Auckland City Council raised $350 million from ‘Secured Fixed Rate Bonds’ – money has already been spent – but where EXACTLY did it go? (OIA reply to Lisa Prager 28 February 2011)

28 February 2011

Official Information Request No. 9000107451 (Please quote this in any correspondence)

 

Ms Lisa Prager

85 Garnet Road

Westmere

Auckland   1022

Dear Ms Prager

Local Government Official Information and Meetings Act 1987

Re: Secured Fixed Rate Bonds

 

I refer to your letter dated 27 January 2011, which we received on 28 January 2011, requesting information about Secured Fixed Rate Bonds.

Please note the following response to each question raised:

1. Please confirm the total amount raised through the Secured Fixed Rate Bond, which closed on 19 March 2010?

Auckland City Council raised $350 million on 24 March 2010 via a retail bond issue.

2. How much of this Bond offer has been spent?

All the cash received on the bond issue has been utilised. Council is a net borrower therefore does not hold significant cash for long periods.

3. What has the money been spent on?

The use of the bond issue proceeds was outlined on pages 7 and 17 in the investment statement dated 17 February 2010 (attached).

The use of proceeds was for general financing requirements of the Auckland City Council, including debt retirement and capital expenditure. In addition, Auckland City Council on-lent some of the net proceeds of this bond offer to other existing councils in the Auckland region.  This was to avoid the need for those councils to undertake their own debt raising, thereby coordinating a borrowing programme across the region. On-lending to the other councils reflected the announcement by the Auckland Transition Agency that the borrowing and treasury functions of the existing councils would be integrated during the transition to the new Auckland Council.

 

4. Name the companies’, contractors and subcontractors who have received funds from this source?

Council manages its treasury and cash flow on a council-wide basis.  Specific cash inflows are not tracked to specific cash outflows (apart from tagged funds), therefore council cannot identify individual third parties that would have received the cash from the bond issue.

5. Name the amount received and the projects related to each company?

Please see response to question 4 above.

6. Where and when was this information made public?

The information on the retail bond issue was made public on a few occasions these are as follows;

1. 1. Intention to make a new retail bond issue was announced by NZX on 24 December 2009.
   2. The issue document (Investment Statement) had the details of the bond issue, dated 17 February 2010.
   3. When the bonds were issued, there was an NZX announcement on 24 March 2010.
   4. It was included in the quotation notice for the NZX as per the NZX announcement on 24 March 2010.
   5. Information on council’s retail bond issues are also available on the councils website. http://www.aucklandcity.govt.nz/council/services/retailbonds/default.asp

7. How is information made public about the amount raised and how it is spent?

Please see response to question six above.

8. Will the Mayor Len Brown uphold his election promise to open the books to the public?

Yes

9. Will the Mayor Len Brown fulfil his election promise to undertake line-by-line anayls of where our public money is going before agreeing to a rate rise?

Yes

10. What possible reason could the Auckland Council expect to raise the rates when the public has already underwritten or gone Guarantor for a total of $350,000,000?

Rising inflation, increases to ongoing debt servicing costs, and any increase in the level of service provided by council or an increase services provide by the council are the primary drivers for rates increases by council. Any increases to these variables will require council to raise rates to meet its day to day obligations. The $350 million proceeds received by Auckland City Council in March 2010 from the retail bond issue has been completely utilised as discussed in question 3 above.

If you have any further queries please contact me on 301 3810, quoting Official Information Request No. 9000107451.

Yours sincerely

Nicole Miell

Information Advisor

Public Information Office

9000107451

Encl.