Investment Fund Meltdown May Have Silver Lining
FOR IMMEDIATE RELEASE: 11 DECEMBER 2008
Massive losses in the Environment Waikato Regional Council investment fund ironically could have unintended benefits,
according to a statement from EW watchdog Geoffrey Robinson.
The investment fund, which represents proceeds from sales of the Waikato public’s shareholding in Ports of Auckland in
the early 1990s, once was valued at around $84 million. A recent internal memorandum from EW’s acting chief financial
officer, however, pegged the value of the public’s nest egg at a greatly reduced $51 million as of October 31, all due
to losses on risky investment holdings.
But according to Robinson, a public advocate and career investigative journalist, the massive loss of public money may
actually result in some benefit to the pubic.
According to Robinson, “EW depends each year on its investment earnings to fund such questionable items as a recent
unbudgeted $350,000 cash handout to a private group, $421,000 in annual fees for poor investment advice from Russell
Investments on how to lose millions, catered lamb chop lunches for EW’s own overpaid managers, a bloated 1080 pest
control programme, and a host of other items entirely unrelated to council’s core mission.”
“While ratepayers might choke on the idea that naïve EW councillors and bungling staff have squandered the public’s
hard-earned savings,” Robinson points out that “such losses are the only way that an out-of-control regional council can
be brought to heel.”
The shrunken investment fund means not only a long-term capital loss, but also results in massive shortfalls in yearly
earnings from the fund. In the first four months of the current financial year, EW income from investments is more than
$6.6 million less than what has been budgeted in the annual plan.
“EW is likely to hit ratepayers hard with heavy rates increases in the next several years in an attempt to bail itself
out of this investment meltdown,” Robinson said. “But council can only go so far with rate increases. Councillors and
staff will have no choice but to put the axe to wasteful spending and discretionary activities. If they don’t slash
spending and try instead to make up their investment gambling losses by hitting ratepayer wallets harder, they will face
a certain rebellion.”
“Councillors have acted like deer in the headlamps for more than a year, doing nothing but freeze as ratepayers warned
of impending losses on EW’s high-risk investments,” Robinson said. “From now on they will have no choice but to shrink
their operations. In the long run, that’s good news for Waikato ratepayers.”
ends