Govt Eases the Way for Local Authorities to Raise Funds - Minister of Commerce Media Statement

Commerce Minister Lianne Dalziel today announced the Labour-led government's intention to restore an exemption for local authorities to the current Securities Act disclosure regime.

The removal of the local authorities' exemption in 1998 resulted in the withdrawal of local authorities from the public debt securities market. 

"Councils have raised with the government their concerns that the requirements this imposed are a barrier to using alternative sources to rates for funding capital works programmes and this is borne out by the fact that only the Auckland City Council has issued debt securities to the public since the exemption was removed in 1998.  The proposed change will ease the process for local authorities to raise funds from the public, and take the pressure off using rates for such projects," Lianne Dalziel said.  

The government is restoring the previous disclosure requirements for local authorities when issuing debt securities. This will allow local authorities to produce an Investment Statement, with an accompanying certificate signed off by two Councillors, compared to the current requirement of an Investment Statement and Prospectus signed off by the full Council.  

"Considering the estimated $30.8 billion that the combined local authorities of New Zealand plan to spend on infrastructure development over the next ten years, this is an extremely positive announcement," Lianne Dalziel said.

Lianne Dalziel said that the law change will contribute to achieving the government's economic transformation agenda, given local government's role in influencing the regional business environment through activities such as funding infrastructure, urban planning, regulatory functions and regional marketing.

In making the change, the government considered the significant level of disclosure that local authorities currently operate under with regard to their finances, plans and prospects.  It will bring them into line with similar existing exemptions for the Crown, the National Provident Fund Board, the Reserve Bank and Housing New Zealand Corporation.  There is also the option available to the local authority to charge a rate or rates revenue as security for any issue of debt securities to the public.

The changes will be made in a Securities (Local Authorities) Amendment Bill planned for later this year.  More information about the review is available on the Ministry of Economic Development's website.

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