Changes to borrowing

In the Draft Annual Plan, we propose borrowing $443.3 million to support the delivery of our capital programme in 2025/26. This is $66.9 million higher than originally planned in the Long Term Plan, due to both the expanded programme and lower capital subsidies from the Government. Additionally, we propose to repay $82.2 million of existing debt.

Overall, 22.6% of Council rates will be allocated to debt servicing and repayment costs, which is slightly lower than the 23.0% originally projected in the LTP. Approximately $104.9 million is net interest costs and the balance of $82.2 million is repayment of the borrowing.

The Council’s borowings are well within prudential limits. Borrowing enables us to spread the funding of infrastructure across multiple years.

Balanced vs. unbalanced budget

A balanced budget is where we have enough revenue to meet all our costs, including the costs of replacing and renewing assets that are at the end of their useful life.

In the LTP we forecasted that we would have an unbalanced budget in 2026/27 as a result of reducing the rating for renewals. We have now identified that in 2025/26 we will also have an unbalanced budget, mainly due to the LTP overestimating the amount of Government funding towards our capital programme.

When we do not balance our budget we need to borrow money to cover the shortfall. This means that ratepayers in the future also contribute to the cost of replacing and renewing the assets as the borrowing is repaid over 30 years. It also costs more because interest is paid on the borrowing.

To address the issue of fully funding our renewals we have been increasing what we rate over time, with a plan to be fully funding our renewals by 2032. This is a year later than indicated in the Financial Strategy in the Long Term Plan.

We are not penalised for having an unbalanced budget, but the Council must resolve to accept the unbalanced budget, and that it is acting in a financially prudent manner.