Apparently the modern way to write an article is to use ChatGPT, so that is what I did: I asked, “Is it wise to start a business with 100% debt?” ChatGPT promptly responded with:
It is generally not advisable to start a business with 100% debt. The risk of failure is higher when a business is heavily leveraged, and if the business does fail, the debt will still need to be repaid. Additionally, having a significant amount of debt can limit a business’s ability to make investments or respond to unexpected changes in the market. It’s generally better to have a mix of debt and equity financing. This way, if the business does not perform as well as expected, the equity holders will share in the loss rather than just the debt holders.
ChatGPT
So why the question in the first place?
About a year ago the Minister for Local Government announced the “Better Off Funding” package for Local Authorities as part of the Three Waters bribery Reform.
This “better off” funding can be used for those projects communities feel they need the most, be it local parks and gardens, swimming pools, libraries and community centres, or investment in public transport and infrastructure to protect against extreme weather events and sea level rises.
Beehive
Here is a chunk of money that you can splash around as you please, Local Council. No need to spend it on cleaning up the sewage spills, repairing the old pipes or ensuring adequate healthy drinking water. No, just go ahead and waste it preventing non-threatening sea-level rise or placating the weather gods in some other way.
But hey, government largesse at the expense of the taxpayer – what’s not to like?
So how much money and where does it come from?
Councils can apply for the first $500 million of Crown funding from the Three Waters reform better off support package by submitting an online Funding Proposal.
The remaining $1.5 billion is available from 1 July 2024. The funding is for local government to invest in local community wellbeing.
DIA
Right, so that is $2 billion and $500 million is from the Crown (that’s you and me – the taxpayers.) The other $1.5 billion? Let’s keep digging.
The Better Off package will comprise:
Threewaters
- $1 billion of Crown funding, $500 million of which is intended to be
provided to local authorities from 1 July 2022 to enable early
investment (“Tranche 1 Funding”); and - the remaining $1 billion to be funded by the new Water Services
Entities.
Oh, so it is actually $1 billion from us generous taxpayers – how nice!
And the remaining $1 billion from the Water Service Entities, available on 1 July 2024, the day that the new Water Services Entities open their doors.
What a wonderful start-up welcoming gift!
On 2 July the Water Services Entities will have spent $1 billion on this ‘Better Off Funding’ largesse, several hundreds of millions on buildings, staff, vehicles, coffee machines etc, $659 million on IT systems and who knows what else. Let’s be generous and say it only totals $2 billion debt on day 2.
How much money will the Water Services Entities have spent on improving the drinking water, fixing the pipes, stopping the sewage flowing into the harbour and so on: all the dire things that are so wrong with the current system that we need Maori governance to fix?
EXACTLY ZERO
And who is going to pay this debt? The water services’ clients – urban NZ ratepayers. Throwing all this money at not fixing the initial problem is going to make your water bills magically cheaper.
Ain’t socialism wonderful?