The Press THURSDAY, APRIL 28, 1938. Electricity Profits and the City Accounts

Press, Volume LXXIV, Issue 22387, 28 April 1938, Page 10

The Press THURSDAY, APRIL 28, 1938. Electricity Profits and the City Accounts

Nine months ago the electricity comnuttee of the Christchurch City Council agreed to a transfer of £50,723 from the profits of the Mumcipa Electricity Department to the municipal general account subject to "the understanding that the "finance committee will at an early date: sub"mit proposals for the consolidation of all the "existing loans from the Municipal Electricity "Department, together with a comprehensive " proposal for their repayment over a period. The finance committee's report on the subject, presented to the meeting of the council on Tuesday night, shows that the net amount owing by the municipal general account to the Municipal Electricity Department for the period since August, 1928, after deducting repayments, is £72,099. The council has agreed to the finance committee's recommendation that this sum should be repaid by annual instalments of £4OOO without interest. It appears, however, that the Municipal Electricity Department contributes £3OOO a year towards the general expenses of the municipality and that "for some "time" £ISOO of this amount has been offset to repay advances from the department, so that the additional sum which will have to be added to the general rate is only £2500. An obvious comment on this arrangement, and on the report on which it is based, is that important questions are left unanswered. Of the transfers made from time to time from electricity profits, some have been treated as loans and others as straight-out appropriations; while in some instances the exact nature of the transaction does not seem to have been very carefully considered. The new arrangement treats all the transfers in the last 10 years as loans without interest and makes provisions for repayment. But it is not at all clear whether the finance committee intends that transfers from electricity profits shall cease. Clearly a sudden drying-up of this source of money would cause the council some financial embarrassment, since in the last few years it has become increasingly dependent on electricity profits as a means of keeping down rates. On the other hand, it would be farcical for the council to continue using electricity profits for general purposes and at the same time to raise the general rate in order to pay money into the electrical general account. The truth is, perhaps, that the members of the finance committee had their tongues in their cheeks when they made the proposals for repayment; they must know well enough that the chances of the proposals being carried out over any long period are remote. Nevertheless, it is important that the question of the relationship between electricity profits and the municipal finances generally should be settled according to general principles, even if those general principles have to be established by legislation. The great objection to haphazard transfers from electricity profits is that they obscure the financial position of the City Council and make the municipal general account incomprehensible. The first step towards straightening out the tangle must be to decide what reserve fund should be maintained or aimed at by the Municipal Electricity Department, since loan repayments will presumably go into this fund. Originally, it was contemplated that the Christchurch City Council would one day construct its own generating plant; it has now been made clear that the generation of electricity is a State monopoly. It seems reasonable to assume that the removal of this contingency has a bearing on the size of the reserve fund. -