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How did sinking funds grow so much within a year? By Andrew Loh.

Sinking funds: From $1 billion in 2007 to $2 billion in 2008

Andrew Loh

On 2 December 2007, the Straits Times reported a new rule that caps how much town councils can put into higher-risk investments. In the report, it said:

This new rule... applies to more than $1 billion in sinking funds managed by the 16 town councils in Singapore. (Emphasis mine)

One year later, on 19 December 2008, the same Straits Times, in an interview with Health Minister and the People’s Action Party’s first organising secretary, Mr Khaw Boon Wan, reported:

... the $2 billion in the sinking funds its 14 town councils manage is in good hands, said Mr Khaw Boon Wan, the party's first organising secretary. (Emphasis mine)

It would thus seem that in a year which saw the worst financial crisis in decades, Singapore seeing record inflation and our town councils being affected by the collapse of Lehman Brothers, the town councils have been able to effectively double its sinking funds.

The question one would ask is: How did this happen? Were returns from investments so good? Or are town councils collecting unnecessary excess of service and conservancy charges?

How did the sinking funds grow from $1 billion to $2 billion within the space of one year in such an adverse economic climate?

In the 19 December interview, Mr Khaw said:

“It’s absolutely transparent because this is not a secret society activity where there is secrecy and so on.”

Perhaps Mr Khaw, or the co-ordinating chairman of the 14 PAP town councils, Mr Teo Ho Pin, or the PAP MPs themselves, would provide some explanation on how the sinking funds grew by effectively 100 per cent in the last one year.

Mr Khaw also clarified the prospects of town councils increasing service and conservancy charges in light of the losses in the investments. He gave his assurance that PAP town councils will not do so as a result of the losses. “Why should it be?” he asked. However, he explained that conservancy charges are adjusted because of other factors. “So, over time, all those things will have to go up. Just like hospital fees,” he said. “I cannot guarantee you that hospital fees will stay forever. I can’t,” he explained. “Unless you say you allow service to drop.”

I think Singaporeans should remind Mr Khaw – and their MPs – that town councils’ funds do not come just from collecting service and conservancy charges from residents. Besides collecting S & C charges from residents, town councils also have other sources of funds, as detailed by TOC here previously - Uniquely Singapore, F1 or F9: “Residents willing to pay more for service and conservancy”?.

Namely, these are:

- Town councils collect S&C charges from businesses within their constituencies.

- Town councils rent out facilities to residents and businesses. For example, in Aljunied GRC, void decks, banner arms, acrylic panels for advertisements and event halls can be booked for use. The charges are anywhere from $25 per month for an acrylic panel to $2,000 a day for use of the event hall at the town centre for commercial purposes. (link)

- Town councils collect car park fees as well.

- The government provides grants to town councils. PAP town councils receive more grants than opposition-run towns. The Aljunied Town Council, for example, gets $560 per household in 2006, while government grants for Potong Pasir was only $113 per household.

So, while Mr Khaw sought to allay fears and concerns about town council investment losses, there are more questions which have yet to be answered satisfactorily.

Two lingering questions still hang in the air:

Are the town councils going to do everything they can to recoup the $16 million lost in Lehman-related investments?

Or are the town councils writing these off as “bad investments”?

And how did the sinking funds grow from $1 billion to $2 billion within the space of one year?

Singaporeans await real transparency.

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