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Collapse Issue 386 - 08 Feb 2016Issue 386 - 08 Feb 2016
Collapse  NEWS NEWS
CDOs cost council $38 million
Council appoints consultant for land sale review
Council parking blitz was 'un-Australian', says bowls club
Edna celebrates 92nd birthday
Smith seeks action on channel at Oyster Beach
Rescue for sinking vessel
Don Young receives OAM
Management plan does not list all council land for sale
Plan still applies to community land after 20 years
Cr Scott moves to withdraw land from sale list
Rally at council chambers to oppose land sale
Contributions plan supports retention of open space
Service commemorates Voyager sinking
Progress association will oppose Patonga hotel plans
Resident addresses amalgamation hearing
Councillors propose Peninsula be part of southern ward
Greens hold meeting about amalgamation
New Guides wanted at Blackwall
Australia Day at Woy Woy
New facilities at holiday park
Buildings to be demolished
Teenager charged over Woy Woy robbery
Two more arrested for robbery
Almost three time average monthly rainfall
Why the rush to sell parks and reserves?
Council land sale reminiscent of Enclosure Laws
Not in touch with the common person
One-way Esplanade would make sense
Misdirected attack on tax system
Pensioners and workers will be hurt
Illegal no, immoral yes
Workshops about being a dad
Collapse  ARTS ARTS
Christine wins at speech evaluation
Humble Boy to open at Little Theatre
Opera in the Arboretum has sold out
Umina band to play in blues festival
Roots balladeer to play at folk club
Parent information barbecues
Maintenance works nearing completion
Contact RMS for school zone flashing lights
Program for first Holy Communion
Kitchen garden program to continue
Bank to support road education program
Swimming carnival
Two teenagers were among the best
Umina Surf Club to get 20-year lease
Ettalong bowlers create zone history
Netball registrations open
Bridge results
Major pairs play ahead of storm
Boardriders' competitions start

CDOs cost council $38 million

Gosford Council could be $38 million better off if it had not invested in speculative instruments like Collateralised Debt Obligations (CDOs) in the market boom prior to the global financial crisis.

A returns on investments graph published on Gosford Council's website on Thursday, February 4, shows that total capital losses from investments in unsecured instruments with Lehman Brothers, Blue Gum, Torquay, Scarborough, Parkes, Kakadu, Green and Esperance totalled $19.12 million.

Only one CDO remains in the Gosford Council portfolio and it has a maturity date of June 2016.

Its current market value, according to the latest financial reports from Council was $1.29 million (December 2015).

The face value, or the original amount invested in the CDO by Council was $1.93 million so, based on current market value, the CDO will result in a further capital loss of around $700,000 when it matures in June.

According to the returns on investments data provided with the business papers for Council's February 9 meeting, in addition to the capital losses incurred due to the unsecured investments, if those losses had not been suffered, Gosford Council would have been able to earn an additional $19 million in interest or earnings.

Since 2002, according to the graph, council's investment portfolio has returned $66 million net of those capital losses; the potential interest return if those losses hadn't been suffered could have been $85 million.

Over the same period, if the council had stuck with much safer, capital stable and secure investments, it could have expected returns that tracked close to a benchmark like the bank bill rate.

The graph uses the UBS 90-day bank bill index to provide a comparison, which since 2002 would have given the council a return equivalent to about $80 million in interest and earnings.

On January 2014, Gosford Council resolved to appoint Prudential Investment Services Corp Pty Ltd at the council's independent financial advisor for a period of three years.

Investments are currently managed by council officers based on the recommendations from Prudential.

Gosford Council's current investment portfolio is now spread among the top three credit rating categories and has a face value of $130.26 million.

Of the total portfolio, $53.59 million relates to restricted assets and capital reserves and committed funds and unspent grants consit of $89.27 million.

Apart from the one remaining CDO that is due to mature in June, council's funds are now invested in 12 floating rate notes ($36.25 million), 25 term deposits ($80.5 million) and a cash account ($11.58 million).


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