LOCAL LOANS.

New Zealand Herald, Volume LVII, Issue 17660, 22 December 1920, Page 6

LOCAL LOANS.

The practical effect of tSe newborrowing powers given, and to be given, to certain local bodies is made clear by the terms of the Auckland Harbour Board loan announced a week ago and approved by the board yesterday. The loan, bearing interest at 5h per cent., is to be floated at £94. This gives to the lender 6 per cent, interest. No good reason has been advanced for the Minister's decision to reduce the price of the bond rather than advance the rate of interest, but local bodies will be generally satisfied with flotation terms which should bring them a substantial share of whatever money is seeking investment. Indeed, when taxation is considered, the stock has special attractions. By the Act passed during last session of Parliament the income tax on local bonds is limited to 2s 6d in the £. Local authorities all over the country protested against this clause. They were offered a privilege to which they had no colour of right, and they clamoured as if they were being subjected to a grave injustice. Probably the advantage of the clause will now be evident to them, as it certainly will be to the wealthy investor. At the lowest computation these bonds are worth 5£ per cent, free of tax, and lenders who pay on the highest income tax scale will find it difficult to get corresponding securities yielding the same rate of interest- Even at their present low market price the Government's per cent, taxfree bonds do not give so good a return. If there is money in NewZealand available for investment, the local bodies should attract it at th© price they are now able to offer.