SATURDAY, JUNE 25, 1921. THE CITY FINANCES

Dominion, Volume 14, Issue 232, 25 June 1921, Page 6

SATURDAY, JUNE 25, 1921. THE CITY FINANCES

Although the state of the city finances is in some respects far from satisfactory, it affords no Justification for scaremongering. The bank overdraft is considerably bigger than it ought to bo, and in regard to various classes of expenditure the need for economy is very plainly’ emphasised, but it of course would be ridiculous to suggest that the financial position of the city isunsound. The municipality is able to set against its overdraft rating powers over property values which under the latest assessment amount to close on thirty millions sterling. At the same time, the fact that the city is able to show a tremendous margin to the good over all its liabilities in no way affects the necessity for effecting a radical improvement in the existing state of its finances. ■ Although the present stringency is occasioning some temporary difficulties,- it promises to serve a useful purpose in compelling members of the City Council to take a serious view of their responsibilities of financial administration. Apart from the fact that several accounts, including those of the principal trading departments, show an undue growth of expenditure in relation to revenue, the council during recent years has provided considerable sums for capital 'expenditure otherwise' than by raising loans or issuing debentures. The weakness of this makeshift policy is sufficiently apparent now that the city 7 is saddled with a gross overdraft of £334,000, on which the rate of interest is about to be raised from six to seven per cent. One of the first steps to a sound readjustmont is to determine what proportion of this overdraft, having gone in capital expenditure, may legitimately be liquidated by a loan. • In spite of all that has been said on the subject, the exact position in regard ito the overdraft is not set out as clearly as could be desired. Apparently, however, a substantial proportion of the total amount represents what may fairly’ be reported as capital expenditure. The ordinary receipts and expenditure, of the City Council (excluding trading accounts) for each of the five years to 1920 are given aa under in its official Year Book: —

The detailed accounts for the year which ended on March 31 last are not yet available, but the late Mayor (Sir John Luke) stated recently that receipts from all sources during 1920-21 fell short of meeting expenditure by £28,068. Adding this sum to the deficits in the non-trad-ing accounts for 1919 and 1920 a total of £47,801 is accounted for. The position in regard to the balance, and more especially as to the use of revenue for the purposes of capital expenditure, ought to be fully cleared up without delay. Allowing for the growth of population, extension of services, and inclusion of additional areas, the growth in non-trading expenditure on the figures quoted lias not been, extraordinarily rapid. With careful management and economy it should not he a difficult matter in the. course of a few years to wipe out the accumulated deficit and place the. non-trading accounts generally on a satisfactory footing. Probably, however, it would be a better course to extinguish a- portion at least of the overdraft by means of a loan, for which the authority of Parliament -would be required.. ft is in the operation of some of the trading dcnartinents that really difficult problems are raised. Tn April last it was announced that the citv tramway accounts showed a credit for 1920-21 of £3231. According to a report just presented by the corporation auditor CMc. A. E. Clarke), and published in our news columns today. the actual position is that there was n. loss on last year’s tramwar working of £l2BO. This loss, the first in the history, of the electric tramwav undertaking. compares with a. not credit balance in 1919-20 of £16.439. Last year’s tramway revenue of £347.695 showed an increase of £70,600 on the revenue of 1919-20—an increase of more than 25 per cent.—but this was much more than balanced by the increase in expenditure: particularly in working expenses, of which the chief items arc wages and coal. Yet the council has just agreed to a further incmase. of wages, involving an additional annual cosit estimated at £7OOO. It modifies the position that the latest increase in fares was in operation during onlv a part of last year, but even so the. need of setting limits to tramway expenditure in relation to revenue stands out very plainly. As much is to be said of the electric lighting department. The auditor’s report on the accounts of this undertaking for 1920-21 also appears to-day, and it shows that but for the interest earned on the accumulated revenue surpluses of more prosperous years there would have been a loss of more than £2OOO on sales of light and current during ilie vast financial year. A sound rcadiustinent of the finances of these trading departments might to be regarded as even more imperatively urgent than fhe reduction of the city overdraft. Unless expenditure checked charges will have to be increased, and in. the case of the tramways, at least, any addition to the existing scale of fares would be as likelv to limit as to increase rev onun. The. trading departments are, of course, self-contained. The council. if it shows reasonable enterprise, ought to be able to readjust the ordinary finances, of the city without adding unduly to the burdens now imposed on ratepayers. Since 1913-14 the total rates on the unimproved value have increased from 251-65 d. in the pound to 3 35-1 (lOd. in flic pound. The Hospital and Charitable Aid rate ton fhe annual value) has increased over the same period from 3d. to 6jd. in the pound. These are heavy increases, and at the present time of financial stress the prospect, of a further addition to the burdens of ratepayers, the outcome of the recent, increase in valuations, is decidedly embarrassing. It is plain that the'City Council, like many private citizens and public bodies, has been | drifting along through tin- prosperous years with a somewhat slack

attention to its finance. Councillors now appear to have been brought up with a rude shock, and the outcome is likely to be a closer scrutiny of financial matters that should have a wholesome influence in the management of the city’s affairs.

Revenue. £ Expenditure. £ DeSurphiB. licit. £ £ 1916-16 .. .... 258,061 253.955 4106 •— 1916-17 ■■ .... 262.621 260.662 1839 1917-18 .. .... 263,326 262,367 959 1913-19 .. .... 272,416 278,361 , — ... S.945 1919-20 .. .... 305,278 319.066 — 13.788