CITY SINKING FUNDS.

Auckland Star, Volume LXIII, Issue 136, 10 June 1932, Page 3

CITY SINKING FUNDS.

Deficiencies at Maturity.

NO REDUCTION IN RATE. MAYOR'S FIRM STAND. PRESERVING CREDIT OVERSEAS

; Sinking fund payments were the subject of a report submitted to the City Council last evening by the Mayor, Mr. G. W. Hutchison, who stated that, following an interview by the chairman of the Auckland Transport Board, Mr. J. A. C. Alliun, with the council's finance committee, he had invited the chairmen of the Harbour Board, Auckland Electric Power Board and the Hospital Board to meet him for the purpose of discussing Mr. Allum's views in regard to the desirability of reducing sinking fund contribu-

tions on certain 'oan*

Mr. Hutchison said the chairman of the Auckland Harbour Board declined to attend, stating that if and when the question of sinking funds was nationally to be discussed he would be pleased to take part and to express the views of his board concerning its responsibility. The chairmen of the Auckland Hospital Board and the Auckland Electric Power Board did not attend, and it was understood that they were both out of town. The chairman of the Transport Board attended, and referred particularly to loans of £1,24(5,400 maturing on July 1, 1040; £3t>oo, maturing on January 1, 1043, for both of which sinking funds of 2i per cent were established, and £28,000 maturing November 1, 1953, for which a sinking fund of 2 per cent was established. He suggested that, in view of the. substantial security for these loans and the need for some relief, having regard to the board's reduced revenue, steps should be taken j to reduce the sinking funds in each case, ifor the balance of the term, to 11 per cent.

The effect of such deduction, said the Mayor, would be deficiencies at maturity of £220,780 on the two loans totalling £1.200,000 and £7410 on the loan of £28,000. He had informed Mr. Allum that he was personally opposed to making any representations either to the Government or to overseas bondholders for variation of the city's sinking funds, and ho recommended that no action be taken by the Auckland City Council on tho line's suggested by the chairman of the Transport Board.

Conjointly with the Mayor's report a letter from' the town clerk of Blenheim was discussed. This stated that, after serious consideration of the question of how ratepayers might be given some relief by a reduction of rates, his council had come to the conclusion that to postpone the payment of loan sinking funds for at least two years would be the best and perhaps the only method now available. His council proposed to submit this matter to the Municipal Association with a request that Government sanction be obtained, and he asked, providing the council approved of the proposal, if it would communicate with the association to that effect. Much Involved. Mr. T. Bloodworth said it was a proper subject for the Municipal Association to consider. Mr. G. Grey Campbell said much wan involved in the problem. It was quite simple to say "Reduce the sinking fund payments," but before any decision was made the council should be in possession of a report on the funds.

Mr. G. L. Taylor said any suggestion of default or repudiation would do harm. Nothing should be done that would be interpreted as an evasion of responsibility.

Mr. E. J. Phelan said lie would not support any action that would mean "juggling" with tlio sinking funds.

Loans Maturing.

Mr. W. H. Murray said that during the next five yeare the council would have loans to the aggregate of £SOO,OOO falling due, and the sinking funds would only amount to £17<i,000. The council should stand by itts sinking funds. A Voice: And sink with them! Mr. H. P. Burton said that no matter how bad tilings became he would not agree to any form of repudiation as far as sinking funds were concerned. Mitss Ellen Melville said the question should be discussed by the M:>yor at the. Municipal Association meeting without the council being bound in any way. Variation Opposed. "I want the .council to stand foursquare against any suggestion that we should consider for a moment not meeting our obligations to the bondholders,' said the Mayor. "As long as I am associated with the council I will oppose any variation, even if the Municipal Association favours it." He felt sure the ratepayers would not support a council which attempted to interfere with credit overseas. The Mayor's recommendation was adopted. Blenheim Letter. When the letter from Blenheim n-a<s under consideration Mr. Bloodworth said that Mr. Burton had suggested that ho (Mr. Bloodworth) had favoured repudiation., He denied that. The credit of the city \vas not endangered by a request that the sinking fund period should be extended. Surely it was not wrong in these days of depression to reduce the sinking fund to 1J per cent. It was an obligation they had incurred themselves. Mr. Entrican: Part of the contract. Mr. Bloodworth: No. We contract to pay so much interest and the repayment of the loan at due date. Mr. Phelan: The Legislature, provided for that. Mr. Bloodworth: No. It is our own option. The stand taken by one or two was the very thing that led to repudiation. Large sums of money were being takeit from people who could not spare it. It was criveji to commissioners to put it in the bank. A Voice: You put off the evil day. Mr. Bloodworth said the present was an evil day and relief was needed. He, was not concerned about the bondholders, but with tHe people who had to find the money. It wae stupid to starve and ruin people in order that money might be piled lip to pay debentures in 10 or 14 vears , time.

"Not Repudiation." Mr. Martin said a temporary form of assistance was needed. It was not repudiation. Pie believed the bondholders would bo willing to meet the borrowers and extend relief. Mr. D. Henry pointed out that America had granted a" moratorium for one year. The Mayor said he was against any initiative 'being taken by the council. While in the chair he would never do anything to interfere wtth the credit of the city. It was decided to reply that tile council could not give support to Blenheim's request,