After years of trying to avoid borrowing with Crown or council guarantees to keep pristine credit ratings, the Govt will quietly allow 500% debt-to-revenue for still-on-balance-sheet water entities
Watercare has its own arrangement being set up in the legislation going through parliament - it was the easy one. This announcement is for the next piece of legislation to deal with the other Councils, which are a more complex situation
Thanks Andrew. My impression is the Watercare deal set the scene, although it's on a larger scale and will also set the tone for any credit rating changes.
I have followed Watercare CCO over many years. Initially it seemed that it was set up for privatisation & there were many groups opposed. It was not well run & there were major problems. However over time it has improved (price continually increases unfortunately) & it is established that water is essential commodity & cutting off supply is mot permitted. It is also a rate on property owner but charged separately to land tax.
Maybe wrong but Simeon seems to be following this path but excluding storm water which makes no sense to me.
Taumata refers to a summit or gathering of people coming together around an important area of focus. Our focus is on improving the performance of the water services sector over time.
Arowai conveys our focus on wai as a taonga, and our focus to put wai mauri, wai mana, and wai ora at the centre of everything we do.
I love the metaphorical significance associated with names in Te Reo, there is a literal and shallow translation that John found, then there are the deeper and more profound meanings that confer mana
Umm, I don’t see the explicit words crown guarantee on these documents. Local government borrowing act 2011 states there is no crown guarantee for debt entered into by LGFA, and any borrowing needs to state such. Sure they have loaned 1.5B to it and are a 20% shareholder, but that would limit their liability. I am really curious to see what impact this has on rating, and shareholder councils once they all start drawing down on these funds.
There is also part of the design that means some arrangements can't access the LGFA funding and have to go to the market i.e. will face a higher interest rate. Be interesting to see how the structure and incentives of LWDW direct councils towards or away from the LGFA.
"Our ratings on LGFA reflect its SACP of 'aa-', and our view of an extremely high likelihood that extraordinary financial support from the New Zealand government (the Crown) would be forthcoming in a stress scenario.”
Re the thread on Taumata Arowai and its various Google definitions I was successful on my second search attempt at finding out what SACP stands for (stand-alone credit profile). The first search led me to the South African Communist Party.
yes I read this as all fine at the current level and secured against rates income ( feb 2024), but not sure how tight it will be when the debt number is twice as big? from say $18B to $32B and the balance is secured against unmetered water rates or water distribution assets it might be slightly less sure. As you say how the Watercare 2 waters spinout project proceeds will be instructive.
Good waters explainer in there today, thanks Bernard... Although, I'm not sure what to read from that Te Waihanga chart, given our long-term energy services have been patently underinvested in, based on our growing general-energy and climate transition needs; and our roading investment has been decidedly slap-dash over the past few decades. It's also worth noting that (unlike the other services) telecommunications over that period has undergone a fundamental shift from wired/hardware to predominately-wireless/software infrastructure so the investment/cost is measuring completely different things at either end of that chart. Regardless, I feel like the actual reality that chart demonstrates about the last 30 years is that energy and telecommunications industries have fissured away because they are able to "soak up" capital investment like a sponge: Specifically, if you build an energy or TC supply, it can be easily absorbed by industries like data centres and raw materials processing. Conversely, if you build roads or water infrastructure and it will either induce congestion or simply deliver empty air down pipes and tunnels. There's no extra 'productivity' that can be gained from over-investment in waters or roads, simply because there's a finite amount of sewage and freight relocation for the investment to absorb.
Brilliant summation of where all the noise and effort, wasted time and money has got us.
I suspect this announcement will go over the head of many and they will be shocked when they are told in 6 months time they will have to pay for the water they use.
So no new taxes then, just translates to new charges for water. Also in the news, higher power prices are on the way due to the rort that is the NZ electricity market and the best that the smirking twerp (aka Minister of Energy) can do is witter on about building expensive and unnecessary LNG import terminals. FFS, I need to have a lie down to deal with the bullshit let alone the cost of living.
Exactly David - as someone with a modest income, whose tax cut was cancelled out by my rates increase, I am 'thrilled' that I will now get to choose whether I pay my mortgage, my ever increasing power bill, my new water charges bill or buy food .....
Really interesting two links on settled homes you gave us Bernard - The Charles Waldegrave one and the ODT editorial. Great social history in combination. Waldegrave makes the clear neo-liberal cut off point when home ownership stopped being government policy.
