The Gisborne Times PUBLISHED DAILY TUESDAY, MAY .10, 1933. THE LOCAL BODY LOANS CONVERSION SCHEME.

Gisborne Times, Volume LXXIII, Issue 11945, 16 May 1933, Page 4

The Gisborne Times PUBLISHED DAILY TUESDAY, MAY .10, 1933. THE LOCAL BODY LOANS CONVERSION SCHEME.

It is important to note that tho Local Government Loans Board is advising all local bodies to take advantage- of the new legislation uhioh permits them to convert their loans on a cheaper basis. As matters at present stand, local bodies seem to be content to secure the benefit of that portion, of the enactment which lias out down interest on their loans by 20 per cent, with a minimum of <K per cent. The interest reduction, as is well-known, is not permanent: hence tho aim of the hoard to encourage local bodies to gain permanent relief by the adoption of the principle of converting their present loans into new and cheaper issues with an. extended term. The Loans Board is convinced that the. cheapness of money to-day is not a mere flash in t.hS pan. At all events, it is prudently advising local bodies to take every advantage of the low interest rates at present ruling. It ; s a matter of common knowledge that the, new law has not brought down interest rates on the dearer local body loans to the minimum of 4-Vpor cent, Tho hoard, however, is firmly of the belief that the maximum rate of. interest in respect to all such loans should not ho higher than the. figure mentioned. -In fairness to holders of bonds in dearer issues it therefore suggests that, at time of.. conversion they should ho offered as an inducement to convert a cash premium to compensate them for agreeing to accept a lower return than is provided, by the 20 per. cent, “out.” Tt is plain that, if the scheme .should be adopted generally, it will have far-rfiaching effects in iiive.stment circles. Although the board ha : s

not touched upon the, rnattpf, the scheme will do much more besides affording relief to ratepayers all over the Dominion. There can, fbr instance, bo no doubt but that holders of surplus moneys in future will he forced into other avenues of investment if they are not prepared to accept the new rate of return upon State and, local body issues. What the Government is, of course, most anxious to ensure is that land shall once again become the chief security in cohncctloil with the investment of spare moneys held by the public. Prion- to the slump, there was, it will ho agreed, no hotter class of hi vestment in this Dominion than “broad acres.” It would seem, however that some inducement •is required to turn money hack to the country districts, and: that the Government may be forced to assist tho movement by reducing taxation on returns from investments upon the security of farms, stock, produce, etc. Any scheme involving the conversion of the whole of tho Dominion’s local, body loans must, unquestionably, create a great deal of work Tho hoard, it will have been noted, appreciates the l fact that the utmost care must bo taken in spreading the new maturity dates, for no one can forecast when another time of dealmoney, may come round, and it would never do if, at such a time, a lot of local body leans should be. scheduled to mature. In all the circumstances, one would imagine' that local bodies will not prove dilatory in the matter of securing the sanction of the Doans Board to engage in conversion schemes. Under the Act, two years only is the period within which a local body may elect to gain permanent interest xolief by calling upon it s bondholders to convert their holdings into cheaper issues- As many local bodies are to-day finding it difficult to meet their interest hills, the scheme should meet with the approval of bondholders as well as or xatepn vers.