JINKING FUNDS

Gisborne Times, 13 October 1932, Page 5

JINKING FUNDS

HELD BY PUBLIC TRUSTEE, SOME LOCAL BODIES WISH TO WITHDRAW, BILL TO PREVENT SUCH A MOVE TILL 1935. WHAT THE PREMIER SAYS. MONEYS RE-INVESTED IN RURAL SECURITIES. •DEPARTMENT NOT IN A POSITION TO REPAY. \ (Press Association.) WELLINGTON, Oct. 12. When the Local Authorities Sinking Funds Bill was introduced, Mr. Forbes said the Bill had been brought down to protect the Public ■Trustee in relation to funds invested by him for local' bodies. Owing to the previous legislation brought down by the Government preventing; the liquidation of tlieso securities, the Bill proposed that no .-'alteration should be made in the investments until 1930. Mr. Lee (L.) asked if, in the event of a local body wishing to withdraw its funds, would the Goveniment have to take steps to create credit to enable the Public Trustee to remain solvent? Mr. Forbes said that, under certain Acts, the Public Trustee had invested sinking funds of local bodies in rural securities. Some local bodies now claimed that they could get v higher interest if they could witlif draw these funds. But the Public Trustee was not in a position to repay them. The Bill would not cause any increase in interest; it would only place the Public Trustee in the same positiou as mortgagors. Mr. Mason said the Prime Minister's explanation of the Bill made a*i obscure position more obscure. He could sec no reason for the Bill, it would prevent any change being made—that was to say, local bodies must invest their money with the Public Trustee. Why should local bodies be placed in a position of servitude. Mr. -Forbes said that they could not make any change until 1935. Mr. Mason: ‘‘Why should that be the case? No one wishes to sec the Public Trustee circumscribed, bub, whoa it comes to compulsion. 1 think it is going too far. - ' 5 Mr. Sullivan suggested that the Bill be sent to the Local Bills Committee. He was nob prepared to say that it was not justified, hub he thought it a fair tiling that local bodies should have au opportunity to put lileir side before the committee. j Mr. Coleman (L.) supported this view. The Leader of the Opposition also agreed with it and. said that, if Mr. Forbes would allow the Bill to be read a second time pro forma, it then be sent direct ■to the committee. Mr. Forbes said the Bill was only being introduced and local bodies would have ample opportunity to see what was in it when it was printed. The Government had tied up the investments of the Public Trustee by its legislation and all that the Bill proposed to do was to safeguard his position until 1935. If thei - e was a tendency on the part of local bodies to withdraw money from the Public Trustee to invest it at a higher rate of interest elsewhere, the .Bill would prevent, that. The Bill was read a first time. U FIT Cl AL EXPLANATION. PURPOSE OF NEW BILL. (Press Association.! WELLINGTON, Oct. Id. In au official explanation of the Local Authorities Sinking Funds Bill k alter the first reading, it was stat- • ed that the Public Trustee was the sinking fund commissioner for a large number of local body loans, and he had been giving them the benefit of a common fund rate of interest, which, up to recently, had been 5,’, percent. The common fund rate had been lowered to 4 per cent, some time ago, and the result was that some local bodies -wanted to withdraw their funds from the Public Trustee. In receiving instalments of sinking funds, the Public Trustee allowed interest from the time the sums were paid to him. This meant that they commenced to •am interest immediately, whereas, if the sinking fund commissioners in'osted them themselves, jhoy would have to wait for a suitable investment, especially if the sinking fund were a small one. Placing the sinking funds i lt a common fund gave the local bodies the benefit of a regular rate of interest, irrespective of the securties in which the common iuud moneys were invested. At the present times, losses on mortgage investments were met out of the common fund, but local bodies did not loro the principal. They were omy suffering a reduction in the rate or interest, whereas, if their own sinkiug fund commissioners had invested in mortgages, their losses would probably have been heavier. The Public Trustee had arranged ‘ : -or the sinking funds to be released at the date of the maturity of .loans. The action of local bodies in asking for the release of the sinking funds at the present time meant that the Public Trustee had to realise on his investments in. order to accede to their demands. At the present time, however, he could not realise on these - investments on account of the legislation in the Mortgagors’ Relief Acts and the National Expenditure Adjustment Act. The. present Bill was, therefore, designed to enable him to refuse to pay out sinking funds until the expiry of the relief legislation on Api-il 1, 1935. : kTiffo principal questions are dealt with in tho Bill, Caluse 3 imposes the temporary restriction on rights of the local bodies to withdraw sinking funds from the control of the Public Trustee. Glaus© 4 states that, where any local body has appointed,,-or appoints,

t l lo Public Trustee as commissioner of any sinking fund, and the appointment‘bus been expressed by deed or resolution to be irrevocable or to be revocable only on certain specified conditions, tire appointment twill still be irrevocable except in accordance with any specific conditions provided for. Clause 5 relates to the changing of securties. At the present time a, local body can apply for an Order-. in-Council .to have its securities taken out of the common fund and separately invested. The clause provides that no such. Order-in-Council shall, be granted at any time before April 1, 1935. ,■ J