Full S&P report (160KB PDF)
S&P says it views the City Council’s financial management to be strong in a global context. “This is a key factor supporting our ratings.”
It adds: “The council has credible and well-established financial-management processes.”
Water reform and other reforms that are/will impact the local government sector remain a key focus after S&P downgraded a number of councils earlier this year as a result of their review of the institutional framework settings for the sector.
S&P notes that after the upcoming elections next month “we expect the new council not to make material changes to its financial strategy.”
The negative rating outlook reflects the risk of the Council deviating from the adopted strategy over the next two years.
The City Council’s acting Chief Strategy and Finance Officer, Raina Kereama, says the S&P reaffirmation was expected and reflects the continued challenging economic conditions and need for large-scale infrastructure investment faced by councils around the motu.
In response to some of the more material statements S&P have included in the report, Ms Kereama has provided the following insight to explain the difference: “The assumptions used by S&P (specifically in calculating water debt and the debt to revenue ratio) in their modelling are different to those of the Council as reported in the 2024-34 Long-Term Plan. This reflects the conservative position S&P are required to take due to the methodology used to rate the sector (in New Zealand and internationally). The basis for these calculations is not reflective of how either Council or the LGFA calculates the covenant ratio for lending purposes.”
Today’s rating will have no impact on the cost of borrowing for Wellington City which, like other councils, benefit from very efficient funding costs by borrowing predominantly from the Local Government Funding Agency.