Hamilton's Spending Problem Just Got Bigger

Hamilton’s Spending Problem Just Got Bigger

by Horiana Henderson

Hamilton City Council has been warned—officially. Global credit agency Standard& Poor’s recently downgraded the city’s credit rating from AA- to A+,attaching a negative outlook. The reason? Escalating debt, deepening deficits, and weak financial discipline—placing Hamilton among the most financially stretched local governments in S&P’s global assessments.

The numbers back it up. Hamilton is spending far more than it earns. After-capital deficits are forecast to reach 44% of total revenue this year. According to S&P, debt was projected to triple over the period 2021 to 2027, while the Council's Long Term Plan shows interest costs have doubled in the last year alone. The council is not just living beyond its means—it’s accelerating toward a financial cliff.

But rather than slowing down, the council may soon hit the gas.

The government has signalled changes that will allow new council-controlled water entities—like the one Hamilton is forming with Waikato District Council—to borrow up to 500% of its revenue. That’s five times its income. And crucially, that borrowing will be backed by Hamiltonians’ homes through the Local Government Funding Agency.

In principle, investment in water infrastructure is necessary. In practice, this opens the door to an unprecedented expansion of council borrowing power—despite its current track record of poor financial stewardship.

Chartered accountant and former city councillor Rob Pascoe is well aware of that track record. In a scathing write-up on the S&P downgrade, he noted that council had once kept debt 20% below its limit to allow for unexpected costs—but abandoned that approach.

On CityWatch, Pascoe said he had hoped for “Fresh Thinking” in the 2025/26 Budget, but instead saw more of the same “spendthrift culture” driving up debt and rates.

“Despite year-on-year rate hikes of 16.5% in 2024 and 15.5% in 2025, council still cannot balance its books,” he said. “The majority of this council continue to support an addiction to spending. They are out of touch with their community and show no fiscal prudence.”

Evidence of this mindset is already emerging in the new water CCO. According to Stuff, the entity’s setup costs have blown out by 20%—from $6 million to $7.35million. Former Te Pūkenga CEO Peter Winder, who is managing the transition, attributed most of the increase to digital technology requirements, noting that the budget included a contingency buffer for unexpected costs.

And while budgets balloon, the burden doesn’t disappear—it shifts. In the year to March 2025, Hamiltonians paid over $63 million in interest alone—before a single pothole was filled or a pipe replaced. That’s real money out of the pockets of families and small businesses—just to service debt.

Yes, Hamilton is growing. But growth must serve the people—not smother them under the weight of runaway debt and unaffordable rates.

The real crisis here isn’t just financial—it’s leadership. Council has borrowed its way to a financial rating downgrade. Now, it may gain the ability to borrow exponentially more.

Debt can be managed—but only if discipline, transparency, and public accountability return to the council chambers.

Hamiltonians are paying the price today. Come election time, they’ll have a chance to call time on it.

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