SINKING FUNDS.

Dominion, Volume 1, Issue 287, 28 August 1908, Page 8

SINKING FUNDS.

INVESTMENT IN STATE SECURITIES. THE MAYOR OPPOSES. A discussion on sinking funds at tho meeting of the City Council last evening led to a difference of opinion on tho subject between Councillor Fisher and the Mayor. ... The matter was brought up by the Mayor, who made a reference to a resolution of the recent Municipal Conference regarding the powers of local bodies as to the investment of their sinking funds. Tho subject, said Mr. Hislop, was before Parliament at present, and the proposal was that the sinking funds should bo invested in securities in the general Government of New Zefaland." This meant that the municipality, would earn the lowest rate of interest and was not to have the management of its own finance. If tho idea had anything to do with the management of any city in the future, and if this Bill was carried, he would certainly advise the council that no sinking funds :bo made at all. It would be better to . make, provision in some other way for meeting liabilities. The sinking funds would be'earning a' very much lower rate of interest, which was certainly not good finance. There seemed;:ho said, to be a misapprehension as to the place sinking funds occupied in municipal finance,, and in some cases tho lenders wanted the interest, not tho principal. He would like the council to pass a.- resolution appointing a committee to go into the matter with a view of approaching the 1 Ministry, and he moved that the Finance Committee deal with the ques-

UUU. • , * Councillor Cohen seconded the motion. Councillor Fisher Moves an Amendment. Councillor Fisher moved as an amendment that the nmtter be dealt with by tho Legisand Leaseholds Committee, as it was set up specifically for this purpose. If, he said; the proposed principle (of ignoring ■ a special committee) was extended, the committee would be useless. As chairman of that committee, he' did not think that they were being'properly' treated. As to the special functions of the sinking funds, ho would like to point out that for many years it had been the practice in Victoria and New South Wales for the sinking funds of local bodies to be paid into the funds of the State Treasurer,, and the.,system had many advantages. It provided a .uniform rate of interest; there •was no loss, for immediately an instalment of sinking fund became due.it was taken by ;t)ic Treasurer, and was interest-bearing from •that :date; -and it had a State guarantee. Under tho present system, it was impossible to claim security. The last Mayor believed ;in investing in the funds of building societies, 'and tho present Mayor believed in investment in freehold property. The speaker thought, that; the Municipal Conference dissented from .the proposal now before Parliament to invest sinking funds in State securities. When, a sinking fund had accumulated sufficiently to pay' off a; portion of a loan, the council only had to go to the Government and ask for it. He would express no opinion as to motive. He would urge that the council should support its own committees, whereas this action ■ amounted practically to want of confidence.

The Mayor: Thero is no proper -committee to 1 deal with the matter.. The Legislation Committee was appointed for tho purpose of considering questions, not of general policy, ' but regard to . special circumstances of the council. It has nothing to do with matters that affect the finance of the city. The proper place is before the Finance Committee. ■ • 1 ; Councillor M'Laren said there were reasons ..why the matter • should be considered by a committee of which the Mayor was chairman;- In • Australia, they had gone in for centralisation that we were not. prepared to folio,Wj. and tho general Government of the country, should not take charge of the sink-' ing funds and shut out the local bodies. The Government was riot justified in taking' that course unless it .was. prepared .to make a guarantee. He supported tho Mayor. • Tho Mayor said that the Conference voted for tho matter to remain as it .wasi ' ""A Vote of No Confidence." In. seconding the amendment, which he said lie regretted having to do, Councillor Shirtcliffe said- he thought that the consideration of the Bill came within the functions of the Legislation Committee. Tho Mayor:-It does nothing of tho kind. 1 Councillor Shirtcliffe: That is my view of the matter. ■ ■ The Mayor: I can only take that as a vote of no confidence in me. Mr./Shirtcliffe: The Mayor is ex officio a member of'-all committees. . The' Mayor: Thank you. I would not take' advantage of thfw. 'Councillor Luke supported the motion; He thought (the Mayor had taken tho right attitude. . ' ■ • The Mayor said, in reply to a remark from Councillor Carmichael, that tho Legislation Committee' was ' formed for a specific purpose. - ' ' •'" - > Councillor -Fletcher suggested that tho council as a - whole deal with the matter in ; ■• Tho Mayor ; preferred a committee of three, or the Finance Committee. The amendment was lost by 8 to 4. Tho ayes ;wcro Councillors Carmichael,' Fisher, Hales, and Shirtcliffe, and the noes were Councillors Ballinger, Cohen, Fletcher, Hiridmarsh, Luke,, M'Laren, Morrah, and the Mayor. - Tho Mayor In Reply.

Tho Mayor, in reply, asked whether they would' follow, tho example of' Australian towns in allowing water works and tramways to.be controlled by the general Government? Because Australia did something, were they going backwards to promote an oriental system.under which the central Government controlled . everything ? He hoped that it would bo a long-time before they allowed tho sturdy example.of Glasgow and other places in tho Old Country to bo displaced by the oxamplo of Australia. As to tho advantages of giving this:into tho general Government's hands, uniformity of rating sounded very fine, but was a "municipality which managed better than anothor to havo no scope for its better management? If it was making 1 per cent, more' for its money, was that to be lost because they believed that the municipalities wore so useless that they could not manage their own affairs? Tho whole argument was that a municipality was so corrupt, or lavish, or stupid, that it' was not fit to have ' the management of-its own sinking funds. He would be very sorry to adopt the methods of some of the 'mtimcipalities on the other side. If they were told that the councils were not fit to conduct their own business and manago their own moneys, no self-respecting person would belong .to them; the councils would eventually be composed of those who actually wero not fit so to do. The more responsibilities were entrusted to the councils, the more likely would it bo that they would be composed' of men who would bo worthy of the trust. Ho had no sympathy with the silly notion of _ following a system becauso Australia did it. If _ they followed tho example of Australia in many things they would go back many years. Then it was stated that with sinking funds invested only in State securities they would havo no loss of interest. He urged that if they could make 1 per cent., or oven per cent., more out of their money under the present system, tbey could afford now and then to loso a few. pounds, but could they bring up an instance where an investment had been mado at a loss?;

Value of State Security. Again, Continued tho Mayor, it was said that thoy would have the State security. If the State' was going to do everything ho did not know whether th© State security was going to bo a very high one. Look at tho State bonds in London now! Tho council's bonds could be. bought nearer tho amount at which they wore floated than was the case with th© Government's 3 or 3J per cent. he-did-not- jmeia

State security came in. Imperial consols, which were the safest of all, had gone down 40 per cent, more than Wellington bonds in the London market. Stato security was all right when the money was' due, but it was not all .right when it was desired to realiso halfway through. The council was much better able to manage the business than the Government was. Glasgow, for example, would never submit to such a proposal as was now made. > Glasgow was getting a much higher rate of interest from funds invested in its tramways than would be got from ail investment in Imperial consols. Alike from the practical and the sentimental points of view, they should protest all they could against the invasion of the duties of local bodies by the central authority. Cr. Shirtcliffe said that ho heartily agreed with his Worship. Ho hoped the day would never come when the investment of the sinking funds would bo taken out of the hands of the local bodies. ' The matter was referred to the Finance Committee.