NO MORE LOANS.

Auckland Star, Volume LXVI, Issue 58, 9 March 1935, Page 10

NO MORE LOANS.

OTAHUHU TOLD.

GENERAL ACCOUNT IN DEBT.

FOOTPATH SCHEME 'UNSOUND'

It has been decided by the Otahuhu Borough Council to maJce public the reasons given by the Local Government Loans Board for refusing to sanction the council's proposal to raise a loan of £8500 for footpath construction. The letter refusing sanction of the loan stated the Loans Board was of the opinion that the financial position of the borough at the present time did not warrant the raising of a loan. The board considered that the Borough Council should concentrate on improving its financed generally before recourse to further borrowing. "In this respect the board draws particular attention to the fact that the general account at March 31, 1934, was in debit to the extent of £3223."

Rates Unpaid by State. The council in reply pointed out that nearly half of the large debit was due to the redemption of leans falling due in 1932 and 1934 having to be made out of the general account, owing to the fact that the council could not sell Us debentures. The inability to sell these was due to the Government being in the market at a more favourable rate of interest. It was also pointed out that £11,585 was outstanding in ratos at March. 1!>34, and about half was estimated to be ilne by various State Departments, the liability going back for about six years.

Tn a final letter the Loans Board stated that it was pleasing to note that the Borough Coi'/icil had since been successful in disposing of it* debentures to the value of £13,850, and the general account relieved to that extent. "The fact remains, however, that even allowing for the sale of debentures, the. general account must still be substantially in debt. At March. 3034. after taking into account the snle of debentures, it must still be in the region of .tlfi.OOO to .ClT.Ofin." It admitted that the statement of the jieneral account would be in n fairly satisfactory position if outstanding rates were paid, jvas priniA facie correct, but that did not alter the fact that until rates were collected the position was unsatisfactory. In the board's view raising further loan moneys would place an additional burden on the ratepayers who were already unable to meet their rating obligations. Rate Collection "Fundamental." The council's proposal to pay interest and sinking fund charges for the first few years.out of a subsidy obtained from the Unemployment Board was looked upon by the Loans Board as an unsound method of finance. "The problem of collection of present rates is of fundamental importance, and the Loans Board cannot overlook (he fact that it is well within the bounds of/possibility that the council may exi'erienee just ns much, if not more, difficulty in a few years' time in collecting increase'] rates as a result of incurring liability." The Loans Board correspondence was siyned by Mr. A. D. Park, secretary to the Treasury.