THE CITY’S FINANCES

Dominion, Volume 14, Issue 231, 24 June 1921, Page 6

THE CITY’S FINANCES

POSITION SERIOUS MAYOR DISCUSSES THE OVERDRAFT A TOTAL* OF £334,205 COUNCILLORS EXPRESS THEIR VIEWS

“The position is serious. I hav« never had to do with anything like it in my life," said the Mayor, Mr. R. A. Wright, M.P., while reviewing the state of the city finances ut the council meeting last night.

The Mayor said that the indebtedness of the council was made up as follows:—

These last-mentioned items, the Mayor commented, were duo next March. Summing up, Mr. Wright told the council that there was £334,205 owing, against which there was no set-off, except as far as interest was concerned. It seemed to him that the position was grave. During the past week he had sounded every lending firm or company he knew of in the city, and there was not one of them that had a shilling to lend. The Harbour Board could scrape up £7OO or £BO9. The bank manager had told him that it was impossible for tho bank to go on as at present. The council had to be carried on (he back of the bank, and the overdraft would pile up till tho rates came in. The whole of the rates would be swallowed up in one week, and the council would still ow a large amount. The position was serious, and. he had never had to do with anything like it.

In regard to the credits not set off against the debit, there was the item “water supply loan, 1920, £68,414” in tho bank. That was really profit made by the electric light department. He had been under the impression that that was used as a set-off against the overdraft, but he had found to his great surprise that it was not so. He had consulted the city solicitor about tho matter, and under advice had ordered the sum to be attached to the district fund account; now it was used as a set-off in the calculation of interest. He had also been told the unpleasant news that whereas at present the interest on the overdraft was six per cent., the council would receive a notice that, it would have to pay seven. When, time after time, he had tried to keep down expenditure, the council would see he had been doing only what tivas absolutely essential. The council could not indefinitely go on as at present. . If a loan could be raised next day, it could not be used to pay off the overdraft. Legislation would have to be passed first. Ho had been to Sir Francis Bell, the Acting-Prims Minister—he had been to everybody, in fact—to see if he could find “a way out of the morass. Sir Francis Bell said the only thing that could be done was to get legislation passed next session to authorise a special loan to pay off tho overdraft. Jr the council were to raise a half-million loan in the London market next day, he had been informed, the money could not be used in connection with the overdrft. . “Wo are tied up every way, said Mr. Wright. “Whatever way we move there is some law or obstacle to block us. Councillor B. G. H. Burn: Surely we have some assets. The Mayor: Wo have not a -solitary shilling. ... Of course, if you talk about assets, such things as the Basin Reserve or the Town Hall are assets; but we have no money assets.. Councillor M'Kenzie said the Mayor had made a statement that gave them “cold feet.” The Mayor: That is likely. Councillor M'Kenzie: ? wrong.” Councillor M'Kenzie said that when the loan was raised, that money borrowed from tho electric light department for the Orongarongo tunnel work could bo paid back and used as they liked. ~ ... .. The Mayor: Not to liquidate the overdraft. At least, that is the opinion of Sir Francis Bell. Councillor M'Kenzie: I don t think that can be. I l>eg to differ from your good self, and even from Sir Francis Councillor M. F. Luckie: “Either Sir Francis Bell misunderstood yon or you misunderstood Sir Francis Bell.’ The money was only borrowed from tho electric light department to finance an urgent work against tho time they could raise a loan. They must have both sides of the balance-sheet before the™. After all thev were only in the position of many other businesses in Wellington. The Mayor: Exactly, hut two blacks don’t make a white. Councillor Luckie: But they are Bound. The city solicitor said that the money for the liquidation of tin overdraft could not bo met out of a loan It could onlv be done by the hypothecation of debentures, and special legislation had to be provided to enable that to be done. Tn short the city had certain receipts and expenditure, and it should live within its income. Councillor Forsyth pointed out that the Finance Committee had never functioned properly. Take its reports on somebody’s fence or drain and while it was tiddly-winking with these little matters tho trouble had occurred. He Imped that such matters would be thrashed out bv the Finance Coinmil tee who shoo’d address themselves seriously to the financial problems that face the Burna said that the one thing that had struck him during the twelve months he had sat on (ho council was the lack of debating power on matters of finance. That was not the fault of councillors, as they were not supplied with the information. He thought they should have the city Gearn rer before them to explain the finanr:il position from time to time. To firn it seejned not make enough use of their officers. The Mayor said tho position was so simple that a Sixth Standard boy would I

