APRM has circulated fairly widely a discussion paper we prepared in June 2008 in respect to the structure and operation of the local government debt market. Councils throughout New Zealand have large infrastructure spends and debt increases over coming years. If Councils continue to pay the current market interest rate of 2.00% over the swap and Government Bonds for their money, some projects may not proceed as ratepayers will rightly conclude that the interest cost is too high. Substantially lower market interest rates to record low levels over recent months certainly alleviates this risk. Nevertheless, given the very high credit quality of local government debt, the borrowing margins should be considerably lower than what the market currently prices. The pricing problem is one of no liquidity, with individual councils issuing small debt amounts via the private placement market to all different dates and no secondary market activity. Tauranga City and Auckland City have recently issued bonds to the retail investor market and it makes perfect sense that Mum & Dad investors put their money into the safety and security of local government bonds. Our paper canvases the real opportunity of borrowing Councils clubbing together to form a centralised single debt issuer for the sector. One issuer would have volume, create market liquidity and secondary market activity. Individual Councils would still manage their own debt and interest rate risk, however borrow their requirements from the central issuer at pre-determined margins depending on their credit rating. Depending on how it is established and structured, the single issuance vehicle could be rated AAA with some central Government support. Such centralised municipal debt issuance institutions are not unusual in individual states in the US. With the right support and structure, Councils have the potential to lower their debt issuance margins to well below 1.00% over NZ Government Bond benchmarks. The Rob Cameron-headed task force on NZ debt and capital markets is likely to support this initiative.