Chamber calls for Ministerial inquiry
The Peninsula Chamber of Commerce is calling for a Ministerial inquiry into Gosford Council's offshore investments, an independent audit and a plan to reimburse Section 94 "developer contribution" funds.
Chamber president Mr Matthew Wales has questioned whether Gosford Council has "fully understood" the risks involved in investing up to $100 million in Collateralised Debt Obligations, even after the collapse of Lehman Brothers bank late last year.
Mr Wales said the Peninsula business community held grave concerns about the aftermath of council's $95 million exposure to the offshore investment market.
"While Gosford Council claims that these securities are only showing a paper loss of nearly $50 million, we believe the reality is that the underlying value of these investments has collapsed and that the prospect of recovering the ratepayers' money is remote," Mr Wales said.
"Right across NSW, councils are preparing to write down these losses as it becomes more evident that the market for these securities has disappeared.
"It is pointless to say that council is going to hold these investments to maturity in the hope that the market will miraculously recover without having a contingency plan in place should the losses be realised.
"The fact is that some, if not all, of the $16 million of the Section 94 developer contributions are at risk, which is a significant concern to the business community as these monies are earmarked for roads, drainage and community facilities."
Mr Wales said by council's own admission some of this infrastructure may be delayed.
"It is cold comfort to say that all the programs will be implemented but how long will that take if you are short $16 million?" Mr Wales said.
"The business community fully expects that some of the Section 94 infrastructure works may need to be reviewed with a real possibility that some projects will be axed.
"The business community wants to know how the council is going to ensure that the Section 94 accounts are reimbursed when the losses are incurred.
"After all, it is our understanding that the monies levied from developers are monies held in trust by council for works that are associated with those developments.
"It's all very well for the council to blame the global economic crisis but the big question here is why did council invest so much of our money in these offshore investment schemes?
"The investment in the Collaterised Debt Obligations, which have suffered the greatest drop in market value, represents nearly 60 per cent of the council's offshore investments.
"We understand that no other council in Australia has as much exposure to the market as Gosford Council."
According to Mr Wales, Gosford council ratepayer and the business community have a right to know whether councillors fully understood the risks involved in investments when it made its decisions in 2005 and 2006.
"We are told that council's former investment advisors Grange Securities explained both the benefits of these products and the risks," Mr Wales said.
"It would appear that the risks were considerable and therefore you have to wonder why so much of our money was invested in the first instance.
"From our point of view, the business community wants three things.
"Firstly, a Ministerial Inquiry needs to be held to establish how council came to find itself in this precarious position.
"Secondly, a fully independent audit of the investment accounts needs to be undertaken so that the community has a full and transparent view of the current situation and the potential losses.
"And thirdly, council needs to have a plan in place detailing how the Section 94 developer contributions and water and sewer contribution accounts are going to be reimbursed when the losses crystalise."