Councils have mixed views on investment bonds

Wairarapa's councils have shown mixed views on the concept of local bodies issuing investment bonds to the public.
Changes to the Securities Act last year loosened up councils' ability to raise bonds and the idea is fast gaining interest as more and more investors look for safe places to put their cash.
The scheme was appealing to some councils as it took pressure off rates by allowing the cost of infrastructure assets essentially long-term investments to be spread across the life of the asset.
Legislation changes also reduced compliance costs by easing the process for local authorities to offer securities to the public.Masterton District Council chief executive Wes ten Hove felt the idea had merit and said a council could offer a safer investment than finance companies at competitive or better interest rates.
Councils could in turn raise money more easily to fund big-ticket infrastructure projects.
"The investor return might be slightly better than retail deposits and security is pretty damn good. What's more is the security is in the community, rather than sub-prime derivatives type instruments."
He said given the state of the economy and the changing risk profiles of companies, he was not surprised the idea had been raised at last week's Job Summit in Auckland.
"Many years ago I was in front of the Commerce Commission discussing this. I'm not surprised the market has moved around to this logical position."
All that was needed was the setting up of an "investment instrument", which could be done by a collective of councils to gain an economy of scale and spare individual councils the cost of legal fees.
Masterton Mayor Garry Daniell said his council had looked at the option since it recently came back on the radar.
"If the council could guarantee investments with a better return than a bank, than it would help with the council's ability to advance infrastructure projects. "The fundamental thing is that the council has got good security." Steering away from the "old-fashioned thinking" of relying on rates for funding has been a recent hobbyhorse of Masterton councillor Jeff Workman, who said bonds could be one part of the bow of his proposed council "business arm".
"I can see the advantages of it and we have discussed it at council, although I'm not completely au fait with it and wouldn't feel comfortable making a comment on it yet."
South Wairarapa District Council CEO Jack Dowds was, however, a bit more sceptical. "I can understand why in the current economic climate such an investment might be attractive.
"But in my own view I think councils should stick to their knitting.
"We would need to tread very gingerly before we began to get involved in something like this. "Bigger councils would have a lot more scope for this type of activity than smaller ones."
Carterton District Council CEO Colin Wright said his council had not given it any thought and was keen to see other councils trial it before he gave it serious consideration.