2011-2012 Annual Report - Full Version - PDF - Palmerston North ...

Borrowing Ratios20%Policy Maximum16%201212%201120108%4%Overview Financial Overview0%200%160%120%80%40%0%Net debt to equityNet interest to revenueNet debt to revenueNet interest to ratesPolicy Maximum201220112010Through a period of intensive capital investment ininfrastructure the Council’s gross debt has risen to currentlybe $140m. With the decision to wind down the investmentfund withdrawals have been applied in repaying debt withthe effect being to reduce gross debt from $154m in 2008 tothe $140m currently. Prospective debt levels are determinedthrough the robust long term and annual planning cyclesand managed within criteria set out in the Council’s TreasuryPolicy. The policy contains conservative prudential ratios ofborrowing permitted against several benchmarks, as detailedin the graphs above. The net debt, currently $120m, representsthe total debt less the value of the long term investmentfund.With the increasing level of debt the gross interest expense hadbeen increasing until 2008, but with the reduction in gross debtthis has been reducing. This year with the reduction in effectiveinterest rates the gross interest expense has decreased by 6%remaining below the conservative policy limit contained in theCouncil’s Treasury Policy.14Palmerston North City Council Annual Report 2011/12