THE CITY LOAN.

Auckland Star, Volume LII, Issue 72, 28 March 1921, Page 4

THE CITY LOAN.

The terms on which the Auckland City Council is raising half a million pounds on the London market for its electrical extensions show that if you want money you have to pay for it. The statutory limitation of interest placed on local body loans has made it impossible for iheso bodies to raise money locally, and there would have been no more success at this limited rate on the Loudon market, where money has been dearer than in Xew Zealand. The City Council, having failed to raise the money locally, went to London, not only with the permission of the Government, but with the State's guarantee behind it. Considering the state of the money market, the result is satisfactory. The loan has been underwritten at 61 per cent at par, which means that with underwriting costs added the money will cost something over (U per rent. Underwriting costs have risen like everything else. I'ntil it is known what they amount to, it will be impossible to say exactly what the loan is costing. The State guarantee raiaes the loan to the status of Government loan, and the return on the investment is about the same as that on the recent loan floated by the Commonwealth Government in London. The City Council will have to meet a considerably higher interest hill than it would have had to pay if money could have been obtained at 5} or 5J per cent, hut this is one of the cases in which the right course is to take dear money and go on with urgent work rather than to wait for money to become cheaper. There can be no question about the urgency of the need for electrical extensions. Auckland has years of leeway to make up in this matter. It has in its system of supply an enterprise that returns a profit, and by all the laws of business should be extended without delay. The placing of the loan in London will have an interest for the whole of New Zealand. It means that the attempt to keep down the rate of interest to local bodies has definitely failed. Theoretically at any rate there is no reason why a New Zealander with money to invest iv n municipal loan should not. be permitted to get C* per cent for it if his cousin in England can get the same rate, though the Government may think it has good reasons for prohibiting such a local rate. If local bodies are going to London for their money they will have to go with a Covernnicnt guarantee, otherwise the}' will not be able to get it at ti* per cent. They will also have to ask for large, or fairly large, amounts. The position of tile smaller local bodies, who want ten, twenty, fifty or a hundred thousand pounds, will remain difficult, ami probably their only chance of success will be to pool their requirements and float a joint loan.