MT. ALBERT FINANCES

New Zealand Herald, Volume LXIX, Issue 21263, 17 August 1932, Page 10

MT. ALBERT FINANCES

SINKING FUND INTEREST

CHANGE IN ADMINISTRATION

PUBLIC TRUSTEE REPLACED

A decision to remove the Public Trustee as commissioner of all sinking funds of the Mount Albert borough to which he had been appointed, was made by the Borough Council last evening. In a report presented to the council, the chairman of the Finance Committee, Mr. 11. Ferner, said the sinking funds established in connection with loans raised prior to 1926 were administered by private sinking fund commissioners. The loans in respect of which these commissioners administered the sinking funds at present totalled about £265,600, and the accumulated funds and investments in their hands on March 31 were £22,989. The position regarding loans raised subsequently to 1925 was different, however, as the council, on August 31, 1926, appointed the Public Trustee commissioner of the sinking funds established on that date. The total loan commitments of the borough in respect of which sinking Wnds were now administered by the Public Trustee amounted to £787,270, and the accumulated funds in his hands on March 31 last were £21,182. It would thus be seen that the sinking funds covering by far the greatest proportion of the council's loans were administered by the Fublic Trustee. Recent Reduction* By Order-in-Council dated December 18, 1931, the rate of interest payable by the Public Trustee on the borough's sinking funds was reduced from 5£ to 4J per cent, and recently a further reduction to 4 per cent had been made. "When the large proportion of the borough loans in the hands of the Public Trustee is appreciated it will be readily seen that a very serious situation will be created for-the borough by so large A reduction in the rate of interest payable on the sinking funds by the Public Trustee, continued Mr. Ferner. "Without some difficult calculations, it is not possible to compute the ultimate result to the borough, assuming that the rate of interest remains at 4 per cent, but the effect must be to create a very considerable shortage on the maturity of the respective loans. In other words, when each loan becomes due for repayment, a much greater amount will be found to be unprovided for than was originally calculated. Original Basis Upset "So drastic a reduction in the rate of interest as the Public Trustee has imposed gravely upsets the whole basis upon which the sinking funds have been arranged. The reduction in interest from 5i per cent to 4 per cent on the sum of £21,000 already invested with the Public Trustee on March 31 last amounts to £285 per annum. When it is considered that the term of these loans has barely commenced and that sinking funds on most of them will continue to accumulate for over 30 years, it will be seen how serious may be "the mischief ultimately caused should the Public Trustee continue to limit the sinking-fund earnings to the' same rate. "A reduction of li per cent on the total sinking funds for the full commitment of £787,000 would , amount to a considerable sum per year, which would be compounding yearly. The action of the Public Trustee is arbitrary and while the funds are in his hands the council" has no redress on this or any other matter." On the motion of the Mayor, Mr. W. F. Stilwell, the council decided to replace the Public Trustee by three private commissioners, Messrs. T. B. Clay, A. F. Bennett and L. E. Rhodes, all former Mayors of Mount Albert.