Source: Whangarei District Council
Updated: 26/08/2020 8:59 a.m.
Strong, disciplined and consistent financial management has seen Council lift its credit rating to AA “with a positive outlook” over the past five years, according to international credit rating organization S&P Global Ratings (S&P).
“In fact, the international credit rating agency scored Whangārei’s standalone credit profile at ‘AA+’, which is stronger than that of the New Zealand Government,” said Councils Corporate Group Manager Alan Adcock.
“Unfortunately S&P will not give us a higher rating than the sovereign has, so our rating is capped at our government’s rating, AA with a positive outlook. We are one of just seven councils in New Zealand to achieve this credit rating from S&P, which is the highest possible to be given by S&P within New Zealand’s public sector.”
In its annual assessment released last week, S&P said the steady rise in the rating had occurred since Council’s current financial strategy was adopted in the 2015 – 2025 Long Term Plan.
“S&P assessed our credit worthiness in considerable detail before concluding that it is extremely strong, and put us in the top tier.
Mr Adcock said using S&P to provide a credit rating made it easier for the Local Government Funding Agency (LGFA), banks and other funders to determine the risks involved in lending to Council.
“The information helps them to offer better interest rates for our borrowing, which benefits the ratepayer. The better our credit rating, the less interest we are charged on debt.
“The credit rating is a hard-nosed, independent commercial assessment of Council’s financial position, our financial policies and management capability which provides Elected Members and ratepayers with good evidence of the state of Council’s financial position and strategy,” Mr Adcock said.
Explaining the detail of the assessment, Mr Adcock said S&P have re-confirmed Council’s long term credit rating at AA with a “Positive” outlook.
The rating also benefited from the way New Zealand has managed the COVID-19 pandemic to date, allowing our economy to reopen sooner than other advanced countries.
S&P’s report said Council’s measured response to the impacts of COVID-19, demonstrated that it was sticking to the strong financial strategy of the past five years and indicated plans to continue to do so into the future.
S&P said Council’s robust financial management, strong liquidity, and the country’s excellent institutional settings underpin the ratings, which could rise within the next two years if that of the New Zealand government rises.
They said they expect Whangārei to post moderate after-capital-account deficits during the next few years as revenues dip due to the effects of the COVID-19 pandemic and capital expenditure rises and that the accompanying rise in debt should be modest.
“All in all, we would not have hoped for a better outcome, especially in such difficult times,” said Mr Adcock.
“I hope that ratepayers are reassured by this result, as we all work to navigate through these difficult times and further plan for the future of our District, whatever it’s Covid status.”