Govt mulls local govt bond bank

BY ADRIAN CHANG
Last updated 11:49 08/07/2009

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The Government says it is considering creating a local body "bond bank" which would help finance up to $30 billion in planned infrastructure costs over the next decade.

Finance Minister Bill English said today the idea of the bond bank came from February's Jobs Summit and was also recommended by the Financial markets Development Task Force.

English said  a study would look into whether combining council borrowing needs into a centralised debt institution would result in lower interest rates and transaction costs.  He said the arrangement is common overseas and the study would also investigate how such an organisation would be run.

"The Government recognises that councils face a big spike in costs over the next decade to provide adequate sewerage, water and roads.  Some of this will be appropriately financed by debt," said English.

"We are sympathetic to any arrangement that can lower the cost of local authority borrowing and we are keen to help councils work together to see if they can do this," he added.

A joint central and local government steering group will be set up to consider the outcome of the bond bank study and will make a decision on if and how the bank would be run.

Local Government New Zealand president Lawrence Yule said he welcomed the study.

"We look forward to working with the Government on this initiative, which has the potential to significantly reduce the cost of borrowing for councils, with flow-on effects for ratepayers too," said Yule.

The study will be undertaken by Cameron Partners and Asia-Pacific Risk Management.

 

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