MUNICIPAL FINANCE.

New Zealand Herald, Volume LXVII, Issue 20727, 21 November 1930, Page 13

MUNICIPAL FINANCE.

POLICY OF DEPOSITS AT CALL.

COMMITTEE'S ENDORSEMENT. CONVENIENT AND ECONOMICAL. In view of certain criticism that had been directed against the City Council's practice of accepting money on deposit at call, a report upon the matter was presented last evening to the council by four of its members who are public accountants, Miss A. Basten, and Messrs. G. W. Hutchison, G. Grey-Campbell and B. L. Bagnall. The report commended the system of obtaining temporary loans by the means stated. After citing the portion of the Local Bodies Finance Act, 1921, governing the practice the report stated: — "We strongly favour the policy of the council in accepting moneys on deposit to the extent of its requirements, within the limit of the foregoing authority. Wo do not uphold the suggestion that the council should pay 7 per cent, on bank overdraft when it can obtain money from other sources at 4 per cent. "If the council could be assured of receiving its j-evenue as money is required to pay for city maintenance and works, and interest and other charges, then there would be no necessity for either money on deposit or bank overdraft. Experience proves that such a state of affairs in municipal finance is a practical impossibility. To illustrate, we would draw attention to the fact that in the past three years never more than 43 per cent, of rates is received in the first six months and never less than 50 per cent, of the rates collectible is received in the last three months of the financial year. Incidentally, the ratepayer is a gainer by not paying his l'ates immediately on demand. Of a total amount of £545,408 collectible for the year ending March 31, 1931, only £43,580 had been collected to September 30. "Our examination shows that all, deposit money is paid off promptly when funds are available and that in instances where the district fund has been in credit and loans still unpaid there has been a very large bill for interest due within a few days. In some cases where a large amount has been payable for interest the bank account has been overdrawn at the date when interest was payable." It had been suggested that trouble would have arisen if on July 23 last, when there was £22.883 in the district fund and a debit of £201,300 in the temporary loan account, had a majority of creditors elected to call up their money at a moment's notice "The contingency seems too remote to consider," stated the report, and wo venture to suggest, that if such an improbable thing occurred the council would find itself much better placed to meet the position than most firms or institutions. "At the date mentioned the council had arrangements with its bankers to meet a far larger demand from its creditors than was likely to be made under the most exceptional circumstances. The city treasurer has informed us that whenever a sense of depression is evident in the city more money than usual is offered to the council on deposit, the lenders quite rightly judging that the council is one of the safest repositories. "We are satisfied that the city treasurer has acted throughout entirely with a view to saving interest and has effected very considerable saving both by accepting deposits at call and the close watch he has kept on balances of various funds to ensure that they shall not remain non-in-terest bearing." The report was received and the four councillors were thanked.