CITY AFFAIRS

Evening Star, Issue 17325, 13 April 1920, Page 6

CITY AFFAIRS

THE YEARLY ESTIMATES. AN INSTRUCTIVE REPORT BY THE TOWN CLERK. Mr G. A. Lewin (town clerk) Las forwarded ‘to the Finance Committee of the City Council a statement of the yearly estimates for the coming financial year. In hig-report he states:—Lam following the practice of submitting a general review of the figures respecting the general account, but before doing so desire to direct attention to a few more out-standing points regarding financial operations of that account for the year just closed. 1. The first fact that emerges from a perusal of the statement of estimated receipts made 12 months ago, in comparison with the actual result, is the exceedingly close agreement between the two sets'”(if figures. At this time last year we set our probable revenue from ajl sources of the General Account, including the Hospital Rate, at £1117,299. The realised sum is £117,949, or a difference of only £650.

2. The fact is, of course, that the incon® of the General Account is so inelastic that it is possible to estimate these sources ot revenue to a degree of accuracy that is not possible with the trading branches of the City’s business. It is well to stress that point, if only to sound a word of warning when we come to a consideration of the relative figures for the year upon which we are now entering. It would be merely deceiving ourselves to suppose that the probable revenue set out in the statement is capable of inflation from any undisclosed source; while, on the other hand, the same measure of certitude cannot obviously be claimed for the contra side of the statement covering probable expenditure. In respect of those figures, hardly a year masses that fails to bring to light demands that were quite reasonably unforeseen when the estimates were compi ed. If such a position manifests itself in normal times, the probability of its recurrence in a much exaggerated degree is only a reasonable inference, having regard to the industrial and commercial that prevail to-day. Prudence, therefore, demands that while the figures shown.on the revenue side of the statement may fairly lie regarded as the maximum, those on the expenditure side should just as faijiy be considered a.s the minimum—a minimum that in all human probability will be exceeded. The expendituie of the year just closed supports that view, because whereas the income exceeded the estimates bv £650, the expenditure was in excess' of th» estimated figures by £I.SOO, and to this latter sum should be added £2.400 allocated to the cost of motor vehicles. Owing to the disorganised state of the worlds markets these vehicles have not been delivered, but the money earmarked for them has been otherwise' spent, and the item is therefore reinstated in the proposed expenditure for the incoming .year. The - actual expenditure is fore £4,300 above the original allocation Having regard, however, to the cost of material and to the ever-increasing demands for higher • wages due to the abnormal times through which we are pass-' >ng, the position msut be accepted as-in-evitable. ■

o. So much for the result of th- list year’s operations. In dealing with fhe figures for the incoming vear the fact that is first to be noted is that in practically eiery instance the figures forwarded bv thV> Standing Committees provide for ‘ substantial increases as compared with la=t y«u s expenditure. A notable case is the 5"o oio VV f iS CV ’ n ?. lliittoe - w hich asks for .or public works, as £35,000 actually expended to March 51also tor £10.500 for public lighting as against £9,200 last year; while £5.000 is set down _ for land purchase—'chiefly' tor street widening—as against £1.740 spent_ to March 31, 1920. The same position is apparent right through the statement, with the final result that, as comH • vea / a ack,al of de™ I? /u XC : U . dl P g the Ho spita! Boards the total requirement for the vear upon which we are now entering is shown as or an advance -equal to the very respectable sura of £13,013. Moreover, the General Committee direct attention to the fact’that their figures do not incmde provision for a filtration plant for e public baths, an expenditure that is sachy needed ; while in like manner the Library Committee point out that no provision is made in their demand for extensions at the Library. Should these improvements be effected, the total outlay urnuld absorb several thousand pounds adstatoment. " Set ° ut in the

nririu- Vlll i be seen - therefore, that the total additional expenditure of £13,013 is aeoounted for to the extent of £6,712. or abont 50 per pent, by the amount of' the [he v l +" rork ' S f d (T and - Havin S regard to the nature °f the vote, this is not more than might reasonbly be expected if any progress at all is to be made in the stand- °\ maintenance. This sharp rise in the public works estimate has been a feature of the statement for several years fniw-T m o y be Se , €n b - v a glance at the following figures showing the percentage of this vote relative to the total rates, -the figures are as follow:

