Kedgley Sue: Local Government Borrowing Bill — First Reading 
Kedgley Sue: Local Government Borrowing Bill — First Reading 
[Volume:672;Page:18750] 
SUE KEDGLEY (Green) 
: 
 The Green Party like other parties supports the Local Government Borrowing Bill although with some misgivings. We will listen carefully in the select committee process and see whether our concerns can be addressed before we decide whether we will continue to support the bill. 
On first looking at the bill it certainly makes some sense to set up the New Zealand Local Government Funding Agency which will be able to issue debt and raise finance on behalf of local governments. The agency will become a sort of large-scale borrower and hopefully get a high credit rating and thereby a lower interest rate so that local councils will be able to borrow more cost-effectively and the agency will be able to lend on more favourable terms than those that would normally apply. There is merit in that proposal. There is merit too in allowing councils to come together in this way cooperatively to fund large infrastructure projects. We are pleased that it is an opt-in arrangement. Councils are not forced to go to this agency to borrow money but they can do so if they wish. 
There are as the previous speaker Nanaia Mahuta said a lot of large infrastructure projects in local government that need funding not to mention the Christchurch earthquake rail projects etc. So spreading the risk over several generations makes a certain amount of sense. 
We have some concerns however about allowing the Auckland Council to borrow in foreign currency which it is currently prohibited from doing under the Local Government Act. We fear that there could be some unintended consequences because the effect of this bill could be to encourage even more borrowing amongst local councils. We need to remember the Asian financial crisis of 1998. One of the main reasons for it was that large entities and organisations in Asia borrowed offshore to finance their domestic activities and when exchange rates fell they were left insolvent. We are fearful that we could see similar things happening in New Zealand. If the Auckland Council is encouraged to borrow offshore while our currency is strong what happens if the currency falls? We hope that would not happen but that is the sort of risk that is attendant on encouraging the Auckland Council to borrow in foreign currency. 
We noticed that the Treasury impact statement referred to some risks of borrowing in foreign currencies but it did not spell out what those obvious risks are. They have never really been spelt out. We have considerable concerns about that. We will address those concerns in the Local Government and Environment Committee. 
Another concern we have is about the briefing we were given by Cameron Partners investment bankers. They came along and gave us a presentation to try to encourage our support for this bill. When we looked at the fine print we noticed that it said at the end “In each case public consultation will be required for borrowing money.” but then there was a little asterisk that said “unless borrowing less than $20 million dollars.” So in other words we understand from that that any council would be able to borrow $19.9 million dollars without public consultation. That is a huge concern to us. This provision is not spelt out in the bill as far as we can see but it was admitted to in our briefing by Cameron Partners. This is something we will quiz very closely at the select committee. It would be completely unacceptable to allow councils to borrow up to $20 million without having to go through a public consultation. It would be a further erosion of the public consultation provisions of the Local Government Act. 
We note that the bill seems to be particularly set up to encourage the Auckland Council to borrow—not only in foreign currency. We have huge concerns about the Auckland super-city. As far as we can see it is not local government at all; it is a form of State government. It represents a third of New Zealand’s population—1.3 million people—and its councillors have constituencies that are larger than the constituencies of members in this Parliament. The Auckland Council is not a form of local government at all. In fact we have erased local government in the Auckland Council and instead we have a form of State government. 
We also managed cleverly under the Minister of Local Government Rodney Hide to transfer almost all of the assets of Auckland into these council-controlled organisations or CCOs which are essentially corporations that are outside of the democratic control of the council. They now have the odd public meeting but basically they meet behind closed doors they function like corporate boards and the democratically elected councillors are not able to directly have a say in how the 80 percent of assets that have been hived off into these council-controlled organisations are run. 
I come back to the bill. It will allow those council-controlled organisations which meet behind closed doors to borrow—and to borrow in foreign currency. They will be able to borrow up to $20 million as far as we can see from our briefing paper without having to bother to inform the people of Auckland. 
Already the $28 billion of assets of Auckland have been hived off into the so-called super-city this State government that is the Auckland Council. The whole Auckland Council has been corporatised and basically siphoned off into corporations that are controlling and making the decisions about virtually all of the assets of Auckland. 
We have serious misgivings about the ability under this bill to allow the Auckland Council to borrow in foreign currency. It will not be the Auckland Council borrowing at all; it will effectively be these directors sitting on corporate boards and meeting in secret. They will be able to borrow without public consultation they will be able to borrow in foreign currencies and they will be encouraged by this bill to borrow in foreign currencies. We are worried that this bill could have unintended consequences. 
It reminds me somewhat of a bill that was before this House last week: the Weathertight Homes Resolution Services (Financial Assistance Package) Amendment Bill. In this Chamber all of the National and Labour members voted for the Building Act 2004 which deregulated the entire building industry wiped away all the regulations and controls and gave it over to the market. Everyone supported it and said what a wonderful thing it would be but they did not realise the unintended consequences. They said it would save money and here we are nearly 20 years later with a $20 billion bill as a result of that original legislation. 
I worry that the Local Government Borrowing Bill could similarly have unintended consequences and that we could be standing up and asking why we encouraged our councils—and particularly the Auckland Council—to borrow in foreign currency. We could find ourselves—I hope we will not find ourselves—facing up to a series of crises like those that happened in Asia and in other places where the currency suddenly fell. The Auckland Council could easily become indebted and of course the Crown is not liable so it could be the citizens of Auckland who could find themselves up to their eyeballs in debt as a result of this bill.