30 August

Standard and Poor’s (S&P) credit agency has lowered Hutt City Council’s long term credit rating one notch from AA to AA- with the rating outlook maintained at a ‘negative’ outlook. The short-term rating of A-1+ remains unchanged.

This follows similar credit rating downgrades for other councils across New Zealand, and the likelihood of this downgrade was clearly signalled by S&P over the past year.

New Zealand councils’ debt levels have been increasing and the country as a whole is facing escalating costs and inflationary pressures.

The S&P report outlined the challenges faced by all councils leading to downward pressure on ratings around the country. It includes councils’ limited revenue streams, high infrastructure responsibilities, and a level of uncertainty around water reform.

S&P acknowledged the Government’s Local Water Done Well reforms may well give Council the option to shift water assets into a new regional water utility. There is plenty of work to do around this issue but that remains a distinct possibility.

The following criteria is considered by S&P when determining a rating for councils: institutional framework, economy, management framework, liquidity, budgets and debt.

Mayor Campbell Barry says we can’t ignore the infrastructure deficit which has been decades in the making.

"Since 2019 we have unapologetically increased investment in water infrastructure to address decades of underinvestment. Since 2021 we have increased capital investment in three water infrastructure by 234% - from just $29 million to $97 million this coming year," says Mayor Barry.

"Refusing to kick the can down the road does have an impact on our debt position - but it is the right thing to do.

"Our credit rating is still very strong, and we are in a similar position to councils across New Zealand. In practical terms, the change means that there is likely to be a small increase in interest on new borrowing."

© Scoop Media