Council strategy to return in excess of $1 million
A short-term borrowing strategy implemented over the past three years will have earned Waipa District Council more than $1 million additional cash for ratepayers by early 2020.
Since 2016, Council has taken advantage of a favourable difference in borrowing and investment interest rates. The low-risk borrowing has been done through the Local Government Funding Agency (LGFA). The LGFA is owned by 30 New Zealand councils plus the Crown and allows councils to access funds at low interest rates.
In its latest arrangement, Council borrowed and invested $35 million at fixed rates of interest for a period of between three and six months. The money has been invested with three banks –BNZ, ASB and ANZ – in line with Council’s investment policy.
When each investment expires, the $35m will be returned firstly to the Council, then to the LGFA in full.
But the excess interest earned from the investment ($132,759) after payment of interest on the borrowing, will go back to the Council to benefit Waipa district ratepayers. It will be reflected in the 2019/2020 annual accounts.
Chief financial officer Ken Morris said Waipa District Council has entered into several similar financial arrangements over the past three years, securing more than $900,000 in additional interest revenue.
“When this latest series of investments mature, the total excess interest earned on behalf of ratepayers from these arrangements will exceed $1 million,” he said.
“That is a substantial amount of money and we are only really able to do this because Waipā has very strong financial management in place and a robust balance sheet. The risk on the investments is negligible but the rewards in terms of additional cash are substantial and have secured $1 million that ratepayers don’t have to fund.”
For more information, contact: Jeanette Tyrrell 027 5077 599