City may axe fund for special projects
A special endowment fund set up by the Christchurch City Council 14 years ago could be axed.
The council established the Capital Endowment Fund (CEF) in 2001 using its $75 million share of the proceeds from Orion’s sale of its investment in a gas company. The plan was to use the fund to generate an ongoing income stream that could be used to support economic development, civic and community projects.
The balance of the fund currently stands at around $100m but with market interest rates falling the ongoing viability of the fund is being questioned.
A report presented to yesterday’s strategy and finance committee suggested the time had come to disestablish the fund.
Council funds and financial policy manager Steve Ballard said as market rates had fallen, the investment income available after inflation had reduced, meaning that the fund was less able to support selected projects.
The creation of the Local Government Funding Agency had also reduced the volume of highyielding but low-risk local authority bonds on issue. While the council could seek to increase its returns by permitting investment in the share market, that would carry high risks as it was not an area in which the council had expertise.
‘‘It is considered inappropriate for the council to maintain an investment of any kind while its net debt level is high and rising,’’ Ballard said.
The fund’s remaining external investments could be liquidated or incorporated into the council’s main liquidity holdings, while those activities currently reliant on income generated by the fund could be funded from general rates.
Ballard said while the disestablishment of the fund might be seen as the loss of an asset that was originally intended to be kept for the benefit of future generations, that perception was false.
Cr Andrew Turner said he could not support disestablishing the fund. Without the fund the council would have less flexibility to respond to projects outside the Annual Plan or Long Term Plan budgeting process.
Cr Yani Johanson also spoke against axing the fund but suggested it could be put to better use.
Cr Jamie Gough said the fund had outlived its usefulness: ‘‘What is abundantly clear is the purpose this fund was set up for is no longer relevant now.’’
The strategy and finance committee voted four to three in favour of consulting the public about disestablishing the fund.
Its decision still needs to be ratified by the full council.
The purpose this fund was set up for is no longer relevant now.