Ōpōtiki District Council is lifting its borrowing cap by becoming a guarantor member of the Local Government Funding Agency.

The decision, made at its June meeting, will allow the council to borrow more money for essential projects and would be necessary for it to form a Council Controlled Organisation in the future.

The council’s borrowings are around $15.5 million, forecast to increase to $23 million by the year’s end in its Annual Plan 2025-26.

Some of the major infrastructure projects in the plan include roading upgrades of $2.8m, wastewater upgrades of $1.9m, stormwater improvements of $1.18m and improvements to sportsfields, playgrounds, public toilets and cycleways amounting to over $1m.

New Zealand’s Local Government Funding Agency is a specialist organisation that provides loan funding to local government.

As a non-guarantor member of the agency since it was established in December 2011, the council can only borrow up to $20 million.

The council’s finance manager Billy Kingi said if the council had progressed 100% of its capital works programme it would have exceeded its limit already.

Becoming a guarantor member will also allow the council to access interest rates 0.1% lower than non-guarantors and use special loan products like Climate Action Loans, which can help fund environmentally friendly projects.

Most New Zealand councils – 74 out of 78 – are already guarantor members.

Becoming a guarantor means the council promises to help pay back LGFA’s debts if the agency ever runs into trouble, using rates revenue as security. However, the risk is considered extremely low as the agency has an AAA rating by Standard & Poor’s and is carefully managed.

The LGFA has never needed to call on its guarantors since it was formed.

LDR is local body journalism co-funded by RNZ and NZ On Air.