Mike Baird | Member for Manly - Lehman Brothers Collapse

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Lehman Brothers Collapse - New Councillors Left to Sink

Tuesday, 16 September 2008

The State Labor Government has to start taking action to help Councils facing financial ruin linked to the sub-prime mortgage crisis, Shadow Minister for Finance Mike Baird said today.

“The Premier has to own up to his Government’s responsibility in the ratepayer disaster, which has stripped hundreds of millions in ratepayer funds from Councils throughout NSW,” Mr Baird said.

“Councils across the State followed guidelines created by this State Labor Government and made investments through Lehman Brothers. These Councils face further uncertainty following news of Lehman Brothers’ collapse today,” he said.

“The Premier told NSW taxpayers he does not have the ‘time or the inclination’ to explain the financial mess of this State.

“Well today we ask the Premier to take the time to not only consider the impact of Lehman Brothers collapse on the State finances, but also on our Councils.

“On Saturday many new Councillors were elected across NSW and it’s likely few have the financial expertise to manage million-dollar portfolios, particularly in this tough financial market.

“We call on the State Labor Government to ask NSW Treasury to make available a pool of experts from NSW Treasury Corporation who can be accessed by every local council in the State.

“Councillors could call on these experts to review their Council’s investment portfolios and provide long-term strategic advice.

“This would ensure ratepayer dollars could be spent on improving local communities rather than being lost on poor investment decisions.

“Given the further impact of the billion-dollar loss the Premier has spoken about, it’s time the Premier brought forward the NSW Treasury estimates so we have a clear picture of what’s happened to the State finances,” Mr Baird said.

MEDIA: Lisa Harrington – 0406 726 880

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Comments (7)

Financial management

To answer your 'question - what do I think etc'...
I think I remember when Councils were elected to direct & control Council staff (including General Managers) to administer local areas. There are many safe AAA cash management options within Australia. Whoever is rresponsible for venturing beyond that needs severe repromand. Moreover Coucnillors need to understand staff are responsible to them in ALL matters - (including General Manahers).

Posted by: christopher Fletcher at 17-09-2008 10:12

finances

I totally agree with your sentiments re the Councils' finances .
Further, one of the greatest concerns for our State is that families are losing their homes and farms. We need to build shelters urgently and we need laws in place to intervene with banks and force a moratorium on foreclosures on family homes , businesses and farms. It will be critical in these economic times to continue to produce our own food and to house our people. This can be done with urgent intervention at government level. it will take great leadership and strength.

Posted by: Jeanine Treharne at 17-09-2008 10:26

finances

Just how does anyone get away with "putting all their eggs in one basket" in any economic climate?

If council officers do not have these skills, why are they not using any of a number of responsible financial advisors to manage any spare funds they may have? One or even two complete failures should never jeopardise the bulk of funds.

I believe there is, however, another regulation that is a BIG problem for councils (please correct me if this is no longer the case).
Apparently, councils are prevented from borrowing more than a certain amount of money in a given year. As a result, though they may receive windfall income from the sale of assets, few use the money to repay debts, preferring to keep it in hand if a large amount of money is needed for a large project. So, instead of reducing their repayments on loans, they use the interest from investments to offset them.
In order to try to generate enough income, perhaps some councils have been using risky investment methods, and thus exposed themselves to this kind of market failure.

I do not believe that is what councils are supposed to be doing. I do not believe that investment is part of councils' "job description". While I expect that financially-responsible councils should aim to keep money in reserve for large projects, I do not see that they should be trying to gain the maximum possible return on investment, using the methods of amateurs, while they have debts outstanding.

Posted by: Alicia at 17-09-2008 10:52

Management of the State

I know it looks like our state is coming 'unstuck' at the moment and I don't doubt that the overall management of the state has not been good under labor. Howver I am a small business owner and I deal with the NSW State Public service on a daily basis and I have to say in my opinion that there is a general lack of accountability and productivity overall in this state. How can the Health Minister be held accountable for the whole health servcie when there are literally thousands of state govt employees managing all sorts of sectors of the heath service arn't they all partly accountable. Surely it is beyond one persoan to run the whole sector. Multiply this by the SRA, RTA and so on and you have thousands of public employees mis managing the public sector. Don't we need to take a lomg HARD look at why we are paying this public sector so much to mismanage our public resources, blaming one minister or a smallish in the big scheme of things state governement for the mess is a very narrow view of the problems facing the state. There are a lot bigger issues under the surface that are not being addressed in this political game of blame.

Posted by: James Delaney at 17-09-2008 14:00

Council Investments

As a once Council Senior Administrator,I cant for the world wonder why the Council Administrators and the State Governments detioration of controls has let Councils invest public monies in such enterprises.
To improve council finaces we,at the time invested funds at 24hr call---in approved local banks.These were fully protected and in government guarateed.
This is another chapter in the mess of NSW INC

Posted by: Gill Whitton at 17-09-2008 17:09

LGA's

This finanacial misadventure is the perfect opportunity for the Liberal Party to frame a NSW Coucils amalgamation policy. Kennett did it in Vic (Liberal), Beatty in Qld (Labor). So what is holding NSW back??
We don't need 3 Councils on Northern Beaches. Think of the savings in GM's, HR, Payroll and other admin just to start.
I hear Vic is going to do another round of amalgamations...down to under 50!
This might not suit "Liberal mates" but think of the clout a "City of Northern Beaches" would have.

Posted by: Richard Barton at 19-09-2008 17:15

Amalgamating councils

I support Richard Barton's suggestion (having seen it in action in Brisbane).
Why not have 1 council with 3 wards named Manly, Warringah and Pittwater?
Or let's take it further, and make it a Sydney council with those wards, each having ONE councillor, and a separate discretionary budget for each ward, and a degree of autonomy within the ward, for its councillor.
This would enable economies of scale with one set of bureaucracy for the administrative stuff, and real responsibility for each councillor (so you really DO know who to vote out next election if necessary).
This would mean the council would have real power against the state government (Sorry Mike B., but councils have been at a severe disadvantage for too many critical planning decisions).
That way, we also should be able to expect REAL forward planning to cover Sydney's needs as a whole, rather than the haphazard, piecemeal planning we have now.

Posted by: Alicia at 22-09-2008 12:53

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