CITY FINANCES.

Auckland Star, Volume LIX, Issue 269, 13 November 1928, Page 10

CITY FINANCES.

POWER BOARD CRITICISM.

TOWN CLERK REPLIES.

ADEQUATE SINKING FUND PROVIDED.

'The City Council is quite alive to the value of sinking funds adequate for the purpose for which they are'eet up," said the Town Clerk (Mr. J. S. Brigham) this morning, in referring to a statement mads by the chairman of the Auckland Power Board (Mr. W. J. Holds worth) yesterday, that an inadequate sinking fund had been provided for two loans raised by the City Council in connection with electricity. Mr. Brigham said that an amount of f 1000 of this loan, had been raised in 1907, and £24,000 in the following year, the full amount maturing on November 12 last. The amount of annual sinking fund provided was certainly 4 per cent, but the city, in 1909, increased this by a bonus of £3000, and paid an additional bonus of £1500 each year from 1920 to 1922. Had the city continued to conduct the electricity undertaking repayment of the loan would have been fully met by accumulated sinking fund at maturity. The Power Board took over the undertaking in 1922, and gave debentures for all electricity loans issued, the city retaining the sinking funds, and was receiving from the sinking fund commissioners not £11,459, as stated, but £16,000, although no sinking fund payment had been made by the city since 1922. It would have been competent for the Power Board to have set up whatever sinking fund it thought fit, provided it was not less than i per cent.

Proceeding, Mr. Brigham said it was quite true that in the early period I \<cv cont was the usual amount set aside for sinking fund, but with a short currency loan it was recognised that such a percentage was inadequate. Long before the Local Government Loans Board came into .being the City Council increased its sinking fund to .provide a large percentage of the capital amount of loans to be repaid by the sinking funds at maturity. When the f 1,250,000 loan was raised in 1919, seven years before the Local Bodies' Loans Board was created, a 2£ per cent sinking fund was established, and at the rate of interest to be earned would more than repay it at maturity. Continuing, Mr. Brigham said that in the case of the loan under discussion- -by the Power Board and just matured, it was interesting to note that the rate paid by the city from 1909 to 1922 was not the minimum of £ per cent, but averaged 2.61 per cent.