CITY FINANCES

Evening Star, Issue 16777, 4 July 1918, Page 2

CITY FINANCES

YEAB OF RECKONING COMING. HEAVY LOxVNS MATURING. AN ANALYSIS AND WARNING. WORKING CX)STS IN WAR TIME. HEAVIER. EA'rE"rOEECASTED. Tho Citv Council held a special meeting List evening to discuss the Town Clerk s annual report on tl» financial etatementa and departmental reports for the Or Taverner (chairman of tho Finance Committee) commenced tho discussion with a summary' of the situation, stressing particularly the fact thut in 1921 loans amounting to £520,000 would mature, and would require to bo renewed by redemption loan, probably at a higher rate oi interest. THE CHAIRMAN'S STATEMENT. Cr Tavomer said that, having in mind the conditions obtaining in the financial world, conditions which must become more stringent, the City finances should bo arranged with those conditions always _in mind. A complete financial revolution must follow the end of the war, and as tho Dunodin City Corporation governed tho biggest municipal undertaking in the Southern Hemisphere, those who controlled it must look at the situation with sobriety and care, without pessimism, but equally without uiuiuo optmiif.ni. In 1922 loans of £520,200 matured, These loans were obtained at £4 6s per cent., but when a redemption loan had to bo floated in 1922 the council might well ho faced with a rate of &£ per cent, or 6 per cent. The interest charge at the present rate vast £22.390 annually; tit 5-1 per 'cent., the interest w\ £431,300 tfo* by means of sinking fund the loan ol £'520.200 would be reduced to that figure) would bo £23,721; while if they had to pav-6 per cent, the interest charge would be"£25,873, or an advance on tho present annual cost of £5,488; and that increase would of course, operate for the period of tho loan. It Boomed clear, therefore, that the general trend of the City's policy shoulcf be to brincr nearer tho day when the City could claim tho actual ownership of the various public utility services which the City at present controlled, but which as a* matter of fact were very largely own-ed by the English money-lender. Thus, he miidit mention that the total interest charges of tho' trading departments wore •654,810; and tho total interest charges of the Citv, including that on the drainage loans, wero approximately £97,000 per annum, iii On the revenue side of tho annual statement all the branches except the water df'pai'tnifitit showed an increase, the total increase being £12,140. This satisfactory result was lounter-bukvuced by tho increased production cost, which was almost wholly caused by the war. Thus, tho gas department was now paying 36s fid per ton for coal, as against 21s 6d in pre-war tiin"s. Conditions brought about by the war had precluded the possibility of adding to the productive capacity of the various works bv the acquisition of new plant. Particularly was this the case in the electric power, gas, and tramways departments. This condition had a new nnd direct bearing on the renewal fund account, as uiuiuo demands were made and would still have to be made on the present plant, which must shorten the estimated' life of the machinery concerned, and which would have to be renewed at a very much greater cost than that upon which the renewal funds were estimated. Tho renewal funds of tho electric power and li.i:ht and the tramways departments —the departments to which this parties larlv referred —stood respectively at £63,463' and £83,282. Tho ensuing five years would determine tho question of the 'allegedly over-large provision made to these funds. At any rate the subject of providing for an extension fund by transfer from" the renewal funds offered no inducement' at the present time, when no extensions were possible. At the same time it might be recorded that the renewal funds were actually used for that nurpbeo when so required, a case in point beiny; tho issue of the tramway loan debentures of £5,000 by the Renewal Fund Commissioners.

