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THE CITY LOAN

FOR PUBLIC WORKS. REPORT BY TOWN £LER-K. The following minute upon the subject of the authorised' City public works loan of £175.000 has been'drawn up by the Town Clerk (Mr Lewink Tt is to come before the Finance Committee, and will then be referred to the council: The question of the pre-ent position of ihis loan was referred by the Finance Committee, to the Town Clerk to report upon. having especial reference to the possibility of financing the same. Tt will be remembered by the members nf the committee that the -theme a- outlined to council, and n. finally submitted k> the ratepayers. iva< based on the fact that no additional rate would he necessary to finance the scheme. The yearly charges on tha loan were anticipated to be met by—.a: A saving in maintenance over the area to be put down in permanent pavement. d>) "Releasing" from the drdinarv annua] works expenditure a yi-iy considerable portion of the sum .-pent on permanent works, the said works being done out oi the borrowed money. ici And. finally, any deficiency still remaining to be provided by adjusting the contributions from the trading branches and fixing a definite yearlytransfer from each of these departments on a nasi- of the capital outlay in eacn branch. The loan was based on a vearlv expenditure or about £30.000, thus taking: six year- to absorb the total. a.nd it was an e--ential j>art of t!ie whole scheme that, during these six years, the strictly trading branches—i.e.. the, gas, tramway-, and p.p. and 1. departments—would not be re-

r/tiireri to make any contribution to tin* •central account, due to the fact- that the Joan expenditure would be used to dn work that, in normal conditions, would be a charge against- the revenue ao-ouut. The whole scheme is outlined in the Town Clerk's annua! report for 1912-13. page 71 et seq., but a paragraph in the circular sent to the ratepayers when the loan proposal- were submitted might be quot-d a- briefly summarising the salient- points of the financial aspect. The paragraph j-tad.-vas follows : ■'■ How the scheme is to pe financed r In the view of the council, it is possible to so readjust the finance- of the City as to enable the foregoing sum to be expended without the necessity of imposing an additional rate to meet tho vear'y rharge- on the loan. briefly statect. tins object is to be attained as follows :—The total yearly charges at the end of six vears. when the full loan shall have been, f-pent. would be £9.625. ft is estimated that £-1.000 per year would be saved in the cost of maintenance over the area to be prvved. whilst a further sum of at least £4,000 would be 'released' from the nrriinary yearly works expenditure, making a total of £o,ODO arniiable to me?t the new chxrget on the loan. It is proposed to provide, the. balance by an niei eased levy on the trading departments. As no demand would ba made on these departments during the six years of loan expenditure, it is confidently felt that, after the respite thus afforded, the departments indicated would be quite able to meet the increased demands without hampering their development. Tn support of this view. ,t i- to h--> noted that transfers to the amount of £12.000 were made for the rear ended March. 1912. The policy on which these transfers are justifiable is that the ratepayers should derive some direct relief from rating out of the profits of any undertaking for which they are called 'upon i<< pledge their property as security, and a levy of I per cent, on the loan 'capital invested in the three undertakingivamoly, tramways, gas. and electric " departments— would return £6,675 per year.'' It- still appears to me that the scheme was perfectly sound as tlie position stood when it was put forth, but when we came to deal with the general estimates for the year commencing on April 1. 191.4. and ending on March 31. 1915. it was evident that the demand on the general account .showed .sin hj an abnormal increase that practically the whole of the amount on which we relied as likely to be " rr>based"' in consequence of Ihp loan expenditure was found to be required t<> meet other growing demands on the general account, with'the result, that instead Df being able to relieve the trading departments a still further demand" bad forthwith to be made on them to balance \he requirements as <-t out in the estimates. The details nf these increased demands on the general account are dealt with in the Town Clerk's annual report for 1913-11, on page 37 et s.-q. I quote luie paragraph from page 38 as follows :--- "It is, however, when we tome to the estimated expenditure for the coming year that the fa--t of the pronounced iqe ward tendency of the expenditure forces itself into prominence, and seems to me To call for the closest and most careful Fi.-riitiny. Compared with last year's estimates, the figures for the coming vear show an advance of slightly over £5.000. the chief contributing items bene. a s iollow :- -

The members of the l-'iiuno <• Committee nre no doubt aware of these faets. which •".-ere emphasised by Mr W. Downie Stewart in his. retiring speech when quitting the mayoral 'hair in May last. On nage 119 of the Town Clerk's annual report for 1913-14 Mr Stewart dealt, with the position in the following words :—■ •'A good illustration of the need of constant carp in our financial undertakings ii.-eunT-cl during the Tear in connection with the proposed street improvjneut loan of £175.000. That loan was authorised by the ratepayers in June, 1.913. buthas not yet been raised. In a leaflet, to the ratepayers advancing arguments in favor of the scheme we estimated that during the six years the loan was being expended wo would not require to draw on the, profits of the trading concerns at nil: that the ordinary yearly works expenditure could be cut down by £4,000 owing to the capital expenditure out of loan moneys; and that' £I.OOO a year ■would be saved in maintenance owing to the improved paving of the streets. Early tnis, year the money market, improved to such nil extent as to niaku it appear possible to negotiate for the raising of the loan, and at the same time, the allocating of funds for the incoming year's work expenditure was being considered. It was th<m pointed, out by the Town Clerk that, owing ilj to increase in wages under the. new award about £2,000 a year additional would thereby be absorbed : (2) to increase in the costof. metal another £I,OOO a year would be absorbed; ami (3) to the need for a higher standard in scavenging, it would no longer be possible to make the savings predicted tinder the _ loan scheme, and that we would require to draw more leavily than ever on our trading profits. !u these c ire uniita) ices. I was of opinion that we could not keep faith with the ratepayers, and that until the scheme could be recast or modified no steps ihould be taken to raise- the loan."