4. If, then, we assume that the general rate is to remain at the Is 9d, as levied last year, and that the transfers from the trading departments also be made on the basis of last year’s figures, we should still be £8,997 short to make the statement balance. The position can be shown in a concise form as follows Estimated requirements, £117,383; estimated income vear ’ s rating and transfers, £108,386 ; amount still required, £8 997 These figures take no account of the demand to be made on us by the Hospital Board for their purposes; they refer only to the requirements under the general account, and the protect of the hospital rate -has therefore not been included in the estimated income. If the £8,997 were to be provided by additional rating it would call for an increased rate of 3d in the £, making the general rate, sav, 2s, instead of Is 9d, as- at present. 6. It is opportune at this stage in the investigation to leave for the moment tho figures of the general account and refer to the hospital rate account. Last rear the Hospital Board called on the City for £14,832. To meet this demand we had provided for a special rate of 41 d in the £. actual demand by the board did not come to hand until after the rate had been struck. When the true figures were available it was found that we really required a rate of 5d to fully meet the board’s requirements, and therefore the hospital rate account is now in debit to the extent of £1,850. So far wo have no official demand from the board for the current year, but w© are informed that the demand, wjien it comes to hand, will be an advance on last year’s figure of 50 par cent. In that event wa shall be called upon -for £22,248, and shall require to strike a rate of 8d in the £ to meet it and also provide for last year’s deficiency. That is to say, we shall require to increase the hospital rate by 3£d in the £. In view of this fact, it would appear that the method to be followed in providing the estimated deficiency in the figures of tho funeral account, shown as equivalent to a urther 3d in the £, calls for the moat serious consideration of the committee. Assuming that Jhe pruning knife cannot possibly he applied to any of the departmental figures—and I am compelled to say that in each case good reason can be shown for the retention of all the items—than it seems to me that to provide the sum required by an increase in the general rate would be a rather drastic procedure at a time when we are called upon to meet such a heavy additional burden of hospital expenditure. 6. It is inevitable that the Hospital £9sa4’# 4§ffl3»4 ©S§* *><» mi m ad-

vance in the hospital rates, but I arn strongly of opinion that the committee would be well advised to consider imposing an increased levy on the trading departments to make up the requirements of the general account. At the time of writing the profits of the trading branches have not been definitely ascertained, but it is known that in each 'case the surplus to be disclosed will show a substantial advance on last year’s figures. The practice in the past has been to transfer from the water account a sum of about £II,OOO, and to call upon the gas, tramway, and electric power and light account for a transfer equal to 1 per cent, on the loan capital in each case. That means that the transfer has bean approximately on this basis ;

If, then, the estimated deficiency were added to these figures it totals to no less a sum than £28,917, and would require a transior based on 2 per oent. on the loan capital of the three strictly trading branches, made up as follows ;

water account, would balance the statement. I strongly incline to the view that the council would, be justified, under existing conditions, m making greater use of tha surplus profits in the trading accounts to relieve the abnormal strain to which the .general account is just now being subJected lam compelled, however, to say that I think the 2 per cent, on loan capital must bo regarded-as tho limit to which 7. I am not unmindful of tho fact that such a practice is sometimes condemned, hut I venture the opinion that the weight nf fl e erwl i ud S rnel ?t is in support i; •. e p tiff; !C A least within reasonable r lbm: rn;! . v bo room for considerd>v«r.?Mce of opinion as to what bu ite’’ 36 Regarded as “reasonable | -V + s vvhilo tiii> only alternative thi v • n tne ne F e?sar y revenue to meet the lapwily growing demands under the general, or strictly municipal, branch of n--pf Ct i Vltl * S by mcans of a general rate. Sin s°b Knta l ValuoS of ]a,Kl to TuetTfi V MmS m \ to be less difficult ciJ% ty Lhe .P r ?, ctlL ‘c than would be tho case it our incidence of local taxation were more equitably based on the broad principle of “ability to pay." There is obviously one other reservation th-M Sriff d of I T relati™ tai.li of charges in force in the tradiim departments; but - here again any such (injection entirely loses its'force v-hon it 1S cons 'dorcd that to-day we gas and eumtnc current cheaper th.au a„v C 'l y m ib j Dnmini on. At Auckland Melhngton, and Christchurch the C as Sm eac 1 ’ S „ eon^rc ! by private enterprise, than wifh ,1- oUtp . nt is much bichor the co-t a t vei ;v important, factor in r'n 0t a gas undertaking. from tholow ime h facfc was apparent T -“V : mwer charge maae in these cdtes rates Ua r n ? tT P y aS om P are d our venture * e . c ? se ot electric current I venture the opinion that in respect of no in th-Wi °f anting account, either lab Th tT ° r th ° factor >-' Ihe to cdecfric l-vn-r n , ■ mn de to applv pover hj? l and ,n th * matter of fricitv l ? COst of coal aT '.d cloccurly IIS'" °T a pr '^ var must 111 V v . somewhat ridiculous. The same contention applies to tramway teros a conclusive tncts ap P ear to *«' the ';smnsf6i icy value,’; 0 of a™ ailed*" i'\yn eqnlabte d sftll" t^J P f,l;,; i oii 10 + P , rin °l p!e , of “ ability to P aV.” whoN En S h ? hj practice of raisinv the aS h° - °T' loCal t3SeS ’ so called by rating on rental value he , en f f ald of that method that no metnod of local taxation in the world ratimr Sln f l . P e , 33 th<s English system of ratm D entirely on rental value, and none In Ful nJl f- t Mail ' V ° f the citTs m England rate up to 11s, 12sR or' 13s m the £ of rental value, and >- n thor pointed reference has recently been directed to the pernicious effect of'snch an excessu-e W rate on the all-important question of housing. The reference is not without application in this Dominion toda;, and its tendency is to become more evident as time passes. . 9 ' As f . ,!e demands of taxing authorities increase in response to the erv for better to r With J he P due to the diminishing value of the sovereign, the inequitable method of raising all our ■-■cal taxes this indiscriminntino- wav is brought into prominence, and prompts an inquiry into other systems, some of v men have been designed on the avowed Kffl 'iliA "" hor,e ««• ll »

