Key Takeaways
- The majority of external debt for the region’s councils has been borrowed from the Local Government Funding Agency (LGFA).
- Hastings District Council has the highest external debt, exceeding $450m, due to cyclone response projects and previous disasters.
- Hawke’s Bay Regional Council’s external debt increased to $117m, while Napier City Council saw the biggest rise in its debt position, rising by about $70m.
- Central Hawke’s Bay District Council and Wairoa District Council were the only councils to reduce their external debt.
- External debt includes interest repayments, while internal debt means borrowing from existing funds put aside for future projects or in reserve.
Introduction to Council Debt
The vast majority of external debt for the region’s councils has been borrowed from the Local Government Funding Agency (LGFA). Money borrowed from the LGFA includes interest payments, similar to borrowing from a bank, although the LGFA has lower interest rates in comparison. This debt is a significant aspect of the councils’ financial management, and understanding the differences between external, internal, and gross debt is essential.
Hastings District Council’s Debt
Hastings District Council, which now exceeds $450m in external debt, has had a rough decade in terms of borrowing money to respond to disasters. The Hastings District covers an enormous area and was the region hit hardest by Cyclone Gabrielle in February 2023. The council is still repairing roads, bridges, and infrastructure, and was also hit the hardest financially by Category 3 house buyouts in Hawke’s Bay. Prior to the cyclone, Hastings was already well over $200m in debt, with a large part of that related to the 2016 Havelock North water contamination disaster, which led to significant upgrades to the district’s water infrastructure.
Other Councils’ Debt
Hawke’s Bay Regional Council’s external debt increased to $117m as at December 1, a rise of about $9m over the past year. A Hawke’s Bay Regional Council (HBRC) spokeswoman said increased debt went towards flood mitigation projects. Napier City Council saw the biggest rise in its debt position over the past year, rising by about $70m. As at December 1, the council had external debt of about $110m, up from $40m a year prior. Central Hawke’s Bay District Council managed to slightly reduce its external debt over the past year – from $48m to $47m. Wairoa District Council had $9.6m in external debt as at December 1, down from about $11m a year prior.
Understanding External and Internal Debt
External debt is money borrowed from outside an organisation, such as from a bank or a lending agency (like the LGFA). External debt includes interest repayments, similar to a mortgage. Internal debt means rather than borrowing money from a bank or a lending agency (and paying high interest rates), a council reshuffles existing funds put aside for future projects or in reserve and borrows from itself. That process is known as internal borrowing. Gross debt is simply external debt and internal debt added together. Understanding these concepts is crucial for evaluating the financial health of the councils.
Rate Increases and Debt Management
The councils have increased rates to manage their debt positions. Hastings District Council increased rates by an average of 15% in 2025 and by 19% in 2024. Hawke’s Bay Regional Council increased rates by 9.9% on average in 2025 and by 19.9% in 2024. Napier City Council increased rates by 8.9% on average in 2025 and by 19.95% in 2024. Central Hawke’s Bay District Council increased rates by 7.4% on average in 2025 and by 20% in 2024. Wairoa District Council increased rates by 5.2% on average in 2025 and by 19.5% in 2024. The councils’ debt management strategies and rate increases will be crucial in determining their financial stability in the future.
Conclusion
In conclusion, the region’s councils have significant external debt, with Hastings District Council having the highest debt burden. Understanding the differences between external, internal, and gross debt is essential for evaluating the financial health of the councils. The councils’ debt management strategies and rate increases will be crucial in determining their financial stability in the future. By examining the debt positions of the councils and their approaches to debt management, we can gain a better understanding of the complex financial landscape of the region.