The Lyttelton Times. SATURDAY, MAY 11, 1895. LOCAL BODIES’ LOANS.

Lyttelton Times, Volume XCIII, Issue 10651, 11 May 1895, Page 4

The Lyttelton Times. SATURDAY , MAY 11, 1895. LOCAL BODIES’ LOANS.

Now that che rate of interest on i borrowed money has been perman- | entity lowered, it is only natural that the public should desire to secure the full benefit of tho change. The Advances to Settlers Act has, it is generally admitted, caused a drop of at least 1 per cent in the rate on good : private securities, and the success of the Colonial Treasurer in floating a I loan on the London market at 3 per | cons has secured a redaction in the I s rate on moneys borrowed for colonial purposes. There is, however, another class of loans which should be I affected by the supply of cheap money. ¥e refer to tho loans of local governing bodies. Taking as a basis the year 1893-4, we find that at tho end of March, 1894, tho local bodies of New Zealand had debentures and stock in circulation to the amount of £6,614,824. This hugo sum was distributed as follows :—■ Counties ... ... .£ll,OlO Boroughs 2,738,184 Town Boards ... ... 1,211 Road Boards . 8,089 River Boards 45,880 Harbour Boards ... 3,610,450 Drainage Board ... 200,000 .£5,614,824 This amount, however, must be increased by £550,364, to include the amount owing to the Q-overnment under the Government Loans to | Local Bodies Act, 1886, and the repealed Eoads and Bridges Con- ; etruction Vida makes a grand | total at the date named of £7,165,188 i owing by the local bodies of the \ colony. The accrued sinking funds i represented £432,880, and deductI iag these from the gross total we | have a net indebtedness of £6,732,308. j The sum is a very large one, and | forma an addition of about one-sixth I to the bulk of the colonial debt of some forty millions. Taking it, however, on the basis of interest, it is a much greater increase of the burdens of the colonists. The sates of interest range from 4 to as high as 8 per cent, about three millions I being at 5, two and threequarter millions at 6, and £222,000 at 7 per cent. The average rate may be roughly stated at 6| per cent, and ; considering that the colony has just borrowed at about £3 6a per cent, it I! probably occurs to most or oar readers that the payment of the former rate is an unnecessary burden' upon the local bodies. In any ease, i the matter is so . pressing that some- j thing should and must be done at an j early date to relieve the taxpayers. _ j j One of the moat striking cases in | I the list of local bodies’ loans is that j of the Christchurch Drainage Board. This body borrowed under legislative sanction in 1877-8 £200,000 for fifty years, at the then moderate but now enormous rate of 6 per cent, and in addition to this high rate a sinking fund of 1 per cent was imposed. A rating power was granted over the rural districts as well as over the city. For a considerable time the city was able to bear the whole of the rate, but as depression sot in city properties decreased in value ; tho expenditure on interest and maintenance increased ; and the Board was compelled to exercise its power of rating the rural districts. Gradually ithe rats rose higher and higher, and

I ti.ow the Board finds itself in this | position—it is compelled to levy the I maximum rate, not only on the city I but also on the suburban boroughs | and the rural districts of Riccar--1 ton, Avon, Heathcote and Spreydon. I It is scarcely a matter for surprise I that there is in the rural districts a 1 general feeling of bitterness and | irritation regarding a drainage rate I collected under such circumstances, I and that farmers, dairymen and fruit- | growers are incensed at finding their j properties depreciated by a drainage j?tax from which they have never rail ceived one penny of benefit, while I the drains along their own frontages I are left unimproved. We must admit I that for a number of years the j Drainage Board endeavoured to | minimise the burden by not setting I 5 aside the sinking fund. This was done with the tacit consent of the bondholders, or, at any rate, none of them objected. Bat a private action having been brought by a resident of Heathcote against the Board, it was ordered by the Supreme Court to maintain its sinking fund accretions, with the result that the rates had to be increased by about £2125 a year. Aa the city was already rated up to | the maximum provided by the Act, I this increased burden was thrown I upon the rural districts. To show I the extent of the burden, we may I state that the rate levied by the I* Drainage Board for 1894 amounted to £19.046, and that of this sum only £5491 were spent on works and chargee, while the interest and sinking fund (and. the charges connected therewith) amounted to £14,515. Were this tax reduced by the abolition of the sinking fund and the lowering of the rate of interest to 4 per cent, a saving of some £SOOO a year would be effected. Such a sum taken off the annual burdens of the | taxpayers would at onco improve tbs va'ue of all lauded property in the

I district. Oi : course, relief is to be obtained only by conversion of' the loans into longer-dated ones at a lower rate of interest. There are two methods by which this might be accomplished. The first would ha for the Government to bring in a measure to colonialise all existing local loans, issue inscribed stock for them, and collect the interest as is now done with loans to local bodies for works under the Act of 1886. It is doubtful, however, if this method would meet with the approval of the Legislature. It would virtually lay down a principle ; of colonial guarantee for future local | borrowing, aa other districts which have not hitherto borrowed would demand similar concessions to those granted to past borrowers. Indeed, we fear that the fact of the State colonialiaing and inscribing existing loans would mean opening the flood-gates of local borrowing, which would literally turn what waa meant to be a benefit into an evil. The other method t would be for the local bodies to be | self-reliant and convert their own I.loans. This would, however, under S the existing law, necessitate special I legislative sanction in each case. | Last session an Act waa passed to enable the Dunedin City Council to convert its loans, amounting to about£lß2,ooo at 6 and 7 per cent, into per cents. But a special appeal to the Legislature in each case of proposed conversion would manifestly be costly and inexpedient. The Colonial Treasurer has, therefore, at the request of the members for Riecarton and Chalmers, drafted a Bill which is meant to provide machinery for • enabling local bodies to convert tbeir I loans without an appeal to Parliament. It is simple and effective. It provides for existing loans being converted into stock paying not more than 4| percent interest, and authorises eo much as may be necessary of the accrued sinking funds to be expended in paying the premium on and costs of conversion, the balance to be handed over to the local body. Under this Bill, the Christchurch. Drainage Board should be able, by extending the period of its loan, to reduce the interest and abolish the einking fund. Its accrued sinking fund | would be sufficient to pay all expenses of conversion and still leave a handsome margin in hand. The Local Bodies Loans Conversion Bill thus oilers special benefits to the residents of Christchurch and the rural districts, and will doubtless receive the , hearty support of the Canterbury members nest session.