Merger debt claim a 'sham'

21:35, May 15 2014

The Napier City Council's claim that its ratepayers will be laden with Hastings' debt if the two areas amalgamate is a sham and Napier's ratepayers are already paying more to service debt than their Hastings counterparts, according to a chartered accountant.

Brian Martin, former chairman of Unison lines company, made the observation to the Local Government Commission in Hastings yesterday. Napier ratepayers had consistently paid more to service debt than Hastings ratepayers because Napier charged interest on internal debt, and the debt servicing was included in their rates and so did not appear as a cost on financial statements, Martin said.

The cost was recorded in such a way that only an accountant would be able to find it, he said.

Over the past five financial years, including the 2014-15 year, Napier ratepayers had paid an average 10.2 per cent of their rates to service debt, while in Hastings debt servicing had accounted for an average of 8 per cent.

Hastings had external debt of about $56 million and internal debt of $34m. Napier's external debt was about $2m but its true total debt, based on the amount paid by ratepayers, was closer to $60.5m, Martin said.

Napier City Council chief executive Wayne Jack disputed Martin's claims. "Napier's debt servicing includes both interest and principal repayments," he said. "Hastings reads as net interest in their annual plan.

"While Napier charges interest on internal debt, Napier also budgets to receive the interest income from servicing the debt.

"This benefits the ratepayer by eliminating the external borrowing margin and avoids cross-subsidisation between activities."


The Dominion Post