Power Simon: Securities (Local Authority Exemption) Amendment Bill — First Reading 
Power Simon: Securities (Local Authority Exemption) Amendment Bill — First Reading 
[Volume:642;Page:11801] 
SIMON POWER (National—Rangitikei) 
: 
 National supports the Securities (Local Authority Exemption) Amendment Bill at its first reading and looks forward to the submission process at the Commerce Committee. There are some unanswered questions that go with the bill but the Minister Lianne Dalziel has done a thorough job of outlining the provisions in almost a clause by clause way of what would be the purpose and effect of this legislation. 
It is worth recalling that the bill amends the Securities Act 1978 to provide an exemption from the full disclosure requirements of that Act. The Minister is quite right when she says that there was concern around the number of signatures that have to be collected from local councillors and also around councillors’ exemption at law in the event of non-execution of that documentation which provides in the corporate sense an added political hurdle that most businesses looking for the issuing of debt securities do not have to face. This is a very fair point. 
Also I believe that it is worth emphasising the point the Minister made that the reporting that local bodies are required to do at present—particularly through annual planning and report documentation as well as in the long-term council community plan process which includes 10-year projections for financial performance for that territorial authority—does provide quite a strict framework for financial reporting for those particular territorial authorities. 
It was worthwhile listening to the Minister’s comments on those matters. I could not help but note a slight political snipe there at one point when she recalled the fact that a similar disclosure was repealed in 1996 in order to make these types of securities subject to the same obligations as companies and other corporate entities. This brings to bear what is probably the only outstanding issue in relation to the proposed exemption—that is we want to make sure using a corporate governance and financial reporting model for debt issuing as opposed to a territorial authority that whilst we provide a legislative mechanism for convenience we in no way reduce the level of standards that have to be met before the debt security is issued. I think that is probably the one outstanding question National has. 
National wants to reassure itself during the submission process that whilst we create this framework of convenience for local government—and I will come back to why that is so important—we do not in any way suggest that it is the model of governance that determines the reporting requirements and the financial reporting stringency around the issuing of debt securities. I think that is a point that no doubt the committee will— 
Hon Lianne Dalziel 
: It will be good to have the product in the market. 
SIMON POWER 
: I am sure it will I say to the Minister but it is an important point to make because the committee needs to be reassured that we are not creating two standards that come about only because of the nature of the governing body that is making the decision to issue the debt security to the public. 
The example that leapt out—that the Minister outlined in her speech and is contained in the explanatory note—is the issue of political considerations cramming or preventing the execution of documentation relating to the issuing of debt securities when companies operate under a board collective-responsibility model but at law it is not the same for territorial authority councillors and that is a very valid point. 
I think the issue of issuing debt securities for the funding of infrastructure is really the driving point behind this legislation and making available to local bodies the opportunity to fund infrastructure in a way that is outside the current rates-based framework is an important step and one that National supports. In order to achieve long-term assets borrowing is an option because it spreads as the explanatory note says the cost over the life of the asset—it makes some sense. There will be more about that later. 
It is interesting to note too that not only does it make financial sense but the argument about community ownership is an important one as well. Of course we know that if families purchase a home or an asset in a particular community they tend to be woven into that community in a deeper way than they otherwise would have been by way of that ownership. Likewise purchasing debt securities for funding of infrastructure and the like is an important point. 
As I said we will be supporting this bill at first reading. I put on notification as I said earlier that National will need some reassurance around any reductions in standards to make sure that we are not creating a lower standard for local government than for companies. This exemption makes sense. It makes sense from a practical point of view when it comes to execution of documentation. It makes sense because the reporting regimes are also fair and of a high standard for local government outside of the frameworks of the financial reporting legislation. And it makes sense for the funding of infrastructure in the medium to long term. We await further discussion on the bill but at this point the Government can be assured that National will support the first reading of this bill.