Hamilton City Council’s credit rating has been downgraded by the international credit agency, Standard and Poor’s (S&P).
Council’s rating has moved from AA- negative watch to A+ negative watch, which is a one-notch downgrade.
According to S&P, Hamilton is one of a number of councils which have been downgraded, with more to follow as the sector deals with multiple financial challenges.
The shift, according to the Hamilton Council, was expected as high interest rates, inflation and depreciation costs began to be felt by councils around the country.
The tangible outcome of the lower credit rating is a relatively small effect on Council’s borrowing costs. S&P expects that a one-notch downgrade in credit rating would amount to an additional $500 interest cost for every new $1 million borrowed, per annum.
S&P reconfirmed today that Hamilton City Council’s financial outcomes had weakened as it seeks to address growth pressures.
In a report published by S&P in May, the global rating agency foreshadowed sector-wide downgrades, largely due to New Zealand’s local government operating context.
Council’s Finance and Monitoring Committee Chair, Maxine van Oosten said S&P’s rating and commentary reflects the challenges all councils across New Zealand are facing.
“The report’s findings are confrontational, but it’s a stark acknowledgement that this Council made the tough decisions and did the right thing some months ago through our Long-Term Plan. It will be little comfort to our ratepayers that the report shows those decisions were the right ones, but as S&P notes, we can now start to rebuild.”
S&P also acknowledged the Council’s budgets as credible and processes well-established.
“There is stability and credibility in how the city’s monitoring its spending and managing its debt.”
– from NewsViews
