Spinning the debt
September 9,
by Karl Tiefenbacher

I have often looked at American politics and thought “how can they get away with saying that, and how can anyone believe that crap”. Sadly, I have come to believe we are being fed the same level of misinformation right here in our beloved city.

They say you should always drop bad news on a Friday afternoon because it will disappear in the euphoria of the weekend. The Wellington City Council and its 54 comms staff obviously subscribe to this theory.

Late afternoon on Friday it was revealed that Standard and Poor’s have downgraded the WCC’s credit rating. Something that by Sunday afternoon, as I write this, it is difficult to find any mention of.

This downgrade is a significant indictment on the financial health of our city, and deserves more coverage.

“We downgraded WCC because its financial outcomes are weaker than we previously expected. The Council’s additions to its capex program in its 2024-34 long-term plan will weigh on its fiscal performance over the next three years.”

S+P have also kept the WCC’s negative outlook due to lower revenue and cost increases.

Make no mistake: this downgrade is directly linked to the disastrous Long Term Plan that the Council passed in June. The non-essential expenditure within the LTP is so ridiculous that, even with a 18-20% rates rise, S+P felt the need to downgrade our credit rating.

By the end of this year our debt as a city will be over $1.8billion.

It’s worth taking out your calculator (something I doubt many councilors have ever done) to see what this really means.

Too often we see these big numbers and we have become immune to what they mean. Stay with me on this one as I know numbers can be boring to some people.

$1,862,363,000 x 0.05 (this represents 5% interest … we currently pay 5.5% but with the rates coming down a little I thought I should be generous) = $93,118,150. Divide that by 81,000, which is roughly the number of ratepaying units in the city, and you get $1,149.60. Add Gst of 15% and you get $1,322.05!

That is the amount that every household and commercial premise will be giving to the WCC every year to service the interest-only portion of our loans – not to do anything good with it! The debt will be a staggering $2.5billion by the end of 2028 and at that point we will be each paying $1,775 in interest-only payments.

And our pipes will still not be fixed.

Rather than accepting that we are living well outside our means and cutting back on unnecessary expenditure, the Mayor is drawing on her experience as a lobbyist and spinning half-truths again.

She said the council had to balance the need to continue delivering services for the city while also positively dealing with the effects of the economic downturn, inflation, high interest costs, soaring insurance costs, seismic-strengthening projects and the need to upgrade the city’s water infrastructure.

While most of this is sort of true, the reality is we are not currently significantly increasing our expenditure on water infrastructure – that happens in later years of the LTP. I think you will struggle to find much evidence of how they are “positively dealing with the effects of the economic downturn” – I’m not even really sure what that means.

At 5-5.5% cost of borrowing, the “high interest costs” are not driven by interest rates but by excessive borrowing. The roading changes – Thorndon Quay, Golden Mile, cycleways – Karori, Wadestown, Island Bay, Berhampore to name a few – are all non-essential money guzzlers. $550k for a bike rack – enough said.

Revenue lost from car parking removal is in the millions annually and causing cashflow issues.

Until we stop the spin and start dealing in facts, we cannot move forward in a positive way.

Comments in reply.

The scenario Karl paints is as chilling as it is inevitable on current settings. There is something seriously wrong with a system of governance where largely inexperienced, unqualified and ideologically-driven people can plunge a city into mind-boggling debt for vanity projects and other non-essentials, and be long gone, often having departed for political careers, before the fiscal chickens come home to roost.

Edward,

Who could seriously claim that the Wellington City Council is worth preserving? Incompetent and drunk with power, it needs to be dismantled and reconstituted from scratch. Immediate termination of the communications team is an obvious start.

Geoff Palmer,

A million, a billion … what the heck? At that point I ask people to consider the difference between a million seconds and a billion seconds. A million seconds is 11.5 days. A billion seconds is almost 32 years.

Andrew,

54 comms staff! Utterly ridiculous.

The oft-mentioned bike lanes should be stopped immediately. I have driven the length of Onepu Road the last two Sundays, and there wasn’t a single cyclist there. Yesterday, I came back around the bays, and at Baleana Bay there were two cyclists on the road, metres from their multi-million-dollar cycleway. Then to confound it, there was another cyclist on the road, not the cycle path, at Oriental Parade. Then at Kent Terrace, again, not a single cyclist on their dedicated paths.

Even though the cyclists clamour for them, a small number of the population occasionally uses them, and yet more cyclists do not use them at all.

CBD_Penguin