Government Doubles Crown Liquidity Facility to Support Local Council Borrowing

The New Zealand Government has announced a significant expansion of the Crown Liquidity Facility (CLF) for the Local Government Funding Agency (LGFA), doubling its capacity from $1.5 billion to $3 billion and extending its term from December 2031 to June 2037, Finance Minister Nicola Willis has confirmed.

The move aims to strengthen financial resilience across the local government sector, ensuring councils continue to have access to affordable, stable financing for infrastructure and essential public services — even during periods of global economic uncertainty.

Strengthening Financial Stability for Local Government

Minister Willis said the expansion underscores the Government's commitment to supporting the long-term financial health of local authorities, particularly as they face growing demands for infrastructure investment, climate adaptation, and community services.

"The changes will enable the agency to continue to secure competitively priced financing, which supports the delivery of critical infrastructure and public services," she said. "The increase takes effect today."

The Crown Liquidity Facility functions as a backstop funding mechanism, providing confidence to lenders that the LGFA has sufficient resources to manage unexpected financial shocks — such as those seen during the Global Financial Crisis (GFC) or periods of international market volatility.

Although the facility has been in place since the LGFA's establishment in 2011, it has never been drawn on. Its very existence, however, has been instrumental in ensuring strong investor confidence in New Zealand's local government debt market.

Ensuring Access to Affordable Finance

The LGFA is New Zealand's largest lender to the local government sector, accounting for around 80 per cent of annual council borrowing. It currently holds $23.4 billion in outstanding loans to councils and council-controlled organisations (CCOs).

The agency plays a pivotal role in helping local authorities access long-term, low-cost finance — a role that became increasingly important after the challenges faced by councils during the 2008 Global Financial Crisis, when access to international finance tightened dramatically.

By pooling council borrowing needs and issuing bonds collectively, the LGFA allows councils to leverage stronger credit ratings and lower borrowing costs than they could achieve independently. The CLF, in turn, ensures that LGFA's liquidity remains robust even in exceptional market conditions.

A Balanced Partnership Between Central and Local Government

The LGFA's ownership structure reflects a collaborative model between central and local government. The Crown holds 20 per cent of the agency's paid-up capital, while 30 councils own the remaining 80 per cent. This partnership has been key to building trust and efficiency in local government financing.

Minister Willis highlighted that the increase in the CLF does not impose significant costs on the Crown. "A facility fee paid by LGFA covers the cost of the extra liquidity held on the Crown's books to support local government borrowing," she noted.

This arrangement ensures fiscal responsibility while maintaining confidence in the sector's ability to fund long-term projects — from transport networks and housing infrastructure to wastewater upgrades and community amenities.

Supporting Infrastructure and Future Growth

The expansion of the CLF comes at a time when councils across New Zealand are under pressure to maintain and expand critical infrastructure amid population growth, ageing assets, and increasing climate resilience needs.

Access to stable, affordable financing through the LGFA and the strengthened CLF will allow local authorities to continue delivering on these obligations without placing undue pressure on ratepayers.

Financial analysts have praised the decision as a prudent fiscal measure that enhances market confidence while ensuring the Government can respond effectively to future economic disruptions.

Building Confidence and Continuity

Since its inception, the LGFA has been credited with improving financial certainty and efficiency across New Zealand's local government sector. It has allowed councils — from large metropolitan authorities to smaller rural districts — to plan multi-decade infrastructure projects with confidence in their access to capital.

By extending and increasing the Crown Liquidity Facility, the Government is reaffirming its commitment to the stability of local government financing and the delivery of long-term public investment.

As Minister Willis summarized, "This measure strengthens the resilience of our local government financing system and supports councils to continue delivering the infrastructure and services New Zealand communities rely on."