LOCAL BODIES' BORROWING.

New Zealand Herald, Volume LXI, Issue 18813, 13 September 1924, Page 10

LOCAL BODIES' BORROWING.

The criticism that local authorities are borrowing too heavily may be very generally accepted, but the suggestion of restriction by a supervising board put forward in the Legislative Council is not likely to arouse much enthusiasm. Individual authorities are subject to two fairly effective restraints. They must obtain the sanction of either Parliament or their ratepayers to loan proposals and they must find sources of the money they require. The great increase in local borrowing has been due generally 'to the imposition on local authorities of many functions which they did not undertake even twenty years ago, and much of the borrowing has been for enterprises that are independent of rates. Indeed, half tho loan indebtedness is of that character. Capital invested in harbour works, tramways, and electric power and gas undertakings, in respect of which only a 6mall amount of taxation is levied, is at least £18,000,000, out of the total ind'btednoss of £36,000,000. Consequently, revenue from rates of all local authorities is only about two-thirds of revenue from other sources. The weakness of local government finance is not so much the magnitude of its borrowing as the manner of its expenditure. Loans are being raised at the rate of £6,000,000 a year; is good value obtained for the whole of the money ? There is a manifest unsoundness general to most local bodies. The best practice in connection with public works is to accumulate sinking funds that will repay loans in 37 years, yet how many capital works are exhausted and scrapped in ten or fifteen years ? This is probably the gravest element of weakness in local finance, and so long as it is allowed to continue the check on borrowing which the ratepayers' poll should be, will be partly nullified by popular ignorance of the real cost of public works. Local bodies advancing programmes of roading, for instance, do not jeopardise the polls by emphasising the fact that the roads to be reconstructed have worn out before the last loan has been repaid, and there will not be much improvement in this respect until adequate provision for depreciation is made compulsory. There is a further important point that local finance has been made too easy, a condition that does not check any tendency to waste, by the privileged treatment of municipal debentures in the matter of taxation. There never has been and never will be any justification for the discrimination, and by its abolition the Government would simultaneously impose a healthy corrective on tho extravagant tendencies of local authorities and give a powerful stimulus to investment in the directly reproductive channels of primary production.