Geekzone: technology news, blogs, forums
Guest
Welcome Guest.
You haven't logged in yet. If you don't have an account you can register now.
Please note this sub-forum does not provide professional finance advice. You should seek advice from a licensed financial advisor.

To post in this sub-forum you must have made 100 posts or have Trust status or have completed our ID Verification.

If investing please consider our affiliate link for new accounts: Sharesies.



Forums › Finance and wealth management › What happens if a City Council goes bankrupt?
Batman

Mad Scientist
30012 posts

Uber Geek
+1 received by user: 6217

Trusted
Lifetime subscriber

#195969 13-May-2016 22:22
Send private message

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11638732

 

Apparently Auckland City COuncil is $7.5 billion in debt ...

 

Why is that body unable to make money, only knows how to spend? Surely!

View this topic in a long page with up to 500 replies per page Create new topic

This is a filtered page: currently showing replies marked as answers. Click here to see full discussion.

ockel
2031 posts

Uber Geek
+1 received by user: 545


  #1552512 14-May-2016 08:25

joker97:

 

I don't understand why a city council needs to be in debt whether it's $1 or 10 billion?

 

You can tell I am not a businessman ...

 

 

The debt for a council is generally used for capital works.  Rather than paying for key projects out of rates (and never raising enough money to undertake the projects) councils generally borrow and then use the rates to pay the interest.  

 

Laughably if there is a one-notch downgrade in the council debt (because its debt-to-income exceeds 2.7x) it'd result in an $11m increase in interest - on $7.5bn in debt.  Thats a huge 0.14% increase in interest rates.  

 

The council is rated AA and Aa2 which is well above investment grade.  Its higher than any of NZ's trading banks (all AA-).

 

The council has about $40bn in assets - so its debt makes up less than 20% of its total assets.  Plenty of headroom to borrow more and achieve an efficient capital structure.  Its better to use someone elses money to grow your assets than your own - hence the use of borrowed money to increase property wealth in the NZ market.

 

Personally I'd like to see the council borrow more money, buy land, build houses and lease them to first-home buyers or for social housing.  Its got plenty of scope to be a landlord in its own region.

 

More information here for those interested.




Sixth Labour Government - "Vision without Execution is just Hallucination" 

View this topic in a long page with up to 500 replies per page Create new topic








Geekzone Live »

Try automatic live updates from Geekzone directly in your browser, without refreshing the page, with Geekzone Live now.


Updates »

Are you subscribed to our RSS feed? You can download the latest headlines and summaries from our stories directly to your computer or smartphone by using a feed reader.








RSS feeds
Main feed
Forums feed
Copyright
©2002-2026 Geekzone®
Site features
Geekzone BI dashboard
Geekzone Badges
Geekzone Status Page

 

Site Information
Subscribe to Geekzone
Privacy Statement
Forum Usage Guidelines (FUG)
Advertising
Trademark and copyright