HARBOUR BOARD FUNDS

Press, Volume LXX, Issue 21284, 2 October 1934, Page 11

HARBOUR BOARD FUNDS

I ♦ ! | RESTRICTED FIELD OF | INVESTMENT i I U.F.AKFK OFFICIAL FOLK V REQUESTED The restrictions placed on the investment of the funds of harbour authorities, mentioned in a recent message from Auckland, have been the subject of protracted negotiations between the Harbours Association of New Zealand and the Government. The Auckland message mentioned that as legislative authority for investment in mortgages had been withdrawn the Sinking Fund Commissioners of the Auckland Harbour Board were at nrescnt faced with a heavv accumulation of liquid funds. It is stated that the Lyttelton Harbour Board, while not faced with a similar difficulty, is at the same time and in common with other boards hampered in its investments by Government restrictions. The board has taken an active part in the negotiations with the Government for a clarification of the official attitude on U)e question. In 1929. after considering a suggestion from the Lyttelton Harbour Board, the Harbours Association in conference decided to ask ths Government to amend the Harbours Act, 1923, in such a way that a definition would be given to the words "such securities," which in the act appear in the section dealing with the investment of sinking and special funds. The section provides that such funds may be invested in "such, securities" as the board from time to time determines. In 1926, after an action between the Wellington City Council and its Sinking Fund Commissioners, it was held that the words securities" meant those securities mentioned in the Trustee Act, 1900, and its amendments. In' the case oS the Lyttelton board it was held that certain investments not mentioned in the Trustee Act were without authority of law and the board had to sell the securities. Then in 1929, the board suggested to the conference of the association that the Harbours Act should be amended to clarify the position.

Provision for Orders The Harbours Amendment Act. j 933, provides that the GovernorGeneral may. by Order-in-Council, make a definition of the words "other securities'* or may define the investments which could be made. | 'l'he Harbours Association wrote to I the 'Marine Department asking that Mo remove any question of doubt I about the investment of harbour I board funds, the necessary Order-'in-CotmcJl provided for by the I amending legislation of 1933 "would I Ijc issued. This request was made j<nrly this year. The secrdary of the i Marine Department (Mr A. D. 'Campbell') replied that he had discussed the matter with the secretary 1o the Treasury (Mr A. D. Park) ; and the conclusion reached was that ; no general Order-in-Council should ,be issued applying to all harbour | hoards or to any class of investment. ; but that each case should be treated '(•n its merits.

The letter from the secretary of the Marine Department added that, generally speaking, no objection would be raised to harbour board finking funds being invested in trustee securities, including mortgages, provided the currency of such investments was within the term of the loan for which the sinking fund had been established. Referring to other special funds, such as reserve, depreciation and renewal funds, the secretary stated that it might be necessary to restrict the freedom of investment to some exlent, because those funds might have 1o be called upon at short notice and consequently the investments ought to be readily realisable. Generally speaking, mortgages were not satisfactory investments for such funds, as they were not sufficiently liquid to enable them to be realised at such short notice.

Suggestion Denied ; "It has been suggested that there ■■ ;.s a feeling among certain harbour boards that the Government proposes using section 11 of the Har- ! hours Amendment Act, 1933. to force ihoards to carry out loan conversion ; schemes." the letter continued "but jthat is not so. It is true that the 'Treasury expressed the opinion that i the Auckland Harbour Board should | Hot invest any further funds in jmortgages until the conversion of j "loans had been undertaken. That | opinion was expressed not to compel i the board to undertake conversion. !but in view of the experience already gained by the Treasury with | the numerous schemes dealt with. ■it was realised that it was highly ; desirable for any local authority ] undertaking conversion to have as , much of the sinking fund as possible : Liquid to facilitate the .successful ; promotion of a conversion scheme.'' This letter concluded by stating i that any harbour board wishing to ; invest in other than Government j securities would be required to sub•mit an application to the Marine 'Department, setting out full particu- | Jars. The Lyttelton Harbour Board i decided to record an emphatic protest against the attitude of the department, and expressed the opinion | that the Treasury and the Marine Department had no legal authority ! Tor the policy which appeared to | have been adopted. The board took j the view that it had statutorv rights to invest its sinking funds and 'special funds in all or any of those : securities provided for in"the Trusj fee Act without reference to any i Government department, and that | any other course would make in- ! vestments in other but Government Securities very difficult if not imi possible, and would seriously hamI oer the flotation of "Trustee" Public Body Loans. In a letter to the j association the board stated that at ipresent no Government securities | were available except through slock exchange sales at high orices and [consequently other p-ofilab'e invest'ments must be sought. Many of I these are under offer for a matter (of short hours only and must be : taken up immediately. Such a coursewould be impossible if a board or j its sinking fund commissioners had | first to submit an investment to tne !approval of any Government officer lor department. j Departmental Concession \ The next step u\ Uie negotiatums ! apparently led to the Government j granting some slight concession to 'the association. The secretary of (he

association wrote to the Marine Department indicating the delay which would be caused if the latest decision of the department was to be put into operation, and asking for a clearer definition of the principle? under which the Orders-in-Counci; were to be issued. In reply (dated July 18"). the cic • partment' stated that in the ease e: sinking funds no objection woui-i be raised to the- issue of a genera. Order-in-Council authorising the investment of such funds in local bodv securities which have trustee status. The Treasury was not. however, prepared to agree at the moment to tr.e same course being adopted wit": mortgage securities, and considered that the matter should be held over for a few months until cend:tions became more stable. The Treasury considered that in the investment of reserve and other speciafunds the same restriction ought t ■• be placed on harbour boards as o: electric power boards. The statutor.provisions were the same in eac": case and no general Order-in-Cour.-cil had been issued authorising th B investment of such fimds of powe--boards in local body debenture--. Recently another concession warranted the authorities, an Ordev in-Council being issued in August, authorising the Auckland Harbou Board to invest its sinking funds i" certain securities, but it is consia ered that the field for iuvestme.:" of harbour funds is still too v: slvicted. The Harbour.- AiS'.c'at:: is not yet cntireJv sa"isned with thofficial'attitude, it is s'ateu. and v. tends to review th..- negotiations c~ the conference cf the associatic. to be held in Ckristchurch ry-x" month.