On tlio expenditure side, the working expenses of the gas, water, electric power and light, and tramways departments were set down at £120,757—«n increase of £15,534 on Inst year: entirely the result of war conditions. The largest individual increase under this head was in the cas department—namely, £5,355. This might not improbably monn a further' increase in ths selling price of gas. If the gas. tramways, and electric departments had been public companies, with share capital equivalent to the amount of their respective loans, the profits shown would have been: Gas, 8.9 per cent.: tramways, 6.2 per cent. ; electric, 7.1 per cent.—an average of 7 per cent. This. ; ; tier mailing- reserves for depreciation and renewals of £37,160, was equal to an average of 4.1 per cent, on the loans. Coming to the question of rates, Cr j TV-erner said that- to maintain a con- : siantly-mcreasins; standrrd of efficiency in ' the City creator expenditure must be it- I curred. and it : nrsht therefore rot be out j of ph""o to forecast- a further increase, over \ tlie recent increase of - l d, at no distant \ date. i The increase in the hospital levy this \ year wai £1.500, mnkinp the total levy.; £12,800, or nearly one-fifth of the .general' ra-t-e. For that reason he wn.n entirely in i ■a-'i-ord with the action of his committee : in .«triki.iiß a special rate to meet this e\'-, | oonditure. It nibhfc ho noted that, the' demand of the Hospital and ('hai-itahle Aid ; Hoard had Increased during- the past four j ycare by £5,058. ft n.T pearod to him that ; the expenditure of this bodv wa.s out of proportion to the needs of the City. The population had certainly increased, but an increase of £5.038 in four years seemed nut of proportion to the needs of the Citv. • A total'of £15.887 had been disbursed under the head of war paw He thought that these gratuities should have ceased when compulsory service was initiated. : It wns clear that the annual expenditure ' of £6,000. with further increases to come, could not he continued indefinitely without special provision to meet it. He predicted some reduction at lea.st in this item of rc!nirrin:r expenditure. Meanwhile, all such e-rcnts were boinjr made subject to review on December 31 next. Tho rear had opened with a'-bank overdraft of £140.421, to 'which, should bo added temnorarv leans on deposit, amounting to £26,893.' The corresponding figures at March 31, 1918, were: Overdraft, £150.292, an increa.se of £9.870 ;_ while tho temnorarv on deposit had amounted' to £22.748, a reduction of some £4 000. The increase on the overdraft was accounted for by the increased levy contributed to other 10-al bodies, and to the redemption of small loams which had matured during the year; and also by tno fact that tho total expenditure had exceeded the total revenue by £2,253--prin-cipallv brought about by the work-? department expenditure exceeding the authorisation.

THE DISCUSSION. ( j Cr Bepe- (chairman of the Gas Com- | raitt-e\ ccnfvatulated the chairman of finance on his statement. The only paragraph in tho Town Clerk's report in connection with tho gas department. ct.ll.inß for attention was that dealing with coai charges. In tho department's estimates i;vt year they looked for an inci-easo_ ot 2b' 6d per ton. At that particular time Lhoy were buying, State small coal at lOd on tho works. This class of coal vas now entirely off the market, and they wore mainly dependent on State unscreened, which cost 55s 8d at tho works now plus another 9d, which had been imposed upon them by the now harbor dues. They were entirely in the hands of tlio Board of Control In Wellington so fw as the supply of coal was concerned. So far the board had met them in a very fair Fipir.lt. In view of these figures, "gas consumers might expect in the near future to pay a further increased price for gas. Consumers at the present time were being supplied with cheaper gas than in any other part of the Dominion—namely, at 5s 6d per thousand cubic feet. The price in Wellington and Ohristchurch -was 6s 8d

per thousand. If this price wero charged ! hero they would show an increased ievenue of about £IO,OOO per annum. A pleasing feature in connection, with the operations at the works wis the substautial increase in the output of gas. I'or the past half-year there had been an increase- of about 10 per cent, over the corresponding period of last year. The position of the coal stocks had considerably improved. The question was whether they were to - increase the price to consumers or -whether they were to reduce tlie large sum they wore contributing annually to tie renewal fund. Cr Black said the crux of the whole discussion was finance. He had been practically alone in the paot in contending that were not raising enough money by rates to keep the show running.. They Were starving the atTeats. If they allowed their streets and .paths to be run down the cost of repairing them would be tremendono. He was solid, for paying war pay to the employees, who had volunteered. He was pleased to hear the chairman of the Finance Committee nay that the time was coming whan they would have to increase the rates. In his opinion that time came when the war broke out. They were starving their streets and starving themselves. Cr iSoofct (chainmsm of the Tramways Committee) eaid that hia department showed a profit of £6,000, with a Ipsa mileage than for the previous year. Ho fancied that the Tramways Committee would shortly bring forward certain re» eomSrieodations as war measures, in view of the dearth of material, they would have to do all they could to oonservo what materials they already had. in hand. Thoy would probably ask the council to cut out a certain .number of existing stops. Gr Haywavd eaid that the I? v ublic Library was working within its income. The increased price of books was driving the public to the library at a rate which was surprising, and the staff were working harder than they had over done since the library was opened. Ho agreed with Cr Block that the rates should be increased. A penny in t-he £ would give them £2,000, but, personally, he would bo prepared to jro for an additional rate of 2d in the £. B".o_ thought that they should draw on their loan account to keep up the streets. Lower Il;ittray and Lower High streets in particular required attention. The council should have a policy. The Mayor said the council had laid down a policy clearly and distinctly that each trading department pay 1 per cont. of the capital invested to the assistance of the ratepayers. Or Black (chairman of the Water Committee) Paid he would be pleased to answer anv questions. Cr Wilson (chairman of the Works Committee) said that it was not possible to undertake in present conditions, the permanent paving which alone could make Lower High street 'and Rattray street work completely satisfactory. But, although the department was at present spending only £5.000, the- improvements in the City were becoming noticeable. The streets were in very fair condition, hut so lone as the motor traffic increased as it was increasing there were bound to be potholes, until such time as all the streets could be asphalted. There was no doubt that the speed of motor traffic would have to be stringently restricted. Anyone driving at over 30 miiea should he prosecuted. It wos hi\h speed that tore up tho streets. The fact that the department had over-expended its authorisation had been touched upon. There would be no excuse for that in tho future, as the officers would have their grants at regular periods, so that they would be able to keep within tho amounts. Cr Shaddock (chairman of the Electric Power and Lighting Commitee) said the units generated and sold showed a distinct decrease. This was due to the war. A number of customers were running light, and therefore not using so much. The installed capacity had increased, but tho demand amounted to less than the previous year. Repairs to maintenance showed an increuso of £9OO. This, again, was due. to the war. Certain commodities were a good deal more expansive, and even in the matter of men leaving them for the war it meant a cort-nin amount of expenditure every time an employee left them for active service. They would be very fortunate indeed if the net profit during the current year was not rather lower again.

