MUNICIPAL FINANCE YEARLY ESTIMATES

Evening Star, Issue 21099, 11 May 1932, Page 3

MUNICIPAL FINANCE

YEARLY ESTIMATES

LEVYING OF RATES TOWN CLERK’S COMPREHENSIVE REPORT Tho town clerk (Mr G. A. Lewin) has drawn up the following report regarding the yearly estimates: — Pursuant to section 79 of the Municipal Corporations Act, 1920, the conncil is called upon to determine its probable requirements in respect of tho general account for the fiscal year ending March 31, 1933, preparatory to levying the rates for tho year. INCOME NOT REALISED. The draft statement attached to this report has been compiled on lines similar to those followed in previous years, and the estimated requirements for the ensuing year are placed side by side with tlie relative figures as approved last vear, together with tho result as ascertained at the balancing date—namely, March 31, 1932. A reference to the statement indicates that we budgeted for an income of £231,272, but that figure did not materialise, the actual receipts amounting to only £219,240, or £12,030 short of the budget figure. Of the shortage, outstanding rates at the close of the year accounted for £7,795, while a further sum of £2,341 was not available as a transfer from the tramways account, due to the falling off in revenue of that branch of tlie city’s business. These two items account for £IO,OOO of the drop in the income. COST OF RELIEF SCHEMES. Then last year’s estimated figures provided for a special transfer from the "as, water, and electric accounts of £12,000 as part of the fund required to meet the city’s cost of the relief schemes under the Unemployment Act. It is fortunate that the total requirement under this head was found to be less than the estimated provision. Towards a total cost to the city of £21,250 we were able to manage by calling on the departments for only £9,700 in lieu of the £12,000 shown on the statement. Had the result been otherwise the provision made for this special transfer would have imposed an exceedingly heavy drain on the trading accounts, particularly in respect of the electric department, which account, even on the basis of tho modified transfer, was called upon to find support to the general account of a sum in excess of the past year’s actual surplus. It will be clear, then, that after adjusting last year’s estimated figures under these three headings—namely, the short collection of rates, the loss of transfer from the tramways account for the second half-year, and the restricted demand to provide the council’s portion for that part of the cost of the relief works winch falls upon the local fund—the balance of the estimated income has been fully sustained. “ SHORTENING SAIL.” Before contrasting with last year’s figures the estimated income for the year upon which we have just entered, it may be appropriate to refer to the expenditure side of the statement. Here it is to be noted that the estimated outgo was set as £231,272 to correspond with the budgeted income, but as it became evident as tho year progressed that the estimated income was not likely to materialise steps were taken sufficiently early to provide for such a possibility. The spending departments were appraised of the position and called upon to “ shorten sail,” with the final result that the year’s expenditure was met by a provision of £217,460, or about £1,780 below the income. FALL IN RATEABLE VALUE. Turning to the budget figures for the current *y ear, tlie first matter of moment to be noted is the fall in the rateable valuation of the city, due to the disturbed economic conditions of the world at the present time. It is very many years now since the council has been called upon to consider its yearly budget on a falling rateable valuation of the city. The yearly accretion to the valuations that we have enjoyed in the past has made possible the provision year by year for not only an increasing demand on income by way of further works, but even to a greater extent by meeting the increasing call for ‘ standing charges on loan expenditure without materially increasing the basic rate. That fortunate position does not prevail to-day. For the purpose of comparison it might hero be stated that on the total basic rates as levied last vear for the general, water, Hospital Board, and Drainage Board accounts the same basic rates would, on this year’s rateable values, provide £9,816 less than was the case last year. Of that sum £4,975 concerns the general account with which I am now dealing. Following a preliminary > discussion with the Finance Committee) the programme ot expenditure lof the current year has been subjected to a pruning down to harmonise with the 1 ailing income and to meet the pressing need to reduce the rate demand even beyond the loss in income due to the decline in the rateable valuation. Tho main difficulty in complying with that admittedly desirable policy was to devise some means of providing the £20,000 to £25,000 that would be required to cover the city’s contribution to the cost of the relief works, assuming the schemes in connection therewith be continued for the whole of tho present financial year. In this connection it is well to remark . that should the “stand-down” week be eliminated to provide a much-needed improved earning capacity for the men, the cost to the city -will be almost proportionately higher than was the case last year, assuming it bo found possible to provide work of a similar description. WAGE EXPENDITURE ON UNEMPLOYED. Here it may be appropriate to sot down the detailed costs of these works for the past year. The total wage bill was £97,644 lls 6d. Of that sum the Unemployment Board refunds £95,402 8s sd, while the Hospital Board granted £I,OOO, and the city paid £1,242 3s Id as wages to tho relief workers while tho scheme was suspended in April of last year. This wage expenditure of £97,644 cost tho city a further sum of £19,776 3s Bd, or just over 20 per cent. —for supervision (8.3 per cent.), material (5.3 per cent.), cartage and tools (6 per cent.), and accident pay (.53 per cent.). PRODUCTIVE AND UNPRODUCTIVE WORK. Incidentally, consideration of these figures might be of value in the controversy that is frequently voiced anent the class of work upon which the relief pay is expended. The policy of tho Unemployment Committee in cooperating with tho several employing authorities has been to employ the greatest possible number of men with tho limited funds provided from Wellington, while tho matter of prime importance to tho employing authorities in their effort to co-operate in that policy was to keep the demand on thc.ii

