Local Body Finance Corporation Urged

Press, Volume XCVII, Issue 28540, 20 March 1958, Page 12

Local Body Finance Corporation Urged

(New Zealand Press Association)

WELLINGTON, March 19. The Municipal Association of New Zealand today strongly urged legislation to establish a local government finance corporation. In submissions to the Royal Commission on Local Authority Finance, Mr C. L. Bishop, the association’s secretary, outlined a, framework for the proposed organisatipn.Detailing loan-raising difficulties met by local authorities, he said the association was in full accord with stated Labour Party policy to create a finance corporation. Suggested Powers The association suggested that: The corporation in general take over the existing functions of the National Provident Fund Investment Committee, and that investments of £2om be taken over by the corporation. The corporation be authorised to issue its own stock or debentures, and if necessary to carry Government backing. The corporation be authorised within its ramifications to implement a local authority insurance scheme. The corporation take over and operate the local authority section of the superannuation scheme for local body employees, since it forms the major part of the Provident Fund superannuation scheme. The overdraft facilities of the corporation be extended with the Reserve Bank to enable disposal of Government stock of up to £3m, and that such other financial assistance through the Reserve Bank be given as might be deemed necessary for the implementation and extension of the Corporation’s operations. Municipal Bank The association also recommended that, supplementary to the operations of the local government finance corporation, consideration be given to the setting-up of a municipal bank to undertake normal banking facilities for local authorities. “Since the corporation would in effect act as a central bank or clearing house in many instances for loan finance and investments, it is felt that its powers should be extended,” said Mr Bishop. “It is contended that this could be undertaken without any heavy overhead, since the corporation would be dealing with a very limited number of regular clients, and a considerable saving could be effected by way of

overdraft in conjunction with short-term investments. Cash deposits and withdrawals could be by arrangement with the Bank of New Zealand.

Insurance Scheme The association recommended that the necessary legislative authority should be provided to allow the setting-up of a municipal insurance scheme similar to that already authorised for counties.

“Premiums paid by local authorities generally run into a very substantial figure, and the experience of the counties’ insurance company and that of the municipalities who have administered their own schemes suggests that it should be possible to provide substantial sums for investment,” Mr Bishop said. “These moneys would be invested with the local authorities finance corporation.’’ The National Provident Fund Investment Committee, which came into existence about two years ago, had provided about one-sixth of the loan moneys, made available to local authorities during that period, said Mr Bishop.

Mr Bishop added that while the association had no real objection to a limited capital expenditure being made from revenue, particularly in the case of trading undertakings, there was a serious objection if this system of financing capital works was to be expanded to any great extent Under existing conditions substantial rate increases would be called for if capital works were to be undertaken from revenue.