Download this Issue - Live Magazine

asket. However, not even a decadelater, Tasman Farms accounts formore than two-thirds of the fund’sassets.In its five years of councilownership Tasman Farms hasproduced no dividends, which isproblematic when TIML is expectedto deliver around $20m to the NPDCeach year.“The goal of the PIF is to preservethe capital value in real terms ofthe fund at inception ($259 million).Depending on whether CPI (allordinaries) is used or the LocalGovernment Cost Index (LGCI) theactual loss of capital value is $94million or $116 million,” maintainscouncil candidate, Len Houwers.Over the nine years it has beenin existence, the PIF has returned$169.1m to the NPDC to offset rates.At the end of June 2012, the fundhad a value of $227.36m. By Dec2012, the value of the PIF was downto $215.77m. The figures for the endof June 2013 were yet to be releasedat the time of writing.In 2012, the PIF took a caning,losing 1.8% of its value, while everyother asset class it measures itselfagainst, gained, with NZ marketsup by a whopping 24.18%. Once thecouncil release payments have beenextracted, it doesn’t take long to seethat if things continue like 2012,it won’t be long before the PIF haseroded completely and irreparably.The NPDC recognized somethinghad to be done and in June this year,it adjusted the release paymentsit was going to be receiving overthe next nine years in an effortto maintain the fund over thelong-term. The projected releasepayments are now $10.4m for2013/14 (compared to $17.1msignalled for 2013/14 in the LTP2012-2022), $9.4m for 2014/15,$8.5m for 2015/16 and risingsteadily to $9.1m for 2021/22.When the draft LTP 2012-22was released in March 2012, NPDCwas predicting a 9.5% returnfrom the PIF. By the time the LTPwas finalized later that year, thatprediction had been reduced to8.5%. In the draft 2013-14 AnnualPlan that prediction has been reviseddown again, to 7.5% per year onaverage over a 10-year time horizonwith a 75% probability.TIML Chief Executive, MikeTrousselot says fund growth forecastfor the PIF has been reduced from9.5%pa to 7.5% pa as expectedreturns are linked to interest rates.“Many readers would remembertwo year fixed mortgages at 9.5%pain 2008, now they are 5.9%pa,”he points out. “The same factorsinfluence investment returns,and the forecast fund growth is areflection of expected margins over‘risk free’ interest rates.“The returns of the PIF areexpected to be greater than therelease payments paid plus inflation,they comprise income and capitalgain. In total this is expected toaverage 7.5%pa over the next tenyears vs NPDC’s borrowing cost ofcirca 6.0%pa.Yet, in TIML’s PIF report summaryfrom Dec 2012, it outlines that thePIF had an annualized return of5.44% since inception (so a nine yearhistory), which makes you wonderwhy TIML are predicting an averagereturn of 7.5% over the next ten-yearperiod.If the hoped for rate of 7.5% fallsshort and continues to track at theactual realized rate for the past nineyears of 5.44% there will be a majorshortfall.Still, the NPDC target is tomaintain the real value of the PIFas at 30/6/2012 (so $227.36m) overthe long term, according to MrTrousselot, who took over the TIMLChief Executive position from RodgerKerr-Newell in 2008.“The recent release paymentpolicy changes will support theVote Number OneDr Flora Gilkison(Doctorate in Management)TARANAKI DISTRICT HEALTH BOARD1. Experience and wide knowledge ofthe health sector and how it shouldall knit together2. Cares passionately that Taranaki keepsall the quality health services it needsand3. Great fi nancial and analysis skills tobe able to ask the hard questions andable to understand the managementspeak answersAuthorised by Flora Gilkison 29D Hamblyn St New PlymouthVotePat LearyFor Taranaki Health Board‘Your choice… Your voice’EXPERIENCEof 25 yrs in health careDEDICATEDto ensuring accessible health careCOMMITMENTto building a healthy communityThis advertisement is authorized by Pat Leary, 283 Devon Street West, New Plymouth16 I LIVE MAGAZINE I SPRING 2013