NORTHERN ADVOCATE DAILY With which is incorporated the NORTHERN MAIL DAILY FRIDAY, AUGUST 27, 1920. INTEREST ON THE LOAN.

Northern Advocate, 27 August 1920, Page 2

NORTHERN ADVOCATE DAILY With which is incorporated the NORTHERN MAIL DAILY

FRIDAY, AUGUST 27, 1920. INTEREST ON THE LOAN.

Registered for transmission through

the post as a newspaper,

A question of interest to the ratepayers in connection with the Whangarei Harbour Boaid's development scheme is that of the terms upon which the proposed loan of £120,000 will be raised. Under the existing legislation local bodies are considerably restricted in their loan operations, the amount that they are permitted to pay in interest being limited to f"J per cent. So long as these restrictions are continued, and Mr Massey has declared emphatically that he will not agree to any increase in the rate of interest, Jocal bodies that desire to raise loans have cither to obtain their money at what is nowadays the modest rate of 5| per cent, or to go without. So far as we know uione of the local bodies that have gone on the money market of late has failed to obtain the amount required, and there is no reason to suppose that tho demands for

substantial sums that are to be made

in the near future will not meet with

an adequate response. The minimum rate which the banks arc charging for the accommodation their customers require is (3 per cent., and some of the financial institutions ore obtaining higher rates, but that does not mean that local bodies will have to pay more tham they arc at present authorised to do. The security wlyich local bodies have to offer is always attractive to very many investors, the guarantee of the community being considered safer than that of any individual. The Harbour Board, once the ratepayers have approved of the loan proposals, as we believe they will next week, should experience no difficulty in raising the necessary money. The security offered will be in effect the resources of the district over which the Board has rating powers, and we have no doubt but that the district itself would willingly subscribe a large part of the loan if the opportunity offered. Taking tho availability of thp requisite money as at any rate exceedingly probable, there is another point to be considered. If the Board floats the loan within a short period it will pay interest on the money at the rate of 5-t per cent. Any lengthy delay, however, might, mean that a higher rate of interest w r ould have to bo paid. Mr Massey does not intend to authorise local bodies to pay more than 5i per cent., and so long as the banks are willing to provide accommodation for their customers at a charge of 6 per cent, there is no reason why local bodies should exceed their present rate. But it seems to us that the question may well be asked whether money, like everything else, may not become more costly. In some circles in which finance is a staple topic the opinion is very strongly held that before long the rate of interest charged on ordinary business transactions will be higher than C per cent. If there is justification for that opiniwn, and we bel'evo there is, local bodies that propose to go in for borrowing would do well to act quickly. In the case of the Harbour Board an increase in the rate of interest would add considerably to the cost of the loan. The way to avoid any misfortune of this kind is to issue the loan as quickly as possible. If the ratepayers endorse the Board's proposjils

steps can be taken at once to secure the benefit of a comparatively low rate of interest. If the present scheme were rejected some considerable time

would elapse befoie any new proposal for the improvement, of the harbour could be brought forward, the rate of interest would probably go up during the interval anil the district would be put to additional expense. We take it for granted, of course, that even if the present scheme were rejected the district would eventually do something to make the harbour more suitable to its requirements. The need for improvement is patent and the effect of improvement would be to benefit the whole district. Obviously the time to begin the good work is now.