of scale and cheaper interest rates. By collaborating and working together councils will have a better chance of affording the capital they need in the coming years to fulfil the expectations of their ratepayers. At the moment the market for local authority debt is fragmented with over 80 issuers and several hundred mainly small issues of debt. Coordination will improve the overall market for local authorities and make it more efficient for both issuers and investors and generally improve the New Zealand capital market. 
Council borrowing has a very low credit risk and ratepayers should gain the benefits of supporting financially sound institutions. In the past because councils have been unable to coordinate their borrowing effectively they have not taken advantage of these opportunities. The bill will facilitate the establishment of the New Zealand Local Government Funding Agency which will issue debt on behalf of all participating local authorities and will have the same regulatory environment as the participating local authorities. That will allow local authorities to combine resources and purchasing power and to achieve economies of scale that will provide cheaper borrowing than ever before. The agency is expected to yield significant savings for the local authorities involved. In fact the forecast stated that they would indicate a 50 to 70 basis point reduction which would cut the interest bill of local authorities by up to $25 million a year. That is something ratepayers would be very pleased to see. In reality the $25 million might be an overestimate now because local government interest rates have already dropped significantly—partly in anticipation of this new authority—so this bill is already being effective. 
Cheaper finance will mean that communities can spend more on essential infrastructure and other priorities and less on servicing debt. It could also mean there will be less pressure for rates increases. The Local Government Funding Agency will also provide a deeper and more liquid market in standardised local authority bonds which will be good for both wholesale and retail investors. At least nine of the larger local authorities have already committed to working together to support the agency and they represent about 54 percent of the rateable income of New Zealand local government. That statistic is from 2009. But a much bigger group—more than 35 councils—is also interested in being involved. 
The costs to ratepayers have been escalating for years but through this initiative which I believe came out of the Prime Minister’s Job Summit we have found a better cheaper and more effective way for local government to manage its borrowing. It is about time that councils took advantage of their low credit risk and that they do so for the benefits of their ratepayers. I commend this bill to the House.