LOCAL BODY FINANCE.

Auckland Star, Volume LXIX, Issue 3, 5 January 1938, Page 6

LOCAL BODY FINANCE.

After nearly five years of effort the conversion of local body loans domiciled in New Zealand is now practically complete, and as a result of the operations local authorities are now in a much better position than they were when the conversion policy was initiated. The annual charges have been reduced by half a million, the total debt has been reduced by over £2,000,000, over £50,000,000 has been dealt with, and interest rates on this portion of the debt have been reduced from an average of 5.51 per cent to 4.19 per cent, appreciably below the basic rate of 4| per eent fixed by the Government in the 1933 legislation. The conversion of the balance of the debt held overseas is still some distance ahead, depending on the date of maturity of the various loans. As they mature, local bodies will take advantage of their conversion rights and the whole of the debt will ultimately be established on the lower scale now operating here. There has been no overseas borrowings for a number of years. That tendency was noticeable before the exchange rate was increased and before the conversion. It dated from the establishment of the Local Bodies' Loans Board of 1927. From that time onward there has been a remarkable contrast in the rate of borrowing, and also in the rate of interest. In the eight years preceding the establishment of the Board £36,000,000 was borrowed, an average rate of £4,500,000 a year, while since that date the net increase has been less than a million a year. One factor in this reduction was the depression, while the local expenditure was also curtailed by the Main Highways Board taking over more and more of the road construction works formerly undertaken by the County Councils. The completion of several hydro-electric schemes also tended to limit the amount. One curious result of the conversion schemes is that the larger local bodies, such as city councils, poweT and transport boards, are now paying a higher average rate than the smaller bodies, the reason being that the stronger security of the more important authorities enabled them to raise money in the ' London market. These loans have not been converted, and in addition exchange has to be paid on the interest, factors which continue to keep the average interest rate up.