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A total of 143,000 Auckland households are paying rates just to cover the interest on Auckland Council’s debt.
Mayor Wayne Brown told councillors recently that council spends $503 million a year on interest, $1.4 million every day.
“It’s why having debt is not a good thing,” he said.
At the Governing Body meeting on May 23, staff reported that net debt had increased by $760 million bringing council’s debt up to $11.9 billion.
Council’s current financial strategy has been to cap debt at 290 per cent of council’s operating revenue.
If Brown is able to convince the majority of councillors to sell council’s 18 per cent share in Auckland Airport, the debt ratio is projected to track below 220 per cent by 2030/31.
Financial strategy and planning general manager Ross Tucker said that council funded long term infrastructure projects through debt. He said if council tried to directly fund these projects through rates, it would cause a significant increase [in rates].
“You are talking a massive amount, a huge number, broadly in the order of a 50 per cent rate increase,” Tucker said.
He said council’s options to fund large infrastructure projects were either to fund projects through debt, raise the rates or not do the projects at all.
Recent feedback on Mayor Wayne Brown’s budget proposal indicates some Aucklanders would prefer to borrow rather than make cuts.
A total of 39 per cent of submitters said they would prefer rate increases or borrowing over proposed cuts.
