Parker David: Securities (Local Authority Exemption) Amendment Bill — In Committee 
Parker David: Securities (Local Authority Exemption) Amendment Bill — In Committee 
[Volume:646;Page:15227] 
Hon DAVID PARKER (Minister of State Services) 
: 
 The reason that we have the Securities Act is to protect the interests of investors so that investors have adequate information upon which to judge risk. That is relevant because obviously if one is facing a higher risk then one ought to seek a higher rate of return and in many cases if one fully appreciates the nature of the risk when making an investment then one may decline to make it. We can see the importance of appropriate Securities Act disclosure very clearly in the current environment where there have been finance company collapses and where the information disclosure that is required to be given to people who are thinking of investing in finance companies is absolutely essential for them to be able to assess risk properly. 
This bill recognises that there are some entities for which the additional information disclosures are not necessary because of their size. An obvious example is the Crown. The Crown issues Government stock and other securities and because the Crown is probably just about the best debtor that one can have given the tax base of the Crown the assets of the Crown the ability to levy taxes and the reputation that the Crown has for meeting its debt the Crown is obviously seen as a very good bet by investors. 
The next tier down in terms of institutional size and the ability to repay moneys loaned to it is local government. Most local government entities are very large and they at times have the need to borrow money. It is necessary that they have a practical set of rules under the Securities Act that they have to deal with. 
Until now local authorities have been faced with the same set of rules as have applied to private company borrowers and those private company borrowers have had to meet the full rigours of Securities Act disclosure including information statements full prospectus and the related company accounts. This has meant that borrowing by local authorities has become more administratively expensive for those local authorities. As a consequence rather than issuing local government stock directly to people who were wanting to invest money in local government stock much in the way in which they have traditionally invested in Government stock local authorities have not availed themselves of the issuances of debt securities through the Securities Act route because it has been a bit complicated. 
There are good reasons why councils ought to at times borrow money. Many infrastructural projects have a lifetime measured in many many decades. For example once in 50 years it might be necessary to upgrade sewerage infrastructure or stormwater infrastructure—or to build a new motorway as the Minister in the chair the Hon Darren Hughes has mentioned. The assets that are built have a useful economic life that could be five decades and it would be inappropriate to put the full cost of that particular project on to the ratepayers who happen to be ratepayers in the year that these things are built. It is appropriate to spread the cost of those expensive infrastructure assets over a number of years and the way in which a council often does that is by borrowing the capital sum required for the project and repaying it over a long period of years often decades in order to achieve some matching of the cost against the ratepayers who benefit from that investment. Of course borrowing enables local authorities to do just that. 
So the purpose of this legislation is to recognise the reality that it is appropriate at times for local authorities to borrow money through the issuing of local government stock as used to happen recognising that in this instance local authorities are more akin to the Government than they are to private enterprise and to reflect that in the Securities Act settings that apply to them. That is what this bill achieves and I recommend it to the Committee.