LGFA debt limits are strangling big councils, but that's what officials & voters want; Luxon to use more urgency in new 97-day plan; Warehouse wants food price controls; MSD resumes tenancy reviews
National and Act won’t back down, we need to coerce Labour (and possibly the next version of Winston) to cast aside their neoliberal dogma and truly represent ordinary people. Local government will fall into line when the ground shifts nationally.
slight tangent to the article, but in my mind, residential property is a game of leveraged gains, and people wanting to grow their savings will "invest" in property to the amount of leverage that banks allow. silly question: Do you think residential banks would let you leverage up to buy government bonds for infrastructure investment? I also think that people end up in property as there are a lack of good investment options.
I didn't see it in the paper, but wasn't a lot of the local infrastructure that is now coming up for renewal built by central government in the post war period i.e. not included in local government debt?
The suggestion that regular and predictable renewals shouldn't be debt funded is interesting, given our economic regulation rules pretty much ensure this is the case and also doesn't allow depreciation funds to pay for renewals.
Every time Auckland Council runs a " consultation" I say raise rates and borrow more to pay for what we citizens need. They never take any notice of me 😔
For some reason I can not quote the text that I want to quote in my comment but the paragraph starting with "How does it work" is really an excecise in mental gymnastics to get to the desired answer in my view. Can it really be argued that councils keep rates low in order to give ratepayers more money to invest into residential property? What is the evidence for this statement? Are our councils all corrupt? May be the councils want to keep rates low so ratepayers can buy better food and clothes and live a better quality of life? May be the councilors are thinking about the low income families that own a house they live in and are struggling with daily living expenses? What is the basis for presuming that the councils keep rates low in order to give people more money to invest in residential property?
Hi comment seeking comment on broad issues involved. The Dunedin City Council , like Brown knows in Auckland, is seeking to sell off Aurora electricity. I have written a letter to the paper -Otago Daily Times (ODT) seeking debate.(My views based on Hickensian tninking) are open to comment and ideas please
Sir,
Being mightily impresssed by the way the Dunedin City Council is consulting us South Dunedin residents about the issues involved in climate change and sea level rise, I was glad to get a small card in the mail inviting submissions on a proposal to sell the Council owned Aurora Energy.
Alas when I followed the suggestion to check the web page I noted that everything there was focused on why we should sell the company (getting rid of debt and developing a fund for investment). There was little or nothing about the cons of the proposal . This got me thinking.
Although I am 81 and unlikely to be disadvantaged personally it seemed to me (not least for m y children and grandchildren) that even a moment's thought raised lots of issues. As a major local actor, with an impressive record on campaigning - neourology services, the hospital rebuild and homelessness among them -it seemed to me that the ODT owed us a good and indepth coverage of the issues involved when the DCC discussion is so poor.
Some issues that need covering by people far more knowledgeble than me seem to be:
1.Aurora's debt is not because it is useless but because it was used as a cash cow to fund the stadium white elephant - lots of animal metaphors here! Can we add 'bull***t?
2. We need to distinguish between bad and worthwhile debt.
Clearly debt can be useful and valuable. How many of us buy our first house without a mortgage? Why do banks put loan to value limits on loans to land speculators/landlords leveraging 90% debt to buy house after house.?
Such debt makes sense, it is often cheaper than renting,and gives us-long term valuable assets we otherwise could not afford. It also gives us power and control over our lives and leads to intergenerational saving.
As one who remembers 17% mortgage interest rates it is even worthwhile when it costs.
3. For local government moreoover, it spreads costs over time and generations , and is usually cheaper than private debt, as payment is a 'sure thing'.
4. If getting an investment fund is because of financial stress with our rates going up - then it is a short term and temporary fix only. The real problem for local bodies is that they have lots of costs from central government and only rates/fees income. In all other advanced nations local bodies get tax income as well.Central government needs to share this.
5.Should we sell a strategic asset we all depend on - like Aurora?
The lessons from experience seem to be in the negative. Look at our experience with the power companies. The big gentailers (generation and retailing) have greatly increased power prices since partial privatisation and mothballed urgently needed , already consented, solar and wind power farms because extra capacity lessens their profits.
Even worse, the lessons from overseas, indicate the pitfalls. England privatised its water, leading to 360% price increases and super profits to the shareholders. Now Thames Water is going bust and the shareholders will not put more money in , so who is left to carry the can -the public!
If private enterprise is willing to pay enough for Aurora to get rid of its considerable debt and provide a big surplus investment fund -someone is going to have to carry the can - guess who?
6. What about other (non-strategic )assets if theDCC wants an investment fund? I am unsure what they own - maybe sell the stadium (no, because no profit seeker will buy it.) What about some golf courses - great valuable real estate?? Any other ideas?
I would love to be corrected and look forward to some in depth discussion in the ODT.
An aside, I just heard that David Seymour had put up the minimum wage by 45c an hour. He stated that there are few households that a minimum wage earner is the major wage earner, treasury contradicts this by stating that 49% of minimum wage earners are aged between 25 and 64 years. (Read on sideswipe)
Apologies if you have covered this big already, a bit behind on my reading!!
Looks like a form of financial S&M - tying yourself to over tight borrowing limits and strangling long term investment.
National and Act won’t back down, we need to coerce Labour (and possibly the next version of Winston) to cast aside their neoliberal dogma and truly represent ordinary people. Local government will fall into line when the ground shifts nationally.
slight tangent to the article, but in my mind, residential property is a game of leveraged gains, and people wanting to grow their savings will "invest" in property to the amount of leverage that banks allow. silly question: Do you think residential banks would let you leverage up to buy government bonds for infrastructure investment? I also think that people end up in property as there are a lack of good investment options.
