An $11 million deficit on the accountants' books is no reason to panic and will not have any effect on ratepayers, says South Taranaki District Council.
The interim annual report for the 2011-12 year was tabled at STDC's policy development committee meeting yesterday.
Despite an operating surplus of over $730,000, council experienced a lower than expected return on its Long Term Investment Fund (LTIF), which coupled with accounting adjustments of $4.5 million left an interim deficit over the $11 million mark.
By contrast, the 2010-11 annual report was a $4.1m surplus.
The LTIF income return was down because of global economic conditions and foreign exchange losses from investment withdrawal.
However, the council says its books show that while returns by June's year end were low - $2.5m for 3.3 per cent - there was still a further 2 per cent recovery in July.
"We had budgeted a return of $9.5 million, but the ongoing European financial crisis put paid to that," Mayor Ross Dunlop said.
People still needed to look at the long -term picture, he said.
"Over the last three years the average gross return has been a very strong 9.53 per cent."
This was a "paper loss" over not realised income rather than over expenditure so "there is no impact on rates", Mr Dunlop said.
Despite this, yesterday several councillors again pointed out that council continues to budget on getting higher returns from the LTIF than it currently does.
After starting with around $88m following the sale of Egmont Electricity to Powerco in 1997, the LTIF currently sits around $101m - about $30m short of the projections of the time.
"I'm very concerned we are overcommitted and underachieving," said Kirsty Bourke.
Ian Wards said because council voted not to inflation-proof the fund, it is not worth as much today.
It will not be a "forever" fund for future generations as promised.
"It's disappearing and you need to be up front with the community."
Mr Dunlop said by not inflation proofing the fund they had saved ratepayers a considerable amount because to raise it up to original projections would mean charging a "huge sum".
"I am reasonably confident we are in the right space."
Community board member Colin Greaves said being $30m behind projection, the council should stop trying to hide the fact the fund will eventually go.
"Let's stop deluding ourselves."
Mr Dunlop said sitting at $101m the fund was growing, just not as much as they would like.
- © Fairfax NZ News
Should the NPDC councillors get iPads?Related story: Tech-wary councillors hedge their bets