It’s in this context that Brown agreed with the Local Government Funding Agency that the high-growth councils should be allowed to increase their debt caps from 280% to 350%, as well as putting their water assets in council-controlled companies that could borrow up to 500%.
Many of these councils don’t want to borrow more, but they feel they have little choice. Politically, they can’t raise rates any further. The trouble is, the increase to the debt cap hasn’t yet been signed off by Local Government Funding Agency shareholders (that should happen on November 19) and the Govt hasn’t yet passed the law enabling water infrastructure to be moved to the multi-council water companies.
That’s why Wellington’s long-term plan doesn’t use increased debt headroom to fund its water services and insurance shortfall. It’s already up against its self-imposed debt-to-revenue limit of 225%. And S&P is forecasting that Wellington will breach the mandated 280% debt cap in 2026/27; the city doesn’t yet have the increased headroom to borrow more.