Council loses another $2.9M

Gosford Council has reported a further investment loss of two of its structured securities of almost $3 million, according to a council report.

The report stated that council saw a combined principal loss of $2.9 million leaving the principal remaining on these two investments at $2.89 million.

Council staff reported that the losses reported in these structured securities would not affect the service levels or works completed by council as provisions have already been built into its current budget.

The report also stated that the net return on its investment portfolio since 2002 was $51 million representing an average return if 5.82 per cent per annum over the period.

However, Peninsula Chamber of Commerce president Mr Matthew Wales has questioned the existence of the $51 million net return.

"The question on everyone's lips is where has the $51 million gone?" Mr Wales said.

"If indeed the council has made this money, the business community would like an account of where that money has been deposited or what it has been spent on.

"It is cold comfort to learn that the council has built in the losses into its current budget.

"We would also like confirmation that the moneys that were taken from trust funds such as Section 94 Contribution Accounts and Water and Sewer Funds have been returned from the interest received on the investments.

"To date, we don't know if this is the case.

"Our big concern is that services in the medium to long term could be adversely affected by the mounting losses which could tip over $40 million once all the securities mature."

Mr Wales said the recent investment report was a "disappointing result" that did not bode well for the remaining 30 structured securities still to mature in council's portfolio.

"Council has confirmed that its Blue Gum CDO security lost $1.456 million and its Torquay CDO security lost $1.451 million which is nearly half the original value of the products," Mr Wales said.

"Combined with the Lehmann Brothers property note loss of $2.5 million last year, council has lost nearly $5.5 million of ratepayers and developer contribution funds already with more bad news likely to follow next month.

"The business community is bitterly disappointed in this trend especially when Gosford council assured us that our money was safe and that we had not lost a cent.

"We haven't lost a cent?

"Well we've actually lost $5.5 million."

Council agenda COR.13, 23 Feb 2010 Press release, 19 Feb 2010 Matthew Wales, Peninsula Chamber of Commerce