Reminded me how in 1990 I came to Dunedin from Chch after a broken marriage with $22,000 dollars, a clapped out car and 2 children and the government messaging faithfully being delivered in the media was that the new thing was renting. Home ownership was staying stuck in the past. Not the thing to do. Lucky i was a stuck in the past sort of person and a woman lawyer also stuck in the past especially in relation to women, children and housing helped convince the bank manager (remember them?) to give me a mortgage. Don't miss listening to the Waldegrave RNZ interview.
Yes a fortunate move, banks were not keen to give mortgages to women unless they persisted. However I guess you had high interest rate which detered many.
I'm old enough to remember Shane Jobes saying we should investigate the supermarkets as they fleece money out of us and National mocking him. I can't recall him demanding putting an excess profit tax on the supermarkets in the current coalition agreement. I doubt the govt he's now part of will do anything to ease the rise in electricity cost apart from giving us more platitudes and blaming Labour.
I can see the wheels coming off the coalition when Pooh is no longer deputy PM. Jones and Pooh will switch into disruptive/opposition mode as they are more comfortable in that space and will not want to be taken down in the next election when the pendulum swings.
Are there incentives in this new arrangement to actually fix the issues of broken pipes, unsafe drinking water and proper waste water treatment for a growing population?
FYI, I’ve updated this with comments from S&P that ratings downgrades for councils and even LGFA are possible. This one is now fully open for public reading and sharing.
Is Auckland/Watercare somehow excluded from this arrangement? And if so why and what is the impact of that?
Watercare has its own arrangement being set up in the legislation going through parliament - it was the easy one. This announcement is for the next piece of legislation to deal with the other Councils, which are a more complex situation
Thanks Andrew. My impression is the Watercare deal set the scene, although it's on a larger scale and will also set the tone for any credit rating changes.
I have followed Watercare CCO over many years. Initially it seemed that it was set up for privatisation & there were many groups opposed. It was not well run & there were major problems. However over time it has improved (price continually increases unfortunately) & it is established that water is essential commodity & cutting off supply is mot permitted. It is also a rate on property owner but charged separately to land tax.
Maybe wrong but Simeon seems to be following this path but excluding storm water which makes no sense to me.
'The drinking and waste water systems and charges will be regulated by Taumata Arowai.'
What on earth is Taumata Arowai? Any chance of plain English journalism?
Googled it for you:
https://www.taumataarowai.govt.nz/
Thanks. New Zealand's water services regulator. It's the journalist's job to explain that, not yours or mine.
Also an opportunity to acquire new vocabulary!
Google Translate renders Taumata Arowai as 'liquid level', which is meaningless.
Our name and identity
Taumata refers to a summit or gathering of people coming together around an important area of focus. Our focus is on improving the performance of the water services sector over time.
Arowai conveys our focus on wai as a taonga, and our focus to put wai mauri, wai mana, and wai ora at the centre of everything we do.
I love the metaphorical significance associated with names in Te Reo, there is a literal and shallow translation that John found, then there are the deeper and more profound meanings that confer mana
Fair point John. Sorry. Was a bit rushed today. Overwhelmed with about 600 pages of releases and a swathe of reaction. Assumed a bit too much.
Yeah. My apologies. Couldn't resist.
I don't think Taumata Arowai will be regulating the charges, that's more the Commerce Commission's (Te Kōmihana Tauhokohoko) space
Electricity News: Gentailers That Were Set Up To Make Profits Surprised To Be Accused Of Profiteering
Umm, I don’t see the explicit words crown guarantee on these documents. Local government borrowing act 2011 states there is no crown guarantee for debt entered into by LGFA, and any borrowing needs to state such. Sure they have loaned 1.5B to it and are a 20% shareholder, but that would limit their liability. I am really curious to see what impact this has on rating, and shareholder councils once they all start drawing down on these funds.
There is also part of the design that means some arrangements can't access the LGFA funding and have to go to the market i.e. will face a higher interest rate. Be interesting to see how the structure and incentives of LWDW direct councils towards or away from the LGFA.
Here's what S&P says and thinks:
"Our ratings on LGFA reflect its SACP of 'aa-', and our view of an extremely high likelihood that extraordinary financial support from the New Zealand government (the Crown) would be forthcoming in a stress scenario.”
https://www.lgfa.co.nz/sites/default/files/2024-02/RatingsDirect_ResearchUpdateNewZealandLocalGovernmentFundingAgencyLtdRatingsAffirmedOutlookStable_57474348_Feb-27-2024.PDF
Re the thread on Taumata Arowai and its various Google definitions I was successful on my second search attempt at finding out what SACP stands for (stand-alone credit profile). The first search led me to the South African Communist Party.
yes I read this as all fine at the current level and secured against rates income ( feb 2024), but not sure how tight it will be when the debt number is twice as big? from say $18B to $32B and the balance is secured against unmetered water rates or water distribution assets it might be slightly less sure. As you say how the Watercare 2 waters spinout project proceeds will be instructive.