. 1 am /" 11 . v Persuaded that if local governing authorities are to maintain their respective cities as they should be maintained, u they are to provide the improved public lacihties that a progressive people demand of them, and, in addition, if thev are to assume even a moderate measure of responsibility for that wide range of activities that can be embraced within the terni social welfare work.” then they will require to possess themselves of increased revenue the major portion of which should assuredly be raised on a more equitable basis oi taxation than is afforded bv our present rating system. 10. In this connection the committee are called upon to consider applications for grants from (a) The Young Elen’s Christian Association (b) the Education Board in respect of the School of Art, ( C ) the Youtm women s Christian Association, (d) the Workers’ Educational Association, (e) tlie Dominion Boy Scouts, (f) the Art Gallery trustees (should the scheme of transfer be adopted). No provision is made In the figures submitted for any of these items, and any grant that may be made will still u- if 3lK T ease th® estimated deficiency which can he made good onlv bv increa*mg the rate or adding still further to the demand on the trading departments. The grant to the Technical School, which is provided tor, is well within the same category as tne now applications set out

ll._ The remedy, in my opinion, lies in a revision of the whole incidence of local taxation, whereby the increasing burdc-n would be more widely distributed; and r . !sk being charged with the uorat kind ot Mcnlege, I venture to direct attention to the system of local taxation ° r ’ V speak ' v ' ith mare certainty, did prevail, m Germany up to’

The bne.est possible reference to the details is all the present occasion calls for. .that can best be supplied by qncting from a « e n °.f nt ' Vriter on th e subject, who save , ihe German communes adopt as wide a basis of taxation as possible • the local ■taxes are many, and they are so devised as to dra\V into the net every individual citizen from whom contribution to the common fund can be expected without ha’-sh-ness. The citizen may be taxed in one or in several ways, to the sources of his income. Thus, while every person in receipt of income of a certain' amount vans bio according to the State, pavs a local tax upon that income or a portion of it, the owner of real estate is in addition subject to .taxation as such, and not merely incidentally as an occupier, ns is the case in England. Ro, too. the lr, ?i----nesa mm is taxed specially’in respect to his enterprise. , There are taxes intended to tap speculative profits on hand, (axes on amusements, and a variety of indirect imposts. Two objects of taxation, however, are conspicuous in the Tax Ordinances nf every commune—real estate and income. The gravamen may be real estate in one tpw% ip, another income j but it is safe

