Hamilton City Council says 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 the organisation.
Last month, S&P Global lowered its assessment for councils from ‘extremely predictable and supportive’ to ‘very predictable and well balanced’. The new assessment is the second highest on S&P’s six-point scale.
The Council says the rationale for lowering the assessment confirms the concerns it had during the development of the City’s 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 reassessment 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.
There 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 confirmed.
Mr 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“S&P acknowledges the pace that local government reform is being repealed or rolled out, and an increase in unfunded mandates, creates a shifting landscape for councils to operate in.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,” he said.
