SINKING FUNDS

New Zealand Herald, Volume LXIX, Issue 21295, 23 September 1932, Page 12

SINKING FUNDS

PUBLIC TRUSTEE'S RIGHTS NO CHANGE PROPOSED REPLY TO CITY COUNCIL >r, ' The Government does not intend to isb introduce legislation giving local authori.vs ties tho right to transfer sinking funds ve from tho custody of the public trustee to ," tjhat of sinking fund commissioners of their ig own. An ihtihiation to this effect was. relio ceived by tho Auckland City Council last t- evening from tho Prime Minister, the Rt. , r Hon. G. W. Forbes, in reply to a request j by tho council that such provision should 10 bo made. Tho Prime Minister stated that the decision had been made because at present the public trustee was precluded by tho s _ terms of his contracts with borrowers and by the operation of tho special relief legislation passed during recent sessions of J Parliament from calling up tho investments of the Public Trust Office for tho purpose of obtaining a higher return or of ■providing funds for the release of sinking * funds of which tho prescribed terms had not expired. IS f Tho Mayor, Mr. G. W. Hutchison, said that apparently When a local body had raised a loan from a Government department and wished to withdraw tho sinking !r fifnd from the care Of tho public trustee n tho present law prevented it from doing so. Whero tho loan had been obtained e otherwise, there was no prohibition. