"UP IN CLOUDS."

Auckland Star, Volume LXX, Issue 75, 30 March 1939, Page 13

"UP IN CLOUDS."

BOARD DISCUSSION. FINANCIAL ISSUES. WARNING NOTE SOUNDED. A bright interlude relieved the dull formality of a meeting of the Auckland and Suburban Drainage Board this afternoon, when a member, Mr. J. Sayegh, drew attention to the danger ■ of the board permanently appropriating I out of its income sums for the payment I of interest on loans on the table mortgage basis. The engineer-secretary, Mr. H. H. Watkins, reported- that the proposal of the board t<> borrow £5000 for the purpose of meeting the expenditure incurred over and above sums included in Loan 12 of £30,000, already raised for constructing portion of branch sewer No. 9- in the Oakley Creek watershed and a portion of the storin water culvert in Arch Hill Gully, had been advertised, and the board was now in a position to confirm the special resolution passed authorising the borrowing of the siim. The loan was sanctioned for a term of 10 years it a rate of interest not exceeding 3§ per cent a year, the principal suiij being repayable by ten annual instalments of not less than £500 each. Five lending authorities in Auckland were not prepared to consider the loan at the prescribed maximum rate of interest, but an arrangement was made with the Bank of New Zealand for a temporary advance by way of overdraft to the extent of £4000, to be secured by the hypothecation of a debenture for £5000. Subsequently the State Advances, Corporation of New Zealand offered lo advance the amount, after firstly deferring consideration of the matter indefinitely, and the sum was available by April 15. It was presumed, said Mr. Watkins, that the board would accept the offer of the State Advances Corporation, but, as the loan would not be available before March 31, temporary provision would have to be made for tlia actual requirements of the board 011 that date. This could be met by having recourse to the "arrangement made with the Bank of New Zealand. Procedure Confirmed. Resolutions were passed confirming this procedure, but when the clause in one motion relating to the permanent appropriation out of income of sums for meeting interest was raised, f Mr. Sayegh said he desired to strike a note of warning concerning this matter. If the board continued to raise money in this manner, it would mean that a large sum of income would have to be put aside for no other purpose but to pay off table mortgages. The chairman, Sir Ernest Davis, said he quite agreed with Mr. Sayegh's observations. Mr. J. A. C. Allum said he agreed that ten years was a short period, but, on the other hand, he would like to congratulate Mr. Watkins on getting the money. Even if the terms were harsh, at least the board had got the money and it could get on with the job. Sir Ernest said it was always an understood thing that there was a peculiar anomaly with respect to the question of interest. That was to say, that in good times the rates of interest were high and in bad times the rates of interest were low. At the present time, however, that anomaly did notj apply It was the first time in his j lifetime that such a position had existed. Mr. Sayegh said it was not a case of not being able to get money, but a case of people who had got money not being prepared to make sacrifices. "I will put it that way," he added. Several speakers proceeded to challenge Mr. Sayegh's statement when Sir Ernest terminated the discussion. "You were right in the first place," he told Mr. Sayegh, "and we are getting up in the clouds now. I suggest that we end the discussion, which is not an economic one. We are dealing with the question of a £5000 loan, and I think you will agree that the right thing was done in this case."