I didn't see it in the paper, but wasn't a lot of the local infrastructure that is now coming up for renewal built by central government in the post war period i.e. not included in local government debt?
The suggestion that regular and predictable renewals shouldn't be debt funded is interesting, given our economic regulation rules pretty much ensure this is the case and also doesn't allow depreciation funds to pay for renewals.
Every time Auckland Council runs a " consultation" I say raise rates and borrow more to pay for what we citizens need. They never take any notice of me 😔
Re the continued use of ‘urgency’, I understood there were rules governing this. Can anyone enlighten me ?
For some reason I can not quote the text that I want to quote in my comment but the paragraph starting with "How does it work" is really an excecise in mental gymnastics to get to the desired answer in my view. Can it really be argued that councils keep rates low in order to give ratepayers more money to invest into residential property? What is the evidence for this statement? Are our councils all corrupt? May be the councils want to keep rates low so ratepayers can buy better food and clothes and live a better quality of life? May be the councilors are thinking about the low income families that own a house they live in and are struggling with daily living expenses? What is the basis for presuming that the councils keep rates low in order to give people more money to invest in residential property?
Bravo on describing what's happening in such straightforward terms even non-economists like myself can kind of understand it.
I'm so over this government's "relentless focus" on pretending it's 1991.
Informative as always... depressive as ever...
The great deleveraging looks a bit like catabolic collapse
Timely interview from across the ditch
The deficit myth with Stephanie Kelton
https://podcasts.apple.com/nz/podcast/big-ideas/id164330831?i=1000650578445
Hi comment seeking comment on broad issues involved. The Dunedin City Council , like Brown knows in Auckland, is seeking to sell off Aurora electricity. I have written a letter to the paper -Otago Daily Times (ODT) seeking debate.(My views based on Hickensian tninking) are open to comment and ideas please
Sir,
Being mightily impresssed by the way the Dunedin City Council is consulting us South Dunedin residents about the issues involved in climate change and sea level rise, I was glad to get a small card in the mail inviting submissions on a proposal to sell the Council owned Aurora Energy.
Alas when I followed the suggestion to check the web page I noted that everything there was focused on why we should sell the company (getting rid of debt and developing a fund for investment). There was little or nothing about the cons of the proposal . This got me thinking.
Although I am 81 and unlikely to be disadvantaged personally it seemed to me (not least for m y children and grandchildren) that even a moment's thought raised lots of issues. As a major local actor, with an impressive record on campaigning - neourology services, the hospital rebuild and homelessness among them -it seemed to me that the ODT owed us a good and indepth coverage of the issues involved when the DCC discussion is so poor.
Some issues that need covering by people far more knowledgeble than me seem to be:
1.Aurora's debt is not because it is useless but because it was used as a cash cow to fund the stadium white elephant - lots of animal metaphors here! Can we add 'bull***t?
2. We need to distinguish between bad and worthwhile debt.
Clearly debt can be useful and valuable. How many of us buy our first house without a mortgage? Why do banks put loan to value limits on loans to land speculators/landlords leveraging 90% debt to buy house after house.?
Such debt makes sense, it is often cheaper than renting,and gives us-long term valuable assets we otherwise could not afford. It also gives us power and control over our lives and leads to intergenerational saving.
As one who remembers 17% mortgage interest rates it is even worthwhile when it costs.
3. For local government moreoover, it spreads costs over time and generations , and is usually cheaper than private debt, as payment is a 'sure thing'.
4. If getting an investment fund is because of financial stress with our rates going up - then it is a short term and temporary fix only. The real problem for local bodies is that they have lots of costs from central government and only rates/fees income. In all other advanced nations local bodies get tax income as well.Central government needs to share this.
5.Should we sell a strategic asset we all depend on - like Aurora?
The lessons from experience seem to be in the negative. Look at our experience with the power companies. The big gentailers (generation and retailing) have greatly increased power prices since partial privatisation and mothballed urgently needed , already consented, solar and wind power farms because extra capacity lessens their profits.
Even worse, the lessons from overseas, indicate the pitfalls. England privatised its water, leading to 360% price increases and super profits to the shareholders. Now Thames Water is going bust and the shareholders will not put more money in , so who is left to carry the can -the public!
If private enterprise is willing to pay enough for Aurora to get rid of its considerable debt and provide a big surplus investment fund -someone is going to have to carry the can - guess who?
6. What about other (non-strategic )assets if theDCC wants an investment fund? I am unsure what they own - maybe sell the stadium (no, because no profit seeker will buy it.) What about some golf courses - great valuable real estate?? Any other ideas?
I would love to be corrected and look forward to some in depth discussion in the ODT.
Yours
Pat Shannon.
An aside, I just heard that David Seymour had put up the minimum wage by 45c an hour. He stated that there are few households that a minimum wage earner is the major wage earner, treasury contradicts this by stating that 49% of minimum wage earners are aged between 25 and 64 years. (Read on sideswipe)
Apologies if you have covered this big already, a bit behind on my reading!!
Thank you for Peter Nunns interview. Gives clarity to borrowing for infrastructure. A brave decision to do this urgently required.
Liken to 'if the roof is leaking' borrowing is sensible to ensure future is warm & dry.
Bernard, thank you for this important piece that is also very timely when consultation on councils long term plans are taking place.
I hope this will be opened up so it can be shared with people looking to make submissions.
16 more likes and I open this one up. I'd love to do that.