S&P Global affirms Horowhenua District Council’s credit rating
Published on May 22, 2017
Horowhenua District Council’s retained their A+ rating for long-term foreign currency and local currency.
S&P Global is an internationally recognised organisation, and the credit rating process takes into account whether the organisation can service its debt.
The report is compiled following an assessment of Council’s financial policies and practices, budgetary performance, liquidity, debt burden and revenue drivers.
The analysis includes a review of independent media coverage of Council.
“It is reassuring to have the ratings affirmed as it affects Council’s ability to secure lower interest rates thereby making significant savings,” says Horowhenua District Council Chief Financial Officer, Doug Law.
The report states that a supportive institutional framework, strong management, and broadly supportive economy underpin Council’s creditworthiness.
Horowhenua District Council Chief Executive, David Clapperton says the independent analysis by S&P Global should provide ratepayers with reassurance that Council is financially well-managed and on the right track.
The report’s overview says Council’s institutional settings, broadly supportive district economy, and management continues to support its ratings.
It states Council’s capital spending will remain high, leading to after-capital deficits, but a sustainable debt burden, while liquidity coverage is falling.
Horowhenua District Council’s Economic Development Manager, Shanon Grainger says the report highlights the exciting period of economic growth that is now occurring in the district.
The report states the district is set to transform from a period of stagnation; economic growth rose to 3.5% in 2016 compared to average growth of 0.5% during the past ten years. And, that the Wellington Northern Corridor project may lead to Horowhenua being more desirable and productive, and provide opportunities for population and industry growth.
“Council’s Growth Response Team is well aware of the opportunities that the Wellington Northern Corridor project will provide,” says Mr Grainger. “We are planning to ensure the district is able to capture the opportunities to help secure a greater rating-base and attract more employees to ensure a prosperous future for current and future residents.”
Some key take outs from the S&P Global report include:
- Liquidity has worsened
- Debt levels have improved
- Delay in capital works in particular around water infrastructure
- Political environment unlikely to translate into weaker financial governance in the short term.
Mr Law says part of the reason that liquidity has worsened is because Council is taking advantage of low-interest short-term loans over higher-interest long-term rate loans. And, the delay in capital works has reduced Council’s debt against budget.