The Kapiti Coast District Council expects to make $350,000 per annum for every $10 million invested from two funds proposed through the 2018-2038 Long Term Plan process.
The proposed investment funds are at the centre of a war of words between the KCDC Operations and Finance Committee Chair Chair Cr Michael Scott and Deputy Chair of the Paraparaumu-Raumati Community Board Guy Burns.
On Friday (17 August) Mr Burns criticised the council for planning to use borrowings to invest in the financial marketplace.
Mr Burns claims “loans of up to $30 million dollars will be used to invest in financial markets in the optimistic hope of some return”.
He says approval for the establishment of Kāpiti Resilience Fund and the Kāpiti Growth Fund, will be initially funded by borrowing and was slipped into the recently approved Long Term Plan (LTP), without public consultation and with very little background briefing information being provided to Councillors.
But Cr Scott says the funds were discussed and were the topics of public workshops during the development of the LTP.
He says if Mr Burns wasn’t away for 5 months at a time he would have a better grasp of what was happening at the council table and that the Council’s finances are looking better than they have been in at least the last five years.
The proposal to create two $10 million funds was oulined in the Financial Strategy to the LTP (page 21).
On Thursday the KCDC Operations and Finance Committee was asked to approve a draft Investment Policy Statement which sets out how the two funds will operate.
The committee was advised that:
The stated objectives of the Kāpiti Resilience Fund and the Kāpiti Growth Fund are to achieve a return of at least 3.5% above the Council’s borrowing costs.
The targeted surpluses of the Resilience Fund are to be used for funding resilience-focussed projects such as increased insurance costs and Civil Defence costs.
The targeted surpluses of the Growth Fund are intended to contribute towards projects that encourage businesses and recreational / visitor attractions to establish an operating presence in the Kāpiti District. An additional objective of the Growth Fund is to invest in strategic assets that directly contribute to the growth of the District.
The Investment Policy Statement says:
The Council wishes to establish two funds, a Kāpiti Resilience Fund and a Kāpiti Growth Fund. Both funds are to invest in financial securities, most likely through one or more managed funds.
The Resilience Fund is expected to be approximately $10m initially. The Growth Fund is expected to be between $10m and $20m in size.
At least initially, both funds are likely to be funded by additional borrowing by the Council. The goal is to generate a surplus over and above the Council’s cost of borrowing. The target is a long-term return at least 3.5% above the borrowing cost. In other words, a surplus net of all fees and costs of at least $350,000 per annum for every $10m invested. The Growth Fund is also able to invest in direct, unlisted Strategic Assets that support growth in the Kāpiti region. Up to 50% of the Growth Fund can be invested in such assets.
The Council has determined the following underlying purposes of the Funds:
Invest in strategic assets that will directly contribute to the growth of the Kāpiti District; and
Contribute to growth-focussed projects that encourage and incentivise businesses and recreational / visitor attractions to establish an operating presence in the Kāpiti District.
Cr Scott told Beach FM this morning that the draft Investment Policy Statement shows the very careful steps KCDC is taking as it works towards a final decision on the funds it has already publicly consulted on.
“The resolutions were altered to add further steps of oversight by council into the process as development advances,” he says.
Cr Scott says the investment report and related documents were presented at a public meeting (17 August 2018), which was live streamed.
He says it was the subject of both questions and debate - a process Mr Guy Burns took part in.
All meeting documents are available on KCDC website.
Code of Conduct
Meanwhile, the Chair of the Paraparaumu-Raumati Community Boartd Jonny Best told Beach FM that the views expressed by Board member Burns are his own.
Mr Best says: "It appears he (Burns) is using his status as Deputy Chair of the Board to promote his own views."
Mr Best says the Board has not discussed this matter and he wasn't aware that Mr Burns was releasing a media statement.
"Elected members are entitled to talk to the media at anytime, however council's code of conduct clearly states that any comments made must state that the comments are a personal view only," says Mr Best.
Click here for the Council paper and draft Investment Policy Statement, August 2018
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