Financial Strategy owning the remaining 11.5%. MRF, a Joint Operating Committee of both Councils, LGFA has approximately 5,000 hectares of commercial forest with 4,321 hectares owned and Council is a shareholder/member of the LGFA. The LGFA is a Council Controlled the balance in predominantly leasehold title. This forest is managed on a rotation Trading Organisation (CCTO) set up by specific legislation. A key objective of the period of approximately 30 years with minor variations in this period based on market LGFA is to provide a funding vehicle that would enable local authorities to borrow at conditions. The forest had a value of $14.9 million as at 30 June 2017. As a result of lower interest margins than would otherwise be available. this holding Council is entitled to approximately 180,000 NZ Emission Trading Units (NZETUs) almost entirely from pre 1990 forest (current value circa $3.5 million). The current intention is to replant the forest following harvest.Providing the replanting The LGFA is ‘AA+’ rated from S&P Global Ratings. This is the same as the New policy is maintained MRF should not be required to surrender NZETUs to meet the Zealand government’s domestic rating. obligations imposed by the Emissions Trading Scheme on harvest. As a result, Council may elect to sell its Units to assist in meeting a future funding need. All local authorities (but not CCTOs or Council Controlled Organisations) are able to borrow from the LGFA. As at 30 June 2017 the LGFA had advanced $7.7 billion to Council is expecting to generate average cash proceeds of $2.5 million per annum local authorities, generating an estimated saving of approximately 0.2% in interest from its investment in MRF until the 2020 year. Actual returns will vary depending on costs. The amount currently advanced is now in excess of $7.8 billion. an internationally determined market price which Council has little control over. In the 2021 to 2028 financial years no return is expected because if harvesting has gone to The LGFA’s policy is to pay a dividend that provides an annual rate of return to plan in earlier years, there will be insufficient mature trees available for harvest to Shareholders equal to LGFA cost of funds plus 2.00% over the medium term. On 31 generate a profit. August 2017, the directors of LGFA declared a dividend for the year to 30 June 2017 of $0.0556 per share. This is calculated on LGFA’s cost of funds for the 2016-17 year Council also has significantly smaller holdings of trees in its own right, but these are of 3.56% plus a 2% margin. held predominantly for river protection and not for financial return. Investment Bonds and Term Deposits Council holds approximately $12 million of investment bonds and term deposits as part of its Disaster Recovery Planning. It is expected that the rate of return received should be similar to the cost of Council’s external debt. 2018-2028 Long Term Plan Page 167