LETTERS TO THE EDITOR.

New Zealand Herald, Volume XLV, Issue 13694, 10 March 1908, Page 3

LETTERS TO THE EDITOR.

CITY COUNCIL FINANCE.

Sir, —With reference to the two letters under the above heading, signed " Economy with Efficiency," appearing in your issues of sth and 9th inst., may I he allowed to say in the first, place that I am surprised that a

gentleman who may be presumed to have de-

voted some attention to financial matters should consider it necessary to write under - a nom-de-plutne and quote the fact of the New Zealand Insurance Company having £14-7,612 earning interest, at 3-i per cent, as evidence that the City Council ought to be able to borrow at that rate. lie surely ought to understand that insurance companies, as prudent men, always keep a large amount of money invested in consols anil other readily negotiable securities bearing low interest, SO as to be immediately available to meet any sudden strain on their resources. They arc obliged, moreover, to invest in bonds of other countries in order to comply with the laws requiring them to lodge a certain amount of approved securities before carrying on business there, and unfortunately these countries will not accept even Auckland City Council debentures, though we in Auckland may consider these, quite as safe , as their own securities. Having enlightened your correspondent on i this point, 1 may say that the two small loans amounting together to £50,000 were floated because this amount having already been expended out of current, account it was desirable it should be recouped. -May 1 further point out that, by exercising prudence and making such arrangements as a careful forecast of our finances justified, and deferring the flotation of the loans till recently, instead of issuing them two years ago when the first expenditure was incurred, a saving of two years' interest was effected, amounting, say" tut 4 per cent., to £4000. Being in - touch with prominent financiers in Melbourne, Sydney, and New Zealand, 1 anticipated that the banks would soon be accepting deposits bearing interest at 4 per cent., as has already occurred: and in view of the financial crisis in America, which has already affected the London money market, the members of the Finance Committee and myself felt assured that it would be wise to place the above small loans at once. By so doing wo obviated for several months the necessity of borrowing on account of other loans authorised "and placed ourselves in a position to await an easier money market for them, and in the meanwhile to accept any money that was offering at 4 per cent, I am glad to be able to inform your correspondent that three persons have, since taken up debentures at 4 per cent, at par, amounting in all to £5200. As to the Invcrcargill transaction, I can only say that T am very glad ■ to heat' that the conditions of the local market were such that our Southern friends were able to obtain such advantageous terms; but i may point out that the premium Ihev obtained was £1 19k od on £13,000 and £1 9s Hid on £17,000, amounting in all to the sum of £511 7s lid; and L hardly think there is sufficient difference between their achievements and ours to warrant the inference of incapacity oh our part which your correspondent draws from As to the Harbour Board's loans, its last two loans were,, 1 believe, placed at 4i and 4'- per cent. : but your well-informed correspondent might have mentioned the fact that last year I floated a loan on behalf of .the City 'Council of £150,000 at, 4.' per cent., with interest and principal payable ill New /Zealand, making the interest practically equivalent to a little over 4£ per cent Ihe tact, however, that last year we could borrow at 4A per cent., and some years before that at 4 per cent., does not. as your correspondent ought to know, m the least prove that 4* per cent, is an excessive rate, this year. We are dependent on the state. of the money market", like other borrowers, and when we want money we must ho content to pay (lie current rates for it. ; , I think I may venture to claim that the members of the City Council and myself have shown ourselves capable of carrying out a policy of efficiency with economy, and that by careful finance we have •' been able to save the ratepayers a large amount ot money by way of interest; as evidence- of which I may mention it has been found unnecessary to apply to the bank for, any material °assistance, in spite of the heavy expenditure that has been incurred on account of the above loans, and also on account of the town hall, Grafton bridge, and drainage, besides the saving of £40001 to which have already alluded, effected by deferring the flotation of the loans. ... »*..,/■ Arthur M. Alters. .iimi-Tnq-TOim aeiegales. -"■• . *