to say that on the average of the towns as a whole 80 per cent of all local taxaderived from these two sources.* 12. The Income Tax is assessed as a percentage of the Imperial Tax, with an exemption very much lower than we eujov under our State Income Tax—as low as £45 per year, as a matter of fact; while the Real restate Tax is made up of several component parte, and not, as with us. restricted to a rental value. For instance, it includes a property transfer tax, or conveyance duty, and an unearned increment tax, called in Germany an ‘‘ increased value tax.” These are what might be called secondary Imposts, the main contribution under this head being levied more on the lines of the English Land Tax. The Trade Tax is assessed in a great variety of ways, but the capital invested in the business, together with the yearly profits, are for the most part the chief factors in the assessment. The relative importance of these several forms of taxation may be shown by stating.the percentage that each bears to the total income from taxation. The mean of those percentage rates in some 25 of the largest cities is as follows ;—,52.5 per cent, is provided by Reel Estate Taxes, 10.8 per cent, by Trade Taxes, 52.7 per oent. by Income Tax, and the balance of 4 per cent, by Luxury and Expenditure Taxes of several descriptions, the .Amusement Tax being one of them. It will thus oe seen that the system mentioned is devised to cover a vast amount of ground, with the result that the basic charge for each class of tax is relatively low. and ihereby reduces to a minimum the harshness that is inseparable from all forms of taxation

Any apology that might seem necessary for snob reference to these matters here is that they are profoundly interesting to any student of local self-government, and 1 that at a time when we are called upon to make up the City’s financial budget for the coming year seems an opportune occasion to ask if we are finite certain of out position regmding the just and eouitnbie nature of our main avenue for raising local taxation, depending, as we are by Statute obliged to do, on the product of a general rate assessed on the basis of rental value of hind and buildings. 13. 'Hie matter thus far dealt with in the abstract raav be aptly illustrated by a concrete example taken from the fignres now under consideration. Consider for a moment the whole question of the Hospital levy. The Hospital Board require £90,000 for their several purposes. Onehalf of that sum is a charge on the State revenues, the other half being obtained by way of levy on the local authorities, the City’s share of which is £22,248. The figures are approximate, but for all practical purposes of the present argument they can be accepted ,as correct. In the case of the £45.000 to lie contributed by the local authorities, the whole of it will be raised as a rate either on rental value, capital value, or unimproved land value (so called). In our case it means 8d in the £ of annual or rental value, which will be levied without the least degree of discrimination on all' land and buildings that are subject to rates. A rate of 8d in the £ on a home assessed at a rental nt 20s per week means a Hospital rate of £1 Bs. and which, added to the other rates assessed on a like basis, may, and 1 know from actual experience does, press with considerable harshness in many instances. and constitutes what I have for long regarded as a strong argument in favor of the whole of such charge falling upon the Consolidated Revenue. It would appear to be quite incontrovertible to say that the Government, with their more scientific methods of raising revenue, could find the ■whole of the requirements of the hospital boards Without inflicting onetenth of the hardship that would follow from the efforts of the local authorities in finding their half of the amount bv the unscientific method to which thev are restricted.

As already indicated, I am fully conscious that the whole subject leads us along a thorny path; but the tendency of the time in which we are living is in the direction of, first, a doubt concerning many of our practices, based on nothing more rational than mere tradition, followed by a careful investigation of those practices; and, finally, by amendment where such a course appears to ■warrant such action. That is the path along which all reform has come, albeit its gait has been often slow and haltins. No method of taxation is perfect; most of them are obnoxious, but for those very reasons it is worth while striving for something that is reasonable, just, and equitable.

. 14. Aleanwhile, to get back to the position as it exists in actual fact, I have-to repeat, that, in my view, the committee would be well advised to raise the additional sum required in the wav I have set out in paragraph 6, rather than advpt the only alternative that is open to them—viz., of increasing the general rate bv a further 3d in the £. That would enable us to balance the statement after providing for the following rates and charges;—(a) General rate of Is 9d in -the £, as at present; (b) Hospital rate ol 8d in the £, or an advance of olid ; (c) water rates as at present: (d) sanitary fee (where such service is given) cf 203,' as at present. The Finance Committee recommend the report for the council’s adoption.

To March Total Works Per 31, Rates. Vote. Cent 1916 ... £50,855 £22.383 44.0 1917 ... 58,500 25,247 43.2 1918 ... 59,587 26.000 45.6 1919 ... 61,454 28,315 46.1 1920 ... 60,657 51,814 52.6 1921 ... 65,457 42,212 66.5

Water account ... £11,000' Tramways account ... ... 3',050 Gas account ... 1,080 Electric account ... ‘ 4, 790 £19.920

Tramways account £6,100 Gas account 2,160 Electric account ... 9^580 £17,840 which, together with. £11,077 from the