Good morning Shannen,

Thank you for your email to the Department of Internal Affairs. The information you are interested is held by, and more closely related to, the functions of the Local Government Funding Agency (LGFA). While the LGFA is not subject to the Official Information Act 1982, they have indicated that they will be happy to respond to your question directly.

I therefore refer you to the response of the LGFA, which you will receive shortly.

Nāku noa, nā

Michelle Reed (she/her)
Lead Advisor Official Correspondence | Information Management and Privacy
He Ringa Manaaki | Workplace Services Group
He Pou Aronui | Organisational Capability and Services
Te Tari Taiwhenua | Department of Internal Affairs
Level 3, 45 Pipitea St | PO Box 805, Wellington 6140, New Zealand | http://www.dia.govt.nz/

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Dear Shannen,

 

Thanks for your enquiry.  This request was made to the DIA under the
Official Information Act.  However, LGFA is responding on the basis that
we hold the relevant information.

 

When a local authority borrows money, it can provide security (a charge)
over its rates revenue.  Such a charge over rates revenue is typically
created by a local authority entering into a Debenture Trust Deed
(“DTD”).  The DTD creates a security interest in favour of a specified
third party trustee who holds the security for the benefit of the secured
creditors of the local authority, being the council's lenders (eg banks,
bondholders, LGFA) and other financial counterparties. The DTD provides
the mechanism for the security to operate and requires the third party
trustee to oversee and enforce the DTD.

 

The DTD typically creates a security over all rates the local authority
sets or assesses from time to time under certain legislation (in
particular, the Local Government (Rating) Act 2002) or arising under
section 115 of the Local Government Act 2002 and all rates revenue in
respect thereof.   That is, the security is not limited to property rates
and includes targeted rates that set by a local authority under the Local
Government (Rating) Act 2002.

 

If a local authority does not meet its financial obligations (as principal
or as guarantor), the third party trustee can enforce the security
interest created by the DTD. If the security interest is enforced, one of
the key recovery options available to the third party trustee is to
appoint a receiver. If a receiver is appointed, and the local authorityhas
given security over its rates revenue, then section 115(2) of the Local
Government Act 2002 applies.

 

Section 115(2) states that the receiver can assess and collect in each
financial year a rate under that section to recover sufficient funds to
meet the payment of the local authority’s commitments in respect of the
loan or financial obligation during that year, and the reasonable costs of
administering, assessing, and collecting the rate.

 

We trust this assists.

 

Kind regards,

Mark Butcher

Chief Executive

[1][email address]

 

 

 

 

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