'l"hii mailer rested there except, for a iew par-cine references, and on October 7. 1914, tho Town Clerk, in a, minute, to the Finanoe Committee dealing with certain matters* of finance, wrote, ar. follows: "Whether te. circumstances the I into is opportune to raise any portion of thepublic works loan is a. matte.- for very careful consideration, but .1 would lik" to placs on record, my view,-which is: that until the finances of the trading departments are in a, more assured position Cue oi'ly portion of the public works loan that we could safely finance is that for expenditure on permanent paving, and that ■work certainly cannot be done to advantsge at the present juncture owing to the disorganised state of markets and provision for regular supplies from overseas due to the -war."

The history of the works provided for in estimate of £30.000 authorised bv the xitracJl as portion of the £175,000 'is as ioIiOTTS 4

In council on October 14, 1914, Or Marloir moved—"That the Works Committee be instructed to bring forward a portion of the work provided' in the streets construc;i.i<Hi loan proposal with the object, ot prc.vidi.vii: work for those out of employment," The motion was carried, and the Works Committee, on October 28, 1914. reported 1c council a? under:— °" r committee bey to report, that, in accordance with instructions iron: council at their last meeting, 'to bring forward a. portion o, the work provider in th- streets construrtion loan proposals with the object, of providing relief for those out of employment.' the matter has been very carefully looked into, and it is now recommended that the Finance Committee be asked to make the necessary arransrements for the provision of a sum of £30,000 for relief expenditure." The Finance Committee, on November 11. 1914. reported to the council as follows :—•'With reference to the matter of •making provision for a sunt of £30,000 lor relief expenditure. as referred by council to this committee to report, your eommitteo beg to report th.it they are making arrangements to obtain the sum required from "the Renewal Fund Commissioners. '

The details of the works comprised in the schedule- for the nroposed expenditure of £30.000 is attached hereto. 'Hie total includes £IO,OOO for pe'mauent paving m 'Rattray street, and most of the other items are on the original schedule of the £175,000 loan, an exception being the expenditure, of £B.OOO for walling in Leilh street. It will be noted that_:n reporting to council the Finance Committee did not refer io the method by which the £50.000 was to be financed, but merely recommended that the money be borrowed from the Renewal Fund Commissioners. The yearly charge on the £30,000 will be £1,600 per year for interest and. sinking fund, and the only set-off to this will bo a slight living in'the cost of maintenance on the ami \t\ Bnttrnv street to be paved, probablv £l5O or £l6O a year, so that vh f . scheme will entail ;i yearly additional charge on the general account of about £1,500. 1 am still firmly of opinion that there are but two ware in which the major schema can bo financed ; (a) Either by an increase in vie- genelal rate : or (b) }!y a- readjustment of the levenue of the trailing departments to enable a.n increased transfer being made to the

general account. The council have already established the principle of a transfer of 1 per cent, on the capital expenditure in each department, arid this would provide £8,570, which, together with, sav, £B.OOO from the water clepa-rtment, -.mikes a total of £16,870, as against £15.396 which we are taking this year without regard to the expenditure on the, loan scheme. The transfer ot 1 per cent, means £I.OBO from the gas a> coint. £3,000 from the tramways account, and £4,790 from the electric account, bu', to assume that either of the two latter departments is in a position to make this transfer, fu addition w providing im- <He recognised sinking fund, would bet to take it)- a position that is certainly not warranted bv the figures ; whilst it- is obvious that, unless the transfer can lie made, and still le.r.vc the yearly profit sufneieer to cover the sinking fund, the trau.-fer is simply made at the expense of the bank overdraft. For these reasons ] am ot opinion that it is not prudent io entertain anv further expenditure ot the £175.000" loan at the present lime 'I he. authorisation, will be kept on foot by the ir.ising of £30,000 referred to above, and in March next, when tho yearly estimates are under consideration, the members ot the committee would have a further_ opportunity of reviewing the position with the incoming year's figures before them. Personally, l' have looked upon the. expenditure of the £30.000 for relief works _ as having Ireeti altogether exceptional owing to the circumstances arising out- of the war. and. probably, on tht-l account justified, but had 1 been on duty when the proposals were going through council 1 should have felt impelled to point outthat apparently no consideration had been given to the method by which the yearly charge w.ik to Ite, met.

Public v.>'i'k.~ dt'-parriiii^r it £'1.600 Publi<- !it;!niii^ . 722 Street widening . 500 Standard piu'vov ilRu.-dv n and Val lev Wards! " ' . 625 St. ■(''lair hath? . 500 Public tepid hatli.-. ... . 700 tteservr-s ■dt'p.i-rtiiifiit (; I'lvain'f ii pstimatps) . 747 C5.394

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Bibliographic details

THE CITY LOAN, Issue 15705, 20 January 1915

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THE CITY LOAN Issue 15705, 20 January 1915

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