METROPOLITAN DRAINAGE.

Auckland Star, Volume LXVIII, Issue 127, 31 May 1937, Page 6

METROPOLITAN DRAINAGE.

COST OF THE PLAN.

(To the Editor.)

Tn your editorial comment of May 28 on the metropolitan drainage scheme you «ay that the delay which has arisen since the scheme was recommended been extremely costly, ae to the ordinal estimate of £ 1.300,000 has now to be added 15 per cent, or £204.000, on account of increased caste. That is the estimate of increased labour costs only, and if that were all there were to take into account the delay would seem to have been costlv. But if we look also to capital costs a somewhat different result is shown. The money for this work has, of course, to be borrowed, and if the estimated cost of .the work in 1031. namely, £1.360.000, had been borrowed then the rate of interest would have been at least 5 per cent, or £65,000 per annum. If the work is done now it is true we need the extra 1.3 per cent, making the total now required £1.564,000, but the rate of interest is now lower, and if the money could now bo secured at 4 per cent, the annual c-harge would be £62,560, or £5440 less per annum than on the smaller sum at'the higher rate. If the loan were for 25 ysars the saving in interest alone foi- that period would be £136.000, that is the difference between what would have had to be paid on the smaller sum at the higher rate of interest and what will have to be paid on the larger sum at the lower rate. Even if sinking fund is also included, and that, of course, will have to be done to repay tlie loan, there is still a savinsr. I have assumed 25 years as the period of the loan, but in the case of a work of this kind thenis no real reason why it should not be a longer period, in which case the annual sinking fund payments need not be greater than 1J per cent. I think the above considerations are important, and that they constitute a stronjr argument ajrainst further delay, as there is a tendency for interest rates to rise, and if through- further delay the Drainage Board should have to pay a hi<rher rate of interest than that ruling to-day. then, of course, that delay would be really costly. * TOM BLOODWORTH.