understand. He again rehearsed tho position, setting out clearly the council’s indebtedness to the bank.

Councillor Chapman wondered why the discussion had not taken place in committee. The effect would be to harden money, it would make it difficult to sell debentures, and the financiers would sit , back and smile, knowing what a grip they had. It was curious to hear how little money there was until the rate of interest went up, when, strangely enough, there was plenty of money available. It was all a game! He hoped that the Mayor, as a member of Parliament, ’would do his best to alter the system of finance. Councillor Norwood emphasised the seriousness of the position, and that all councillors should get behind the Mayor in effecting rigid economy. As to complaints of some councillors about not knowing anything about the city’s finance, he pointed out that the city treasurer was as much the servant of councillors as the Mayor, and tho information was always available as plain as a pike-staff. He said that there was no city he knew of with such fine assets as the city of Wellington, but they were only entangled for the time being owing to extraordinary conditions that were affecting every business in the land. The Mayor said that he believed that Wellington was as sound as a bell. Simm of the biggest firms in the world had the receivers in simply because they could not get the ready money. They had plenty of assets, but they were short of money for the time being.' Councillor Burn said that the Mayor and other members of the Finance Committee had allowed the finances of the city to get into such a position, yet they came there and criticised the statement. What they had to do now was to prevent the growth of the overdraft. The Mayor said they could not do so, as they had no money io go on with, but as soon as they struck the rate they would get the demands out, and the rates would come in, and then the over‘draft. would be reduced. Councillor P. Fraser gave credit to the Mayor for his frank statement as to the finances, but he did think that it should have been brought before tho Finance Committee in the first instance. The Mayor pointed out that Councillors Fraser and Chapman bad been the greatest opponents of committee work. On the. streets and on the platform they had stormed against the council’s hole-in-a-corner methods, and have even advocated no committee work. Councillor Fraser said he had not advoented any sucli thing. This practically ended the debate on the statement. The Half-Million Loan. In regard to the council’s half-million loan, the Mayor said that he had waited on the Acting-Prime Minister quite a number of times to ask if the embaigo upon tho raising of a Wellington loan in London could 'be removed. Each time Sir Francis Bell had said: “No, it cannot be removed until the Government gets its loan.” On the last occasion, however, Sir Francis Bell had offered to send a cablegram to Mr. Massey asking whether he would at least send word how the market was and what the chances of the city were. Tho Minister had not received a reply when inquiry was made that afternoon. Sir Francis Bell had told the speaker that he did not think the council would have any difficulty in getting the half-million loan, because, as he said the city’s security was better even than the Government’s, since in the first place there was the city’s own special rate, and in the second there was the Government guarantee.

X District fund 236,395 7 703 Tramways 90,107 Total •£33-1,205 The following accounts were in credit. nnd were set off against the debits merely for purposes of interest calculation:— 2,168 Milk 11 390 19 838 General accident 9,069 Tramways and lighting accident 16,839 Total credits set off 2159,304 The following credits were not set off against the debits: — City works loan 54 •Electric power station loan 13,88? Waterworks loan, 1910 1,070 Water supply loan, 1920 68,414 Miramar loans 341 Total •£83,761 From the bank the following amounts had been borrowed on the security of debentures hypothecated:— Milk undertaking loan 52,000 Outlving districts drainage loan 20,214 Street widening loan 23,991 Total 2196,205