SINKING FUNDS.

Dominion, Volume 1, Issue 290, 1 September 1908, Page 9

SINKING FUNDS.

DEPUTATION TO THE PREMIER. OBJECTIONS TO PROPOSED LEGISLATION. A deputation representing tho Wellington City Council and tho recent Municipal Conference waitc<d upon tho I'rimo Minister (Sir Joseph Ward) yesterday afternoon to proffer objections to' Clpuso 10 of tho Local Bodies Loans Amondment Bill, which is now beforo Parliament. Tho clause in question provides that in respect of all future loans raised by local authorities under the Act tho Public Trusteo shall bo tho solo commissioner of sinking funds, and that all sinking funds so vested in him shall bo invested in Government securities. Tho deputation consisted of tho Mayor of Wellington (Hon. T. W. Hislop), tho Town Clerk (Mr. J. R. Palmer), Councillors P. M. B. Fisher, M.P., J. P. Luke, G. Shirtcliffo, A. S. 13iss, D. M'Laren, W. H. Morrah, T. Carmichael, and T. Ballinger, Mr. J. W. M'Ewan (Mayor of Petone), T. Peterkin (Mayor of Lower Hutt), and C. I. Dasent (Mayor of Karori). Mr. Hislop said telegrams had been received from the municipal authorities at Dunedin and Nelson supporting the objections held by tho Wellington City Corporation. Tho other cities had tho matter under consideration. In tho past, so far as .they wero informed, the sinking funds of tho municipalities had been well invested, at fair rates' of interest, and without loss of principal. He submitted that it was well for local bodies to havo, so far as possiblo, tho control of their own funds. If they wero to be treated as incompetent, they would soon, become so. That was proved by tho history of local government everywhere, and he local governing bodies of New Zealand compared favourably with thoso of other parts of the world, becauso they had had tho management of their own local affairs. Tho 'Wellington Corporation was earning £4 15s. per cent, on' its investments. Tho money was being invested safely, and thoro wero no arrears of interest.

•WELLINGTON SINKING FUNDS. The Premier: How long have the invest-, ments been earning £4 155.? The Mayor: Last year it was £4 14s. Tile, Premier: And before that an averago of £4 per cent? Tho Maj;or said that was so. At present tho municipalities had the power to make tho Public Trustee tho commissioner of any of their sinking funds if they so desired, and they that further than that was necessary or desirable. Investment in tho Government funds would bo against tho interests of the local bodies, as it bad boon found both in the Old Country and hero that' it was advantageous to have: these funds invested in local loans. These sinking funds were creatcd, not for tho purposo of strengthening tho security of tlio lender, but with tho object of strengthening tho finances of tho local body raising tho loan. In many eases tho local bodies created these funds compulsorily; but at present it was a matter for mutual arrangement between tho borrower and tho lender. THE PREMIER IN REPLY. Tho Prime Minister asked the deputation to disabuse their minds of any idea that there was a desire on tlio part of the Government to treat the local bodies as though tiioy wero not capable of nianaging i their own affairs. There was.nothing of that sort underlying this very important Bill. , - Tho Mayor: I didn't suppose it was meant so at all.

Sir Joseph Ward went on to say that the proposal to which exception had been taken was only part and parcel of a very important schcrne alfeeting local bodies throughout tlio country. He was not prepared to carry out ono part of that scheme without tlio other. Tlie scheme would enable, local bodies to obtain half a million sterling a year under Government guarantee, tho country paying one-half per cent, towards tho sinking funds, out of tho Consolidated Revenue. Tho local bodies would got ' their loans at a cheap rate of interest, and tho loans would bo paid off in 32i years. It went. without' saying that when he asked Parliament to put the power of the country behind tho finances' of local bodies and to give them contributions which in five years would come to £12j500 a year, and in ten years to £25,000 a year, ho would be called upon to show- that there was another side to the arrangement. The local bodies must recognise that a little was. expected from them in carrying out this' great scheme. Tho investments already made by tho local bodies, amounting, according to the' latest returns, to £1,070,483, would not bo touched. Tho Bill would not affect the transactions of tho Wellington City Council to tho tuno of £1 a year. The schemo would onablo the local bodies to repay their loans in 32J- years, by investing their sinking funds in a safo and easy way, the Government assisting by paying one-half per cent, per annum into tho sinking funds. In ■ consideration of this tho local bodies would bo required to invest their sinking funds in Government securities with tho Fublic Trustee as commissioner. THE GOVERNMENT AND THE MONEY MARKET. Proceeding, tho Premier said ho had gathered from a report that Mr. Hislop the other evening, , speaking possibly in somo heat, had assumed that tho credit of tho Wellington City Corporation was as good as, that of the Government. Mr. ' Hislop explained that his moaning was that tho fall in tho money market had affected tho 31 per cent, stock of tho Government, and also its 4 per cent., more than the City's 4 per cent, stock. They had fallen more than tho City's stock as compared with their former prices. The Premier said ho found from the official lists of the Stock Exchange that tho Government's 4 per cent, stock was running from 5 to 7 per cent, higher than that of the City Corporation. According to latest advices the Government 4 per cents, wero quoted at 106 to 107. Thoy were in a very satisfactory position, as wero all the Government stocks. Ho had only referred to this matter because thero wero people,, hero and at Home, who were always ready to criticise our stocks. Mr. Hislop said ho did not intend anything ' of' that kincL, He had referred to British securities in similar terms. The Premier further admitted that tho Wellington -City Corporation stocks were also standing very well.

CONSIDERATION PROMISED. Roverting to the representations just niacin, Sir Joseph promised to give them tho fullest consideration, but if ho had to take out the proposal that had been objected to, he would also take out tho provision for payment by the Government of A per cent, to tho sinking funds, because ho was not prepared to give £2500 every year to add to the comparatively small amount which tho local bodies would be sotting aside for sinking funds, unloss they showed a little fairness towards tho power that offered thorn such advantages. That was tho bottom of tho whole position. Even if tho local bodies could got a littlo more interest under present conditions, that would not bo worth consideration beside tho increased security. Mr. Hislop: Could you not say that where tho. loan is not guaranteed, wo should havo freedom ? Sir Joseph Ward: I am quite prepared to consider that. Mr. J. P. Luke asked if it was proposed to sot up a board to investigate loans. Tho Premier roplied in tho negative. ' Tho machinery was already provided, and tho Government woidd have to bo satisfied as to every loan to ho guaranteed.