Cashflow 'not impacted', says council

Gosford Council has denied claims it is on the "verge of losing lots of money" due to the current mortgage crisis in the US.

"The current downturn in global investment markets has not impacted Gosford Council's cashflow," according to Gosford Council acting director of corporate services Mr Alan Ford.

"It should be clearly understood that all the credit markets, worldwide, have been affected by the US mortgage crisis."

According to Mr Ford, Gosford Council has one residential mortgage backed security investment, which 37 other local councils also hold, that is directly linked to the US property market.

This represents 1.7 per cent of Gosford Council's total investment portfolio.

"The situation is that if the council were to sell some investment securities in the current and depressed market, then losses would occur," Mr Ford said.

"The full cash coupons for each of these investments are being paid and council's cashflow position has not been disadvantaged.

"Given the global credit situation, council continues to closely monitor the investment portfolio on a daily basis."

Mr Ford said each of council's investments conforms to the requirements of the Local Government Act, the Ministers Order on Investments and council's own investment policy.

Gosford Council has also denied suggestions made by another local council that they may become involved in legal action against a US financial services firm.

According to Bloomberg Television, Lehman Brothers faces legal action by Wingecarribee Shire Council in New South Wales for "deceptive and misleading conduct" after the value of its subprime-related investments dropped as much as 86 per cent.

Wingecarribee Council's general manager Mr Mike Hyde suggested that councils including Manly and Gosford may follow Wingecarribee in suing Lehman Brothers "within three to five months or sooner".

"In relation to the suggestion that Gosford Council is involved in legal action against Lehman Brothers, it should be made clear that this is not the case and council at this time has decided not to take action," Mr Ford said.

"As the market is expected to recover over the coming months, it has been decided to hold other investments to maturity or until the market recovers.

"In the meantime, Council has adopted the strategy of only investing in cash.

"Council staff are meeting weekly with investment advisors to regularly review the state of the market, the performance of the portfolio and Council's ongoing investment strategy."

Lyle Stone, Clare Graham, 11 Jan 2008 Interview: Alan Ford, Gosford Council