Crisis in local-body loans says Cr Hay

Press, Volume CXIV, Issue 33565, 20 June 1974, Page 12

Crisis in local-body loans says Cr Hay

The problem of loan finance for local bodies was at crisis point, and the Government should take drastic action, Cr H. G. Hay told the Canterbury-West-land branch of the Society of Accountants yesterday. Many local bodies would not be able to provide for capital works if the action were not taken, said Cr Hay. Underwriting support for loans was becoming increasingly difficult to secure. The Town Hall loan of $400,000 was underwritten only to the extent of 30 per cent, and with the rapid increase in interest rates in the last few weeks, the prospect of local bodies attracting money was “pretty desperate.”

“It is a complete farce and waste of public money at present for a local body, as part of an underwriting agreement, to have to spend i per cent of the loan on advertising. The only ones to benefit from this procedure are the newspapers and advertising agents,” Cr Hay said. TAX ALLOWANCE It was a pity that the Government in the Budget had not included local-body interest payments as part of the extra $2OO free of taxation to private investors, said Cr Hay. "The situation for localbody borrowing in New Zealand is alarming, and as far as the Christchurch City Council is concerned, because we have had a fair go at the loan market in recent years. I think the prospect of raising such sums as $900,000 for the M.E.D., or ssm or s6m for a new administration block, are pretty grim.”

One reason it was difficult to gain support from the investing public in new localbody ’nans was that individuals could obtain a better return by buying local-body stock on the open market or from some merchant banks, earning 71 per cent or greater, compared with 6) per cent from a new issue.