Research Update: Horowhenua District Council Ratings Lowered To 'A+/A-1' On Rising Debt; Outlook Negative

Horowhenua District Council is facing budgetary pressures from widespread inflation and rising capital expenditure (capex) to cater to its growing population. Budgetary pressures also reflect historical decisions to minimize general property rate increases. Operating margins are weaker and after capital account deficits could be double our previous expectations. This is despite promises of large rate increases from fiscal 2025 (year ending June 30, 2025). Horowhenua was the only rated New Zealand territorial authority to deliver a cash operating deficit in fiscal 2023. We expect the council's debt to rise to more than 240% of operating revenues, and liquidity coverage could be lower than in the past. Consequently, we lowered our long-term issuer credit rating on Horowhenua to 'A+' from 'AA-',

...- Horowhenua District Council is facing budgetary pressures from widespread inflation and rising capital expenditure (capex) to cater to its growing population. Budgetary pressures also reflect historical decisions to minimize general property rate increases. - Operating margins are weaker and after capital account deficits could be double our previous expectations. This is despite promises of large rate increases from fiscal 2025 (year ending June 30, 2025). Horowhenua was the only rated New Zealand territorial authority to deliver a cash operating deficit in fiscal 2023. - We expect the council's debt to rise to more than 240% of operating revenues, and liquidity coverage could be lower than in the past. - Consequently, we lowered our long-term issuer credit rating on Horowhenua to 'A+' from '##-', and our short-term issuer credit rating to 'A-1' from 'A-1+'. - The negative outlook on the long-term rating reflects our view that Horowhenua's financial management could weaken over the next...

Research Update