Council looks to cut fund use
New Plymouth District Council is moving to tighten the vice that has been clamped on the district's biggest financial fund.
After years of taking multimillion-dollar release payments from the Perpetual Investment Fund, the council could soon defer up to $5.2 million of releases this year.
While the council was originally set to take $17.1m from the fund in the 2013-14 year, that amount was screwed down to $10.7m because of the fund's continual under-performance.
However, after taking about half of that $10.7m the council is now looking at leaving the remaining $5.2m of this year's release payout in the investment, or at least deferring the release until next year.
Created from the sale of the council's Powerco shares in 2004 for $259m, the fund peaked in value at $324m in 2008, but is now worth $203m.
Significantly reducing payouts from the ailing fund could help to keep the investment perpetual, finance subcommittee chairman Richard Handley said.
Handley, who has 15 years of experience in banking and finance, spoke out in June against the council continuing to take more than the Pif yielded.
Yesterday he said the council was proposing to defer the release payments of $5.2m largely because it was not needed at this time, but also because the councillors were focused on the long-term nature of the fund.
The main reason behind not drawing on it was the council had delays in completing budgeted work and had a significant variance to budget of more than $20m.
There had also been savings in large budgets, in particular $1.3m on the wastewater aeration upgrade.
"But there is also a general overall caution, especially by this council, to be financially careful," Handley said. The capital works would continue, but to leave the money in the Pif until it was needed was a good option.
"This is taking a prudent and cautious approach to spending."
Even though the council was proposing to defer the releases, Handley said it was possible the $5.2m would never be required and could therefore stay in the fund and help rebuild the investment.
"That is something we certainly have in mind to achieve. Keeping money in the Pif allows it to hold its position."
The council's manager of financial services, Philip Armstrong, said about $3m to $4m was also deferred from last year's Pif release, and was not drawn on this year either.
The finance subcommittee will vote on what to do with the remaining $5.2m of the release at Thursday's 4.30pm meeting.
The full council will then have the final say on August 12.
Taranaki Daily News