QUESTION TIME

Northern Advocate, 14 August 1935, Page 6

QUESTION TIME

PROFESSOR BELSHAW’S ADDRESS BASIC VALUATION PROBLEM.

POSITION EXPLAINED,

At the conclusion of his address to the Whangarei Chamber of Commerce last night, Professor Belshaw answered a number of questions. He did not know what the rate of interest upon the bonds to be issued by the Mortgage Corporation would be, but said that the information would be made available from Wellington within the course of a few days. Questioned by Mr Mannington concerning how the provisional basic valuation would be ascertained at the expiry of the stay order period’, Professor Belshaw safd: —

“The first step to determine the final adjustment of liabilities at the end of the stay order period will be to determine the productive value of the property. This is an arithmetical concept, and is found by capitalising the net annual average income derived from the farm lands during the operation of the stay order at a basic rate to be determined by the court. To arrive at the net annual average income, there is to be deducted from the gross income all expenses, other than capital expenses, deemed to be incurred in the production of this gross income. Such expenses will include living and working expenses, together with interest at a rate to be determined by the Court on the average annual value of stock and chattels, as well as rates and taxes. They will not include interest on mortgages on the land. If the net income was £5, and the current rate of interest was 5 per cent., the productive value of the property would be £IOO. “The next step is to determine the provisional basic value, which is found by varying the productive value -by taking into account; (a) The relative efficiency or inefficiency of the mortgagor as a farmer; (b) the extent to which the farm has not been used to its full productive capacity during the operation of the stay order; and (c) such other matters, if any, affecting the farm pi'operty as it considers relevant. These would include value of buildings, remoteness or proximity of the property, or other factors upon which the Adjustment- Commission may exercise discretion.” Mr Ross inquired whether the Mortgagors’ Final Adjustment Act made provision for writing down interest in any year during the budgetary period. Would arrears of interest accumulated prior to the commencement of the stay order remain as a liability, he asked. j

Professor Belshaw said that at the beginning of each year a budget would be prepared for that year. He did not think it was the intention of the Act to include arrears of interest in the liabilities. In many cases, even if arrears were capitalised, they would represent an excess liability, and would probably be wiped out at the end of the five years period. This matter was not specifically mentioned in the Act, and would be the subject of a ruling in the Court of Review, which was the supremo authority. Mr Ross further asked whether the Act was of value only to the farmer who was today insolvent, and whether it would assist the man whose assets did exceed his liabilities, but was carrying on under difficulties. While not prepared to defend or attack the Act, Professor Belshaw pointed out that under the Act one of the factors to be taken into consideration was whether a farmer could carry on without the protection of a stay order. Professor Belshaw was accorded a vote of thanks by acclamation. He left, today to address meetings at Dargaville and Rnawai. and tomorrow will speak at Paparoa and Helensvllle.