LOANS TO LOCAL AUTHORITIES.

Dominion, Volume 5, Issue 1512, 7 August 1912, Page 4

LOANS TO LOCAL AUTHORITIES.

THE POSITION EXPLAINED. A BILL TO BE INTRODUCED. In order to understand the present uosi tion, ii review of the past is necessary Jn 18SG, by the Government Loans t< Local Bodies Act, niithorily was given t< bomw up to i' 200,000 per annum and t< lend to local bodies under certain restrie tions. The local bodies were to pay to: .this money, a per cent, lor twenty-si: years. Authority was given for Parlia incut to appropriate 2 per cent, from tin .Consolidated Kevenue as a sinking fuiu for repayment of the amounts borrowed but no .amount was , ever set aside for thii purpose under that Act. By tho Amend ment Act of 1892 this provision was re pealed, and XI 10s. p?r cent, was to 1) paid out of the Consolidated Fnnd, am 10s. per cent, out of the Land Transfe Assurnnce. Fund in the hands of the Pub lie Trustee. This 2 per cent, was to l> invested by tho Public Trustee as a sink ing fund, and applied to the repaymen of the moneys borrowed for lending ' t local bodies. It was then believed tha the Land Transfer Assurance Fund wouli never bo required for its original purpose and, as by accumulation' the amount o it was becoming unnecessarily large, i was considered that it would be a dosir able thing l>o use s?inc of it in this way. Amending Acts. I By the amending Act of 1899 Hie'tern ill' loans- to local bodies was made op tional;it might be twenty-six, thirty-two ur lorry-one years. Previously it wa: twenty-six years only. The rate of in tcrest was. to be i\, i, or ;!J per cent, ac cording to'the term. The sinking fun< to \k paid to. the Public Trustee out o tho Consolidated Fund on the new term of thirty-two and forty-one years was ti be 1 per cent, for the thirty-two years loans nnil 10s. per cent, ior the forty-on l years' loans. ,By the amending Act o 19(10 the ra'.o of interest on the. oil twenty-six years loans then in existenc was reduced to i\ per cent. By H-liß Local Bodies Loans Act, 1001 Section 9G, the contributions to the sink ing fund to be paid to the Public Trnste out of the Consolidated Fund ; wore to b on twenty-six years" loans JC2 per cent, on tJrirty-two years' loans £1 Ids., and o; forty-one years' loans Jil. This Act re pealed the provision of the 1892 Act or. preprinting 10s. pin- cent, per annum froi: the Land Transfer Assurance Fund; th who)o of the sinking fund was,to be there after found lij the Consolidated Fund. By the amending Act of 1903 rates c interest on loans were raised to 5 per con I for twenty-f.iix years' leans, i\ pen cent to - thirty-two years' loans, and 1 percent for forty-one yroti's' bans. By the 190 amending Act the rates were .again rr (lure.il to i\,l I, and lii per cent, rospec lively. The Present System. This was/inaugurated by the New Zen land State-guaranteed Advances Act,. I9OE The Superintendent wa.s. authorised t raise up to .£1,000,000 a year for lopnsMloeaJ bodies. There was no restriction oi the amount, that could be borrowed b. any local authority. The money wsp t ba lent at the same rate as that at whiel it was borrowed, a charge of 10s. percent commission'only being The.loan were to be repaid by instalments, includ ins principal and interest. Under the present system local bodie for the most part obtain loans 'having term 'of ;llii years. If money is borrowei at 'A\ per cent., the annual instalment payable by (be local bodies' ifor • encii '-JEIO amount to .ti- 17s. Gd., and if at SJ-pe cent, to .£5 Is.. The payments provide fn interest and sinking, fund', 1 -sonhat' , th whole loan is by these instalments ex tiiujuished at the end'of the term. The procedure for raising loans hasbeei greatly simplified. So numerous have ap plications been that the Hoard has lm to reduce tho maximum loan to .£. r >oflfl fo each body, and to* give preference I smaller local bodies. The total amonn provisionally approved or finally grantei has been in two years .C2.45J1.417 —in 191(1 11. .iil,Uß,!):U;'and in 1911-12. JC1.012.48S As some of the loans are to be obtains bv instalments extending over two c three years (interest being paid only oi moneys received), it has been the prac lice tp enter into engagements in antici pation, before moneys are raised; "x »-■ ■ • • A Hardship. Provisional approval of an applicatioi does not bind the Advances Board to lend and if everything is riot in order, cr i the Board has not. the money in hand, o if it has to raise it at a higher rate'thai that fit.which it has bePirprovisionally ap proved, the Board can in the end. dcclin the loan or charge a higher rate. Unti November last money was obtainable a 81 per cent, for lending to local bodies but since then the Board has had to pa; 83 per cent. As many local bodies ha< applied for loans to be paid over by in slalinentS' during the next .riy.o or (lire years ;\t the lower rate, anil have mad iill iirraiiKoments accordingly, iiicludini tlm taking of polls authorising the rais iwi of the iiimi:\vs at that rale, it is cu> sidered a liii)'iis'hip*l'or IliVin to s» Ihrou'.'l llii' process a, second time in order to oij tain iintimi-ily t'-> pny the higln-r lair, am u Bill will Ik-' in trod uei-d to -nmlif th iivisinal'|iroceediiiKs.o|ientivf. ■ The enormous demand- for mom.vs b; local aut'holitie-), as sliown by the mimcr on? applications to the Advances Office inakes it inlpc«ible tha! 'ihe. State cai fj.nd'all that is rennirrd. It is cpiisidewi dial the amount flint ean be raided by th Govi-rninent. should be reserved for""th smaller'and' more impecunious local'an tliorilit- which jmve no experience it raising loana. , , Accordingly Ihe (iovrvnnient ifas'umlo oonsideraliou a modified »y.-tem of loan l:> local bodies. suine\yhat rost'inbliii;; th old fystem umlor wlijch the smaller inn weaker local bodie? would for urgent wovl connerted with road< and bridges receiv hans at a comparatively low rate, th Plntf hertrinsr p portion of lh-s burden o providing for the in tore? I. and sinkiu: fund; such n policy would, il N eviilenl i-rlirvc Ihp in:i<l- nnd brid:«= vntrs on th Public Works Estimate*