funds within the limits of their respective resources. 1 have shown that in our case it has called lor an. outgo o 1 29 per cent, on the wage bill to do work of the class, some at least of which has been criticised as “ unproductive.” Productive work, or, as 1 would prefer to call it, development work, calling as it would for much higher proportional cost for material and plant, would absorb probably 50 per cent, or oven 6U per cent, in addition to the labour content. To cater for the same number of men as last year, that would, in turn, demand a call on local resources not of £21,000, but anything from £50,000 to £60,000, a figure that would obviously preclude any possibility of curtailing the rato demand, a course that the Finance Committee considered to bo imperative in view of the recently increased taxation by the Central Government to meet the present regrettable position duo to unemployment. It would seem, therefore, that the advocate for work of a more useful and necessary description than that upon which the men are now engaged is left with the choice of substantially increasing the sum for which the city would require to budget, or, alternatively, to reduce, drastically, the number of men for whom work could be provided. The average daily number of men employed under the direction of the local Unemployment Committee is 1,020, of which number the City Council absorbs 680, and in addition makes a contribution to the overhead costs of the ■ Taieri River Trust for another forty-seven. WORK ON FARM LANDS. The extension of the Unemployment Board’s policy to permit of men being engaged on farm lands on permanent improvement work was of considerable value, and no fewer than 200 of the men , under the direction , of the City Council are thus engaged, while the forty-seven engaged by the Taieri River Trust arc well within the same category. The further extension of that policy to .embrace an increased number of men is desirable, as it would remove, to a great extent, the objection that is made to the nature of the work now provided, and at the same time would reduce our cost for overhead. The fact that private properly, is being improved might well bo disregarded. With this digression, reference may again bo made to the statement upon which is shown as probable expenditure for the year a sum of £191,933 as against £231,272 budgeted for last year and an actual outgo of £217,460. Here it should be noted that the call for the city’s cost of the relief works is not included in this year’s figures, as it is proposed to meet that provision from other sources. REDUCTION OF INTEREST. Anticipating the passage of the legislation now before Parliament regarding compulsory reduction in the interest charge on local bodies’. loans, it is suggested that the net saving bo set aside as the nucleus of the fund for this purpose, and thereby relieving Che general account, to that extent, ot the demand to cover the cost to the, city of the relief works. Only by this means is it possible to pass on to the public the full benefit to be derived from tiie legislation regarding the reduction in interest rates on the current loans. Taking the departments collectively, it is calculated that the sum involved would be about £13,000, of which some £3,400 rightly belongs to the general account. This very substantial redaction accruing to us from the Government’s attempt to effect adjustments in public expenditure, duo to the abnormal times now being experienced, again brings into prominence tlio use this city has made of the local market for its loan requirements during the past ten years, and while it is a matter for regret that the expedient of a forced reduction in interest has been considered necessary, the obligation to pass the relief on to the public should bo fully recognised and acted upon. With this £13,000 as a nucleus, it is suggested that the balance —whatever it is found fo bo to meet the city’s share of the cost of the relief works —bo found by a deduction from the scheduled contributions to the renewal funds of the trading accounts. A reduction of 20 per cent, of such contributions would amount to between £II,OOO and £12,000, from which fact it would appear that on the basis of last year’s call for this purpose such a fund should bo ample. If these