Much of what I’ve said about the Auckland Council’s draft Spatial Plan – especially as it relates to transport matters – has been to point out that the Council needs to be more ruthless in how it prioritises transport projects. The impact of this need to prioritise has been highlighted with the Council put on negative watch for its credit rating:
International credit ratings agency Standard & Poor’s is getting the jitters about Mayor Len Brown’s ambitious transport plans and warned of a credit downgrade from AA to AA-.
The agency has talking to the council about plans to significantly increase capital expenditure, particularly for transport, in Mr Brown’s first 10-year budget.
Credit analyst Anna Hughes said it was unclear to the agency how much of this spending would be done with borrowed money, but council projections suggested that the council’s debt level would exceed 170 per cent of operating revenue by 2013 and 200 per cent by 2015.
“We expected to resolve the credit watch during the next 90 days as the council finalises its draft 2012 long-term plan.
A lot of blame is being lumped on the electric trains and the City Rail Link – which is a bit odd as Council will only be repaying half the trains’ debt (NZTA will service the other half), while the City Rail Link is far from being approved.
Reading through the draft documents of the long term plan I can see what the problem is – effectively the Council has, for now, taken “business as usual” as a baseline and added in key projects on top of business as usual. This seems pretty silly as the whole point of the new Council is to make tough decisions over what projects to push ahead with and what projects are no longer a priority – at a regional level. Let’s hope the final versions of both the Auckland Spatial Plan and the Long Term Plan do a better job of project prioritisation. We should be able to avoid a rating downgrade.
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So now we have Standard and Poors making our transport policy? They should bu**er off – if at all, they should make these calls once binding decisions on funding and debts HAVE been made, not while they are being discussed. Unlike, say, superannuition costs forecasted into the future, none of these costs will/have to “automatically happen”. So it is totally inappropriate to treat the DISCUSSION about them as a reason for credit warnings.
This is as bad as “anonymous sources” telling our dear Prime Minister “Oh, if Labour comes into power there will be a credit downgrade”. Pure tampering with politics.
Those rating agencies already got my country, Italy, and now they try to put their hands on Akl Council. We all know they rate what they want who they want when they want. Now they even pre-grade someone. This is just too much. You have to do what they want or they’ll downgrade you. A new weapon, after the atomic bomb became politically incorrect.
Sorry, I don’t think the comparison with Italy is apt, Gian. Italy’s government debt is real – Auckland’s debt (at least the part that S&P claims to be concerned about) is POTENTIAL and FUTURE debt that may or may not occur. There’s a huge difference, which is the reason it is so outrageous.
Oh yeah, I don’t deny that Italy is f***** up because of 20 years of Berlusconi reign and other stuff, the problem is that the people had no word on it. The IMF, ECB and rating agencies stepped in an told Berlusconi to leave, to then put as a PM a men (Monti) that no one ever elected, but that was Vice-president of Goldman Sachs.
He’s going to make sure the banks get their share of money out of the Italians (who are still privately very rich), to repay the debt.
Be aware, if they bought a country so easily, it’s not going to be hard for them to buy a Council.