"'Cr Bradley said ho viewed with alarm the attitude' taken up with regard to the rates—the striking of an additional £d and the transference of £II,OOO from the water department (which needed the money) to the works department, instead -of adopting the Town Clerk's recommendation to increase the rate by Id. He believed that if ratepayers could" only be induced to pay their rates when they were due, instead of leaving payment till the last day, it would save the City perhaps £5,000 or £6,000 annually. Cr Macdonald said he considered the pas department would be justified in increasing tho price of gas. The chairman of the Tramways Committee should try and make his department pay a little better. He should trv and increase the surplus on tho loan capital. Ho was sorry to seo the state of tho Mornington tramways. He wished tho condition of that tramway were belter. He would support an Increase of rates. The trading departments ought to contribute towards the general rates, otherwire they were not running on business lines at rill. The general financial state of the Citv was safe enough, but ho would like to see some measures taken to get rid of the laTgo overdraft. Cr Tavorner said he wanted tho council to take long views of the position. After the war was over the current rato of interest hero -would be governed by tho current rato in London. If they were to be faced with a hi.rher rate, that brought up tho point of increasing the transfers from the trading departments by operating_at a smaller cost, if possible or increasing the price of the commodities. Cr Black said that on this point of operating at less cost., tho running of ttvj cars on Sundays had always been done at , a lass They'had to pay their men at a [ hh'hor rato and he thought Sunday fares I should be raised, or, at least, the fare made a cash one, no concession tickets usable on that day. ' Cr Pincork thought that tho trading departments should pay some of their profits i Into the municipal account. A great pir- : tion of the gas department's capital was ! being spent in extensions. The same applied to the Electric Tower and Lighting Commitee. Ho was pleased to hear Cr B'.-ick say that it was proposed to do somo- ' thine so'far as tho southern reservoir was < concerned. He hoped to see the holding i capacity there increased, and if it were :' it would save them tho expense of bringin" in water from the Bee Stream for some : time to come. He hoped tho works depart- ; ment would in the near future consider the advisability of obtaining electric tractors, which wo-dd mean a big saving on the present methods. _ : The M'avor, in summing up the debate, said that the discussion had centred upon : tho weak points- But they would agree that a strong point wn.s the loaylty of their : servants, from the heads of departments ' downwards. They ought to he very proud ': of the annual report presented to them by

the Town Clerk. As they knew, reports of all kinds from other cities Were received here and none of'these attempted the exhaustive summary which the Dunedin City Council had presented to them. It might Interest them to know that trade journals as far afield as England and America referred in glowing terms to these reports. In conclusion, His Worship said that when tho war was over there was much to be done, but in tho meantime it would be follv to spend large sums'of money when, owihrr to war conditions, thoy could obtain onlylOs worth for every pound.