Under the gun for an underperforming fund, South Taranaki's investment nest egg is doing better right now than its bigger brother in New Plymouth.
Worth $88.7 million when created in 1997, South Taranaki District Council's Long Term Investment Fund now sits at $106.5m, $17.8m more than when it started.
New Plymouth District Council established its own perpetual investment fund in 2004 with the $259.4m from the sale of its Powerco shares. That fund is now worth $227m, $32m less than when is started.
Much of the difference in condition of the funds can be explained by how much of the fund is released to each council. New Plymouth has been getting close to 8 per cent each year, South Taranaki an average of 5 per cent.
In the last eight years New Plymouth District Council's coffers have been buoyed by an annual $20m top-up from its fund, giving its residential ratepayers the lowest average rates bill of Taranaki's three districts.
However, those release payments have come at a huge cost. The fund is now $95.8m short of the $322.8m it would be if it had retained its "real" value, as perpetual funds should.
New Plymouth Mayor Harry Duynhoven said the problem was not with the management of the fund, as it had outperformed most others, but that council had been taking too much.
However, reducing council reliance on the annual $20m top-up could not be done overnight.
"We could fix this tomorrow if we put rates up 10 or 11 per cent. But that would be pretty painful. So for a more gentle landing we have done it over 10 years," he said.
By 2022 council's payout will have shrunk to $13.5m, taking some pressure off the fund and allowing it to recover more quickly, Mr Duynhoven said.
The council had also amended its policy to allow surplus funds to be put into the fund if required to hasten its recovery.
South Taranaki's fund also has some recovering to do.
At $106.5m it is 18 per cent short of the $126.5m it would be at if it had retained its real value and came in for criticism on Tuesday for "underperforming" when it returned just $2.2m against an expected $9.2m.
"Investment funds fluctuate from day to day, month to month, year to year. The important thing is to look at the fund over the long term. For example over the last three years the average gross return has been a very strong 9.53 per cent," South Taranaki Mayor Ross Dunlop said yesterday.
Since its inception the fund has returned an average of 6.78 per cent. This has easily covered the $3.87m annual rates subsidy the council has taken since the fund began and the $1.73m it has been taking since 2009 to repay loans on community facilities.
Overall the fund has released to the council an average of 5 per cent of its original value each year, as opposed to New Plymouth 7.7 per cent.
- © Fairfax NZ News
Should ratepayers fork out for increased security to keep vandals at bay in Pukekura Park?Related story: Cameras set to catch vandals