'Rush' for $40m loans criticised

BY CLAIRE CONNELL

A Marlborough District Council election candidate says a council decision to borrow up to $40 million to pay for core infrastructure in the region is dumping a load of borrowing on the new council.

Blenheim lawyer David Dew contacted The Marlborough Express this week with concerns about the council going through with the borrowing and questioned why the decision had to be rushed through before the election next month.

The decision to borrow up to $40m comes after approval for major items in the region such as the pools complex, the Alfred St car park building and the $14m Blenheim water treatment upgrade, all in Blenheim.

The projects were approved two years ago during the long term council community plan process and the annual plan process this year.

District councillors on Monday gave council chief executive Andrew Besley and corporate finance manager Martin Fletcher approval to organise the loans, either through a bank or from bonds issued to investors.

Councillors also gave approval for Mayor Alistair Sowman and financial planning committee chairman Gerald Hope to sign a debenture trust deed with Christchurch-based company Perpetual Trust. The deed allows the trustee company to monitor council activities to ensure bondholders' funds are protected.

Taking a loan meant the cost would be spread over several years rather than adding up to $40m to rates demands at once, Mr Fletcher said.

Mr Dew, who is standing for the Blenheim ward, said he could not understand why the decision could not have waited until after the election so the new council could debate it.

He denied any suggestion his comments were an attempt to get support from voters.

"This is $40m that the new council should decide upon," he said.

Mr Dew predicted not many ratepayers knew about the borrowing.

"I think the council kept this very quiet and certainly didn't consult on that issue as they should have. It's no excuse to say `It's on page 134 of the annual plan, so you should know about it'."

He also questioned why the council had consulted only one financial adviser, Bancorp Treasury Services, rather than testing the market.

Mr Fletcher said it took several months to set up the loans, which had to be signed off now so the money was available to pay for the projects.

"It's nothing new. It was clearly signalled two years ago in the long term council community plan."

The loan or bond money would be borrowed in smaller amounts as required, so the council would pay interest only on the amount it needed and avoided over-borrowing, Mr Fletcher said.

The council had used Bancorp because they had worked together before.

A Massey University school of economics and finance associate professor told The Marlborough Express it was normal for councils to look at options during a downturn, when it was often more difficult to borrow from banks.

The council has $7m in debt, borrowed from its subsidiary MDC Holdings, which will be repaid when rates come in during September.

There was minimal discussion on the loans at the council meeting on Monday. Councillor Francis Maher and Mr Sowman said the council needed the funds to renew important infrastructure.

- The Marlborough Express