The Palmerston North City Council managed to stop the slide into deeper debt last year.
Instead of borrowing an extra $11.8 million, it repaid $9.6m, cutting its net debt from $120m to $110m during the year.
Mayor Jono Naylor and councillors at yesterday's finance and performance committee welcomed the turnaround.
"There has been a lot of chatter about burgeoning debt," Mr Naylor said.
"This is the first time I have actually seen debt go down from one year to the next.
"It's an outstanding result.
"There is still a way to go, but I'm very encouraged by this."
Mayoral challenger Lew Findlay said reducing debt was one of the things that he wanted to do when he first stood for council 12 years ago, and it was good to see it finally happening.
However, some of the things that contributed to the council's ability to repay debt might not be repeated in the current financial year.
Part of the gain was an operating surplus of $2.22m.
A windfall of an extra $4.4m in development contributions above what was expected helped.
Another $10.6m came in withdrawals from the council's investment fund, where just $3.4m had been budgeted.
And the council spent less than expected on capital projects, so incurred lower interest repayment costs.
Some projects, such as four-laning the Linton St to Pitt St section of Ferguson St, which failed to attract NZ Transport Agency subsidies, were put off indefinitely.
Others, such as the Globe Theatre redevelopment and Ashhurst sewerage pipeline, will become costs in this year's budget instead. A total of $8.7m worth of planned borrowing has been carried over into this year.
Chief executive Paddy Clifford said the council went into this year on a much sounder footing than 12 months ago.
It gave more "head room" if it needed to borrow for emergency or unexpected projects.
Improvements to the city's wastewater treatment plant to comply with new discharge consent conditions imposed by Horizons Regional Council could fall into that category.
Cr Bruce Wilson said while some of last year's debt repayment came from "delightfully fortuitous" windfalls, it was underlined by a sound plan to continue managing debt into the future.
- © Fairfax NZ News
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