Council continues investment defence

Gosford Council has continued to defend its investment portfolio decisions after it was the focus of an ABC 7.30 Report investigation which aired on April 21.

The television report featured Gosford Mayor Cr Chris Holstein and Peninsula Chamber of Commerce president Mr Matthew Wales who claimed that council could lose up to $47 million.

Mr Wales told the 7.30 report he questioned council's independence on the matter.

"The question you have to ask is how independent are they?" Mr Wales said.

"What we would like to see is somebody at arm's length from this process - that is, had no involvement in the past - to come in and do a truly independent audit.

"We want a ministerial inquiry as to how we ended up into this situation in the first place."

ABC journalist Matt Peacock reported Gosford council "sank more than $100 million into a new type of investment, promising higher returns than the traditional government bonds" and "might lose tens of millions" as a result.

Following on from the 7.30 Report on Gosford council's investment portfolio, the council's director of corporate services Mr Nick Pasternatsky issued a response to the "complex" issue.

"Council would like to clarify many points that have been incorrectly reported due to various sources that do not have the full background or expertise on this matter," he stated.

"The community can rest assured that council has not lost any money on any of its investments at this point in time and council staff is continually monitoring our investments. "No council capital works programs have been postponed or cancelled due to the current global financial crisis.

"All of council's investments are made within the guidelines of the Local Government Act and they met the minister's recommendations.

"Many people in our community will be able to relate to council's complex situation by reflecting on the following questions; Is your house more or less valuable than this time last year; How is your superannuation doing; and if you have a few shares, have they taken a beating of late?"

Mr Pasternatsky stated that council understood people would like additional information about points that were raised by individuals "that 'appeared' to be experts on the 7.30 Report".

"Council appreciates that the supply of information can cause some members of council's community angst and therefore would like to address some of the key points as outlined in the report and subsequent comments made by media outlets."

In response to the 7.30 Report's claim that council had "$40 million in writedowns already on the books", Mr Pasternatsky stated: Council has made a writedown of $6.1 million at this point. This writedown is a provision for losses - there have been no actual losses to date.

"The $40 million would be the variance between face value and the February market value," he said.

"The market value is unreliable as there is no market for these securities considering the current global financial climate."

Council denied claims it "sank more than $100 million into a new type of investment".

"Council began investing in Collaterised Debt Obligations in 2000 (nine years ago) and holdings have never exceeded $60 million invested in CDOs at any one time," council stated.

Cr Holstein also denied certain areas of the Gosford Local Government Area would "lose out" on having project works and facilities provided to them.

"Whilst there may well be some loss in regard to the future, it will not seek for the contribution plans not to be adhered to," Cr Holstein said.

"They will be adhered to. They may well stretch out further and take longer to implement than what we had proposed, but they will be implemented."

Mr Pasternatsky stated: "Developer contributions constitute about 16 per cent of council's investments.

"At this point in time no monies have been lost and no projects or services have been delayed or cancelled.

"Regardless of whatever may happen in the future, all projects will be undertaken it will just be the timing of these that may need to be reviewed.

"Council has not lost any money at this point in time."

Transcript, 21 Apr 2009 ABC 7.30 Report Press release, 23 Apr 2009 Tina Davies, Gosford Council