Press Release – Porirua City Council
Porirua City Council has been assigned AA long-term rating and A-1+ short-term issuer credit ratings by Standard and Poor’s.
Council Chief Executive Gary Simpson says the new credit ratings are excellent news and places the Council alongside the highest rated Councils in the country.
“The Standard and Poor’s (S&P’s) report released today shows that the Council is managing its finances extremely well. We had anticipated an AA- rating so it’s very pleasing to have AA, which is an independent reflection of our financial position.”
Mr Simpson says that the Council’s strong financial management has resulted in this stable long-term rating outlook for the Council.
“Part of our financial strategy has been to manage debt at the lowest possible cost. In the last few months we’ve been looking at ways to work toward lowering our overall cost of interest on our borrowings. Although Council’s borrowings are set to increase to pay for the city’s link roads to Transmission Gully Highway as forecast in the Annual Plan, we have still managed to receive this excellent rating.”
He says the Council recently joined the Local Government Funding Authority which opened up longer term funding sources at a cheaper rate.
“And now the Standard and Poor’s rating will enable us to fund on borrowings at an even lower cost because of the confidence it give to the market about the financial strength of the organisation.”
These actions will give the Council a $600K per annum saving which has been factored into the recently adopted Annual Plan.
Mr Simpson says that while S&P’s recognises PCC’s strong financial position, it did note our operating deficit and under-performance with fees and charges.
“We acknowledge this and are looking at all options to ensure that our solid financial performance continues and this will be considered at part of our Long Term Plan process.”
While the report shows that the Council is in a good position to borrow more, it also notes that budgetry performance would be better if the Council rate funded rather than loan funded more projects.
Mayor Nick Leggett says this dichotomy is part of the challenge the Council faces every Annual Plan.
“We know Porirua has high rates, but we try and keep those increases are as low as possible and it’s a balancing act we do every year, so we are reluctant to fund more projects with rates income. Rather, our approach has been to have a prudent budget with manageable debt levels that are supported across the generations.
“Maintaining the city’s infrastructure has been the top priority and we’ve been rate funding for depreciation for a number of years so that we’ve got money in the bank for our infrastructure renewal programme.”
Mayor Leggett was particularly pleased with the acknowledgment by Standard and Poor’s of the strength of the Porirua Management team and of the financial management skills in the Council.
“Residents of the city will benefit from the reduction in interest rates which will come from the credit rating when the Council goes to the market to fund its capital programme,” he says.