Wednesday 5th November 2008

Reserve Bank funding the only sustainable option

"Reserve Bank grants, interest-free loans and low interest loans should be available to local bodies to fund infrastructure projects" said Democrats for social credit Leader Stephnie de Ruyter, responding to information published in the Otago Daily Times about Dunedin City Council borrowing levels.

Yesterday's edition of Otago Daily Times (4.11.08) reports that 'Interest on the $92.8 million the Dunedin City Council plans to borrow this year is set to cost the city $9.5 million a year for the next 20 years (totalling $190 million). More is expected to be borrowed next year. The capital value of Dunedin city will be used as security for the loans, effectively meaning banks could place a claim on rates income if the city was unable to meet its repayments. The council will borrow $45.8 million to be repaid over 20 years at 7.5%, and $46.9 million at 9% on an interest-only basis. The gross interest expense will represent 14.4% of total rates revenues.'

"This indicates that funding issues are driving high percentage rates increases, causing hardship to many ratepayers and stalling necessary infrastructure upgrades. It reflects the folly of the present narrow funding mechanisms" Ms de Ruyter stated.

"By utilising our publicly-owned Reserve Bank of New Zealand, instead of borrowing from commercial trading banks, our country's infrastructure and community project needs could be met without the burden of interest-bearing debt. We would then pay for these projects once, not two or three times over. And tomorrow's ratepayers would no longer be encumbered with servicing yesterday's debts" she said.

Ms de Ruyter noted that this was an example of applied social credit.

"The current practice of gathering local body funding through rates, taxes, fees, fines, government subsidies and top-ups is clearly unsustainable and unaffordable: the burden on ratepayers, residents and taxpayers is too great.

"The government must look to the publicly-owned Reserve Bank to fund essential infrastructure development. It is the only sustainable, ethical funding option suitable for this purpose" Ms de Ruyter concluded.

ENDS

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