Last month international credit rating agency, Standard and Poor’s, stated in their credit downgrade report about Hamilton City Council, “We estimate Hamilton will deliver one of the largest deficits in the world in fiscal 2025, at 44% of total revenue.” It is not a record that we should be proud of. It means the council is spending everything it earns, then borrowing nearly half as much again just to keep the system running.
The council released a press statement that admitted financial problems but omitted their record-setting nature, replacing it with spin about being New Zealand’s fastest-growing city.
That aged badly, as this month net immigration figures approached zero. The growth is not happening. Even before this drop-off, building consent numbers had already crashed due to the council driving up development costs and restricting water connections. The fastest-growing claim was last year’s news and the council leadership has spent the intervening time looking behind while patting themselves on the back.
S&P continued:
We have lowered our ratings on Hamilton because the financial outlook is – and recent outcomes have been – much weaker than we previously expected. We believe this reflects a deterioration in financial management. We estimate the council’s after-capital account deficit will be much higher than peers’, at about 36% of total revenue, over fiscals 2023–2027. Further adding to credit risk is the more than tripling of interest costs over the past three years.
This is after accounting for historically large general property rate increases, savings initiatives, and deferrals of capex. This follows an exceptionally large deficit of more than 50% of total revenue in fiscal 2024. The deficit in fiscal 2024 was one of the highest in the New Zealand council sector, which has lagged all other local government systems that S&P Global Ratings rates across the world.
In the press statement, the chair of the finance committee, councillor Maxine van Oosten, took solace from this last point that at least we are not alone and tried to reassure ratepayers that “we can now start to rebuild”. Van Oosten has been on council for five years, so perhaps the rebuilding should have started some time ago, especially as she notes the “long-signalled financial headwinds”. It seems nobody has been steering the ship.
To keep the analogy going, the public need a new crew who are prepared to trim the sails, change direction and make more than a few of the old guard walk the plank.
