Investment fund spending criticised

16:00, Feb 21 2013

Andrew Judd has described the New Plymouth District Council's major investment fund's performance as a "big elephant in the room" which needs to be addressed.

The council has already proposed a serious reduction in the amount of money being taken from the perpetual investment fund (PIF) each year, but the councillor wants to go even further.

Set up with the proceeds of the council's controversial sale of Powerco, and managed by Taranaki Investment Management Ltd (TIML), the fund has long been touted as the envy of councils around the country.

Mr Judd said since the global financial crisis began in 2008 TIML had been returning lower than expected results, but the council had not reduced its drawings or spending enough to mitigate that.

"We've been living on the back of TIML," Mr Judd said.

For the year ended June 30, 2012, the PIF had a closing balance of $227 million - an investment performance of -2 per cent per annum.


At its inception in 2004 the PIF fund was at $259m.

The council is already proposing to take almost $6.5m less out of the PIF this year than the planned $17.1m.

However, Mr Judd's proposal to take even less was shot down by councillors this week.

Mayor Harry Duynhoven said that since the beginning of his campaign for mayor he had identified PIF release payments as an issue which needed to be addressed.

"We have had $20m per annum for eight years out of that fund," Mr Duynhoven said. "In my view too much was coming out of it."

Now it looks set to come down in the annual plan with $10.7m recommended for 2013/14, $9.4m for 2014/15 and $8.5m for 2015/16.

If it came down any further rates would have to increase, Mr Duynhoven said.

"So I don't know if that would find a lot of favour when we've been conservative in other areas."

But it should be an idea that was considered, he said.

Mr Duynhoven said a lot of councils would be envious of NPDC's financial position and its projected rates increase of 4.6 per cent.

"We have an investment fund which is quite a rare thing in New Zealand, so we are in better shape than many councils."

At this week's meeting, savings of $1.4 million, found through an activity and service review, were confirmed in the council's preliminary draft annual plan 2013/14.

But Mr Judd criticised the review as well.

"It doesn't make cuts, it doesn't raise rates.

"We want to feed off the big bucket of money that's sitting there.

"If it's truly perpetual why don't we cut the ties completely and then use what it does return."

Mr Judd said what was needed was a real conversation about the state of the council's finances.

The PIF fund had sustained ratepayers' lifestyles but now, when it was not delivering the returns to continue that, capital spending continued, he said.

Taranaki Daily News