Liability Management Policy
Objective
To ensure that all current and term liabilities of the Kaikoura District Council are managed prudently
and effectively.
Current liabilities
Current liabilities are those liabilities that will be repaid in a short time, not exceeding 12 months,
and include accounts payable, cash advance facilities, and other short-term liabilities. For the
purposes of this section of the policy, the current portion of term liabilities do not apply, these are
considered as term liabilities.
Accounts payable are to be paid in full by the due date wherever possible. Those current liabilities
that incur a late payment penalty are to be paid in full by the due date in all cases.
Term liabilities
Term liabilities are those liabilities that are for a term exceeding 12 months, and include council
borrowings, provisions, and liabilities associated with the Marlborough Regional Forestry joint
venture.
Interest rate exposure
The interest rate exposure table below is the council's guideline for interest rate exposure. This
table does not incorporate the liabilities associated with the Marlborough Regional Forestry joint
venture.
Term of exposure
0 – 1 year
1 – 2 years
2 – 3 years
3 – 4 years
4 years or more
Proportion of debt
20% - 27%
20% - 27%
20% - 27%
20% - 27%
0% - 20%
Liquidity
The council will maintain a liquidity ratio of a minimum of 1.1:1 at all times, subject to the liquidity
ratio excluding the current portion of sinking funds (if any) and the current portion of term liabilities.
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
the use of overdraft facilities is to be budgeted for to meet operating expenses
the council delegates responsibility for establishing short term debt and overdraft facilities
to the Chief Executive Officer
Credit exposure
The mix of agencies and financial limits as set out below enables the council to manage its credit
exposure.
Approved counter-party credit limits
Government / Local Government Funding
Agency
Banks with A+/A- or better long term rating,
including (but not limited to) BNZ, ASB, National
Bank, ANZ, and Westpac Trust.
Other entities with A+/A- or better long term
rating, including (but not limited to) local
government stock/bonds
Limits (percentage of the total borrowing
portfolio)
Unlimited
Up to 100% subject to not more than $1 million
in any one issue
Up to 50% but no more than $500,000 with any
single entity
Debt repayment
The council will ensure that loan principal budgeted amounts are set aside in a special fund
established to repay specific borrowing, a tabled mortgage is used, or it will repay debt from special
reserves or special funds associated with the activity for which the loan has been raised. From time
to time, where investment funds are surplus, those funds may be used to reduce term debt as
provided in the council’s Investment Policy.
Borrowing limits
The council's external borrowing limit for term debt will be set at the higher of the following limits:


the gross interest expense of all external term borrowings will not exceed 10% of total
revenues
Total borrowings will not exceed $12 million except where;
o The activity for which the loan has been raised will generate sufficient revenues to
cover all costs including loan repayment (and therefore do not require rates input),
or
o The loan is required following a civil defence emergency to reinstate assets
Security
The council has in place a committed cash advance facility, and a customised average rate loan
facility, both with the Bank of New Zealand and secured by negative pledge. The council will not
pledge assets as security except where it has received a suspensory loan (as has been given for the
housing for the elderly units).