A change to how New Zealand’s local government sector is assessed by rating agency S&P Global has had a flow-on impact for Hamilton City Council.

Last month, S&P lowered its assessment for New Zealand councils from ‘extremely predictable and supportive’ to ‘very predicatable and well balanced’. The new assessment is the second highest on S&P’s six-point scale.

The rationale for lowering the assessment confirms the concerns Hamilton City Council had during the development of its 2024-34 Long-Term Plan.

“In our view, the local council sector's revenue is insufficient to fund its growing expenditure responsibilities,” S&P said in a statement.

“Councils have increased their capital budgets to deliver infrastructure for growth, improve quality, and cover rising costs.”

Hamilton City Council’s 2024-34 Long-Term Plan includes double digit rates increases across the first five years to address the challenges that S&P’s announcement recognises.

The sector-wide re-assessment means that Hamilton City Council’s S&P credit rating has been lowered to A Stable from A+ Negative. The A rating is considered ‘strong’ under the Reserve Bank of New Zealand’s rating framework indicating Council’s ability to make timely repayments on its borrowing.

The is no impact on Council’s interest costs to borrow from the Local Government Funding Agency as a result of the rating change.

Hamilton City Council Chief Financial Officer Gary Connolly said the local government policy environment was also a driver of S&P’s decisions.

“S&P acknowledges the pace that local government reform is being repealed or rolled out, and an increase in unfunded mandates, creates a shifting landscape for councils to operate in. This volatility creates uncertainty which is reflected in S&P’s ratings.”

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