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Move to alter LGFA debt covenants to provide more choices for councils

A proposal by the Local Government Funding Agency (LGFA) to lift the quantum of its debt covenants to provide more choices and capacity for member councils to raise more debt, should they choose to do so, is welcomed by LGNZ who say that it will give councils and ratepayers more options for boosting the economic recovery of their regions.

The proposal would allow rated councils with a long-term credit rating of ‘A’ equivalent or higher to reach a net debt to revenue ratio of 300% by 2022, which would then reduce over time to 280% by 30 June 2026.

This proposal would give councils greater headroom to co-invest in ‘shovel-ready’ projects with the Government and Crown Infrastructure Partners, as well as assist ratepayers and business owners with greater flexibility around rates.

“Even before COVID, there was a lot of discussion about raising debt caps. In many cases growth councils, in particular, have the ability to service more debt, that can be used to develop vital infrastructure needed to tackle our housing and transport challenges,” commented LGNZ President Dave Cull.