proposals meet with approval the rating position for the current year could be mot by a reduction in the general rate of 3d in the £—from 2s IJd last year'to Is 10Jd. DEMAND OF HOSPITAL BOARD. Then the demands of the Hospital Board and of the Drainage Board call for consideration. Regarding the former, while the statutory requisition is not yet to hand, the information is that the demand for the current year will be substantially the same as that made last year—that is, a sum of about £23,000. It should be stated that the product of the hospital rate is treated in a separate account and therefore stands alone, any shortage in one year being made good by a variation in the basic rate for the following year. Last year this position was met by a reduction of the rato from 5d to 4kl. At that time the account was in debit to the extent of £2,222, consequently it was not possible to pass on the full benefit of the reduced demand by the hoard, for that year. Assuming that the demand for the current year is about the same as for last year, it is possible to reduce this year’s basic rato by a further £dIt is cutting things rather fine to do so in consequence of the decline in the rateable valuation, and the fact that rate demands are not collected so promptly under present circumstances as they have been in past years. DRAINAGE BOARD ACCOUNT. Then, in respect of the Drainage Board account. The heavy loan expenditure that has been in progress by the board during recent years, chiefly in extending and improving the storm-water disposal facilities of the area, is now reflecting itself in the accounts. Anothqr factor operating in a like manner and increasing the demand for standing charges on borrowed money arises from the fact that loans raised many years ago at a low rate of interest, and with cither inadequate sinking funds or no sinking funds at all, arc now maturing. The money to repay them is costing more for interest, while the provision for reasonably adequate sinking fund is How mandatory. The result of these two factors explains that the current year’s demand for interest and sinking fund moves up from £61,730 last year to £65,430 this year. _ The account would get a fortunate relief in this connection should the legislation regarding a reduction in interest rates on current loans bo passed into law. The amount of such relief is likely to be about £4,000, and would obviate the necessity of increasing the drainage rate —a course that would have been necessary but for the timely relief already mentioned. The decline in the rateable value of the citv means a loss of income to the board of £2,700 this year. POSITION SUMMARISED. To .summari.se the position, therefore, and assuming that the proposal hereinbefore outlined to deal with the requirements in respect of relief works is acceptable to the committee and to council, the rating position, as compared

with last year, can be shown as follows:

That is a reduction in the aggregate of slightly over £29,000 as compared ■ with last year’s levy, of which £19,267 is duo to the reduction in the basic rate if imposed this year as set out above, while the balance—£9,Bl6 —is due to tho decline in the rateable valuations as compared with last year. So substantial a reduction in the basis of rating for this year is made possible mainly by tho proposed relief in the interest charges on our internal loans. By using tho estimated saving by the whole of the departments as part of the provision for the council’s cost under the unemployment scheme, the general account is to'that extent relieved of the burden it carried for this purpose last year. The balance of tho requirement for the scheme is proposed to bo found by a reduction in the provisions for renewals in the several accounts. This is equivalent to a diminished payment to reserves. An examination of the accounts appears to suggest that such a course could be followed with all due regard to prudence, and that is made possible only by the sound financial policy pursued by the council in this connection during the more prosperous times of the past.

1931-52. 1932-33. General rate . 2/1$ = £145,361 l/10i = £123,870 Water rate / 9 = 54,483 / 9 = 53,233 Hospital rate / 4i= .25,652, . /4 = 22,020 Drainage rate 1/2 = 78,777 1/2 = 76,064 4/5 £304,273 4/li £275,187