FINANCES.

Evening Post, Volume LXXXII, Issue 47, 24 August 1911, Page 3

FINANCES.

HARBOUR BOARD AFFAIRS. CRITICISMS AND SUGGESTIONS. The management of the Wellington Harbour Board's finances, and particularly the methods of dealing with the question of depreciation, were the subject at last evening's meeting of the following motions by Mr. M. Cohen ;— "With the object of sabstantially reducing tbe charges recently and allegedly temporarily imposed— -i»nd nr, the practice of executing tiew works out of revenue is unwise and tinnece&sary*-and further, seeing that th<> sinking funds under present processes will extinguish the board's indebtedness in. something like thirty years, leaving tho present assets of the board unencumbered— and further, that a readjustment of the extent and in which amounts for de. preciation are provided, may enable the board to carry this into operation— the following resolutions be given effect to as an initial step s— -(a) That the manner of writing off sums for depreciation ba altered from that now prevailing. That such alteration be effected as hereunder indicated, or in such manner as will have similaf result; (b) that the depreciation and maintenance accounts be kept separate and distinct; (c) that the sum written off for depreciation be arrived, at by a reasonable percentage on the several classes of th© board's depreciatory assets, ahd that when the aggregate amount is ascertained in each year such sum shall be transferred from revenue to the credit of the depreciation fund account in cash; (d) that such cash depreciation fund be available for renewitig such assets as have been under contribution to the depreciation account from time to lime; (c) that in the meantime such depredation fund account be acredited with current interest} either by the board, who may use it for extinguishing or reduction of overdraft, or may b» invested from time to time in the same manner as the sinking fund of the board; (f) that all new work involving an expenditure of more than a certain sum be constructed entirely out of loan moneys ; (g) thit a maintenance account of the usual character in such institutions be kept with the object of keeping the board's machinery and other like assets up to their fullest capacity of usefulness, and that such aggregate maintenance account be annually debited direct to profit and loss account before the net profits for the year be ascertained." The mover explained his reasons for bringing forward these proposals in a lengthy speech full of figures and detail, which can only be summarised here. He noted that the present method of assessing depreciation was by a fixed percentage on the several classes of the board's assets. Timber structures, such as wharves and wooden buildings, were assessed at 5 per- cent., brick and concrete structures at 2£ per cent., and machinery and plant at 10 per cent. Aetu&rially speaking this meant that the lives of wharves and. trooden structures were estimated at fourteen years, Brick and concrete structures at twenty-eight years, and machinery at seven years. After debiting the several classes of depreciatory assets with snch depreciation, tho Amotmt spent for maintenance ana repairs during th« year was added to them. Thus, from 1884 to 1910 a total sum of £426,557 had been written off for depreciation. But a total of £135,518 had been charged, to the several classes of assets for maintenance and repairs. Tne actual amount written off lor depreciation was the difference between £420,557 and £135,518, or in round figures, £300.000 for depreciation alone. Mr. Cohen contended that the statement of the amount written off for depreciation, as £420,559 was inaccurate and possibly misleading. The time had arrived, he »&id. when the whole method of adjusting and applying depreciation to tbe board's accounts should be altered to something at once more conclusive and more in keeping with modern methods. As suggestions for improvement, he referred to clauses B, C, and Dof his motion. The methods intended therein would at least have the merit of being a simpler and more straightforward course. Aa to standards of depreciation, Mr. Cohen argued that it Was contrary to the board's own experience of the lasting capacity of wharves and wooden buildings to give them an estimated life of only fourteen years. With brick and concrete structure** aleo a much longer life could safely bo relied upon. The sum now in hand would be more than sufficient to reinstate the whole of tho assets of the board which were in existenco up to ten years ago. Hence Mr. Cohen objected to depreciation funds being utilised for any extension of the board's appointments or aeeets. Loan money chould be Used for that purpose. "Our sinking fund, 1 ' said Mr. Cohen, "in itself is going to provide such a sum in about forty years as will wipe out the entire board's ifldebtednee© today, and I see no reason why succeeding generations should not face some of the burdens of progress, for which purpose they will be much better equipped than their predecessors. The accretion of value to our reclaimed and other land* alone will be, in the near future, a magnificent aeeet, and they would pos* pibfy have as well relief from liabilities as they at prteent stand, and seized with assets of at least one and a-h&lf millions sterling, This brings me to another point, and perhaps one of more vital interest to the board's contrihutofs. As a- corporate body, we have no right to exact any more from our several classes of contributors than will enable us to administer our trust with ease, always providing an ample margin of safety. This, has be«n done in the past, with the result that w© have accumulated assets, depreciated though they be, of a round cum of £400.000. We have a, substantial sinking fun<i, all of which has been exacted from, and paid for by, the board's contributors, and this has been done on a lower standard of charges than exiet today. As illustrating the extent to which provision is made for depreciation and kindred purposes, we have, out of a total revenue of £180,876) this year provided £35.243 for depreciation (including maintenance), £4900 for sinking fund, totalling £40,143, and show a profit of £6216 on the year's working. This, of course, w outside of further provision, which will be created by giving effect to tho chairman's proposition re reserve fund, or, in other word 6, 25 per cent, of our total revenue is represented by depreciation, maintenance, sinking fund, and profit. The question is whether v,e are not riding sinking funds and other provisions and reserves to death, whether wo are right in exploiting the present generation unduly, for the purpose of absolving posterity from debt, at the expensp, and possible emharassment of present contributors." Mt. Cohen doubted the advisability of making the depreciation fund ro large,. The sinking fund apl>cared to

him to provide an adequate and legitimate provision for renewals. "'iilis could be carried on without greater, probably less, hardship to all concerned than exists at present. Wo further fortify posterity by leaving them an estate in lands which mutt inevitably increase in value, giving them a greater substance upon which to base liability than the board has enjoyed in its previous history. This factor, together with the increasing trade of the port, should provide a sufficient justification for assuming liabilities, rather than, the necessity of wet-nursing posterity by relieving them of a burden they will bo so well equipped to carry. To my mind, therefore, a readjustment, and a lessening of the provision for future, which has become so great a etra-in upon our resource*, would afford that relief which could be well utilised in lessening the burden of rates and charges At the preeent time. This would effect a twofold purpose— it would not only obviously accord a measure of justice to those who may be described as the pro- ■ dnctive, industrial, and commercial pioneers of the Wellington district, but would place the port of Wellington in an unassailable position to combat competition and the inevitable division of trade which must follow the exploits.- , tion and development of other seaport centres of arrival and distribution." The matter was left to a committee consisting of Messrs. Cohen, Harknees, Tew&ley, and the chairman (Mr. R. Fletcher), to report at a subsequent meeting. •