Council 'not affected' by mortgage crisis

Gosford Council has claimed that local ratepayers "will not be affected by the current sub-prime mortgage crisis", as suggested in light of the Cole Report into NSW Councils' investments.

The report states that council's investments have potentially dropped $23 million (estimated Mark to Market) in value in the wake of the US sub-prime mortgage market collapse.

"Council would only experience a loss if it were to call on all investments right now at the present valuation," Council's Director of Corporate Services Mr Nic Pasternatsky said.

"The Cole Report is based on the Mark to Market valuation as at June 30, 2007, and the price we would have received if we sold at that point.

"There will not be a 'fire sale' of council's investments.

"Our current strategy is to hold our investments to maturity, then reinvest the funds in direct cash securities."

Council said it was conscious of its liquidity and currently had over $25 million available in direct cash to meet its commitments.

"The best way to explain it to residents is to equate it to the value of your own home or shares. In recent years, the value of your home or shares may have gone up, but in the current depressed market the value of your home and shares would have most likely decreased," Mr Pasternatsky said.

"However, if you have no plans to sell, then this is only a paper loss with no effect on your situation.

"This is similar to council's current strategy.

"We have no plans to sell these investments at present and this will not affect our commitments to our ratepayers."

The Cole Report emphasises that its findings are based on "market valuations and hence unrealised potential market losses", with it also stating that "these unrealised losses are significant in absolute terms but are not considered to pose a threat to the financial viability to the NSW Local Government Sector".

Council acknowledged that the global capital markets were impacting on the market value of council's investments but claimed that it was "a worldwide phenomenon being experienced across the market".

Council said it had strategies in place to minimise the impact.

Council also said it was regularly monitoring the state of the market, the performance of the portfolio and council's ongoing investment strategy.

Press release, 3 Apr 2008 Kate Carragher, Gosford Council