By Vanessa Chircop
DESPITE the Global Financial Crisis being over, Hobsons Bay residents are still picking up the slack.
Vision Super, the not-for-profit industry superannuation fund for Victorian local government discovered a shortfall of $71 million in its most recent review.
Hobsons Bay’s share of this shortfall is $1.293 million plus a 17.65 per cent contributions tax.
Hobsons Bay council’s Director Business and Finance, Glenn O’Sullivan, said the council did not fall short in their payments, rather the superannuation fund did not achieve the required return on its investment.
“The main reasons for the shortfall include the global financial crisis resulting in a decrease in the fund’s value; continuing need to fund more pensions; the declining ration of contributing members to pensioners, and the closure of the Defined Benefits Scheme meaning a decreasing fund base.”
At the last council meeting, councillors moved to repay the shortfall in yearly instalments over 10 years at an interest rate of 8.5 per cent, costing rate payers $2.137 million – almost double the amount owed.
Mr O’Sullivan said this was the most cost-effective option for repaying the shortfall.
“The additional amount also includes contributions tax that is unavoidable regardless of whether or not the payment is deferred.
“Despite this, paying in instalments will mean an additional interest cost.”
Mr O’Sullivan added paying $1.293 million outright would have resulted in a reduction in the capital works program and an increase in rate revenue.
The payment to Vision Super will be made from the council’s cash reserves and rate revenue.
