We have an update about the Local Government Funding Agency lending - And it is something else you are not going to like.

We have an update about the Local Government Funding (LGFA) the NPDC uses for 95% of their borrowing. This is about the amount the proportion of rates income is, that has to be paid by New Plymouth Ratepayers as the guarantors on LGFA lending.

We don’t think you are going to like what we have to tell you – but please share this far and wide - so lots of people know how this works, and so lots of people understand why we need to vote for new Councillors who don’t want to keep using LGFA funding.

We’ve written before about the LGFA, which the Coalition Government wants local Councils to use for Funding with Local Water Done Well (LWDW), and many Councils across NZ use LGFA for their loans.

We’ll remind you with the LGFA – the shareholders are the NZ Government with a 20% shareholding and 18 NZ Councils hold the other 80% shareholding.

The LGFA has a contract where the NZ Government and the 18 Shareholder Councils, who own LGFA, are not liable if any Councils in NZ can’t pay back their loans.

The Ratepayers of all the LGFA Funded NZ Councils are the guarantors of all the loans across NZ if a loan for any LGFA Council lending should fail.

In our previous story about this - the wording used in the contract was that a proportion of the rates for a Council would be used as a guarantee to cover defaults from other Councils, and this would be assessed each year as what that proportion of rates would be.

We thought a proportion would be “some of” what the total rates income would be for a year. The total rates paid to the NPDC in 2024 was $141 million – we thought maybe 25%, or 33%, or possibly it might be as bad as 50% of the rates being the guarantee amount.

We didn’t like the idea of the guarantee, thinking if 25% of the total rates income was to cover a default from another Council, then New Plymouth ratepayers would either need to pay more rates for a year to catch up with our rates income being used elsewhere - or the NPDC would need to borrow that 25% to cover the guarantee payment.

We thought perhaps it would be interesting to find out what “proportion” the total rates income guarantee would be. Was it 25% or 50% ?

We were totally blown away with the answer.

It turns out from the NPDC Finance Team estimate - based on 2024 rates income - we would owe 270% of our annual rates income if there was a default elsewhere in the country – almost what we pay over 3 years in total rates to the NPDC – somewhere in the region of $358 million.

The city would need to borrow almost 3 years of rates income – or cash up the PIF fund (our safety net). We may not be able to cash up the PIF fund as the current level of debt is backed by this investment fund to give the NPDC a good credit rating.

It just beggars belief how our Council would have signed this city up to this lending contract. We showed you the page with Neil Holdom’s signature on the contract back in 2016.

We save around half a percent on the interest rate using LGFA.

HALF A PERCENT !

What is the total cost of interest if loans default and we have to borrow $358 million to pay our contractual obligation ?

Since discovering this $358 Million loan guarantor liability imposed on the Ratepayers of New Plymouth, we wondered how many people at the Council actually knew how much the rates guarantee amount was going to be when this contract was signed.

The Finance Team provided the answer to our question – so there must be people in Finance who have known what this figure is.

When all the elected officials agreed to borrow all this money from LGFA – how many actually knew about the $358 million risk they were taking on as the guarantee amount for Ratepayers ?

Neil Holdom signed the Contract. Gareth Green is the CEO. Do they know how much risk they have signed the ratepayers up for with this guarantee ?

We decided to ask them and see if anyone would reply. We will let you know what we hear back.

We have had a majority of Councillors over the last few terms who seem to be very comfortable with risk – and Councillors who are pretty certain nothing will go wrong.

A number of our supporters have lived with grandparents who were children in the 1929 depression, they have been through the 1987 financial crash, the GFC crash of 2008, and now the Covid years – where many people in this city are still struggling with the financial conditions after years of increased inflation. Our supporters are very aware things can – and do – go wrong - with global finances.

A group of people at the NPDC have rolled a dice and hoped that over the next 50 years no major global financial crashes are going to happen. They are rolling a dice and hoping no Councils default – but it won’t be an issue for the government shareholders if that does happen - as they have handed all the risk over to all the people who own a house and pay rates in this country.

We are not confident the NPDC have got this right. And we do not agree with the rules of this game.

And as an Alliance, we want a priority - with a new team of Councillors – to refinance where possible the current lending, pay back the debt this city owes, and get out of the LGFA.

Please share this information widely with all the people you know – so they know they need to understand more about who NOT to vote for this year.