"Government has just avoided doing the actual borrowing themselves and claiming responsibility for the higher charges."
Haven't they just.
Some politicians like to say "Drill baby, drill". National politicians are going with "Borrow baby, borrow".
Good waters explainer in there today, thanks Bernard... Although, I'm not sure what to read from that Te Waihanga chart, given our long-term energy services have been patently underinvested in, based on our growing general-energy and climate transition needs; and our roading investment has been decidedly slap-dash over the past few decades. It's also worth noting that (unlike the other services) telecommunications over that period has undergone a fundamental shift from wired/hardware to predominately-wireless/software infrastructure so the investment/cost is measuring completely different things at either end of that chart. Regardless, I feel like the actual reality that chart demonstrates about the last 30 years is that energy and telecommunications industries have fissured away because they are able to "soak up" capital investment like a sponge: Specifically, if you build an energy or TC supply, it can be easily absorbed by industries like data centres and raw materials processing. Conversely, if you build roads or water infrastructure and it will either induce congestion or simply deliver empty air down pipes and tunnels. There's no extra 'productivity' that can be gained from over-investment in waters or roads, simply because there's a finite amount of sewage and freight relocation for the investment to absorb.
Brilliant summation of where all the noise and effort, wasted time and money has got us.
I suspect this announcement will go over the head of many and they will be shocked when they are told in 6 months time they will have to pay for the water they use.
So no new taxes then, just translates to new charges for water. Also in the news, higher power prices are on the way due to the rort that is the NZ electricity market and the best that the smirking twerp (aka Minister of Energy) can do is witter on about building expensive and unnecessary LNG import terminals. FFS, I need to have a lie down to deal with the bullshit let alone the cost of living.
Ha! Smirking Twerp. Best laugh I've had today.
Was there no Hoon yesterday?
Yep. There was. I was slow to put out the podcast. My apologies. Up now.
Exactly David - as someone with a modest income, whose tax cut was cancelled out by my rates increase, I am 'thrilled' that I will now get to choose whether I pay my mortgage, my ever increasing power bill, my new water charges bill or buy food .....
Don’t hold back man!
Really interesting two links on settled homes you gave us Bernard - The Charles Waldegrave one and the ODT editorial. Great social history in combination. Waldegrave makes the clear neo-liberal cut off point when home ownership stopped being government policy.
Reminded me how in 1990 I came to Dunedin from Chch after a broken marriage with $22,000 dollars, a clapped out car and 2 children and the government messaging faithfully being delivered in the media was that the new thing was renting. Home ownership was staying stuck in the past. Not the thing to do. Lucky i was a stuck in the past sort of person and a woman lawyer also stuck in the past especially in relation to women, children and housing helped convince the bank manager (remember them?) to give me a mortgage. Don't miss listening to the Waldegrave RNZ interview.
Yes a fortunate move, banks were not keen to give mortgages to women unless they persisted. However I guess you had high interest rate which detered many.
It was tight but we had a stable home. I dreaded being at the mercy of landlords.
Thanks WendtK. He is very good.
I'm old enough to remember Shane Jobes saying we should investigate the supermarkets as they fleece money out of us and National mocking him. I can't recall him demanding putting an excess profit tax on the supermarkets in the current coalition agreement. I doubt the govt he's now part of will do anything to ease the rise in electricity cost apart from giving us more platitudes and blaming Labour.
I can see the wheels coming off the coalition when Pooh is no longer deputy PM. Jones and Pooh will switch into disruptive/opposition mode as they are more comfortable in that space and will not want to be taken down in the next election when the pendulum swings.
Are there incentives in this new arrangement to actually fix the issues of broken pipes, unsafe drinking water and proper waste water treatment for a growing population?
FYI, I’ve updated this with comments from S&P that ratings downgrades for councils and even LGFA are possible. This one is now fully open for public reading and sharing.
What use is that fabulous credit rating except to facilitate borrowing?
Lovely to see people in China buying lots of electric cars BUT the important thing to note is what will be charging them? In all likelihood - burning coal. So it’s not really a win… https://www.cnbc.com/2024/04/15/china-boosts-global-coal-power.html
This is a beast of an article, I think I'll have to re-read this a couple more times to wrap my tiny brain around it.
Thanks Bernard, appreciate it!