Monday 20th February 2012 |
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Auckland Council has had its credit rating affirmed and taken off CreditWatch negative, but agency Standard & Poor’s warned a more aggressive spending programme could put pressure on the local body.
S&P affirmed the council’s AA/A-1 + credit rating, saying the body’s operating balance is very strong, even as the capital expenditure programme lifts its debt burden. The rating agency removed the council from CreditWatch negative because of the strength of its balance sheet. Still, S&P warned any increase in the spending programme or debt blow-out could threaten the outlook.
“Downward pressure would be placed on the rating if Auckland Council’s budgetary performance was significantly worse than our expectations, with an extended period of after-capital deficits in excess of 25 percent, or if debt increased more quickly and higher than forecast—in particular if it exceeded around 200 percent of revenue,” credit analyst Anna Hughes said.
“The most likely scenario for this would be if the council implemented and achieved a more aggressive capital-spending program or there were a weakening in its operational position due to a significant increase in operating expenses or a change in the council’s rating policy,” she said.
S&P put the council’s rating on notice in November, citing its planned increase on spending, particularly on transport.
The rating agency said there are early signs decision-making at the council has improved under the new supercity structure, and completing its long-term plan will be a “significant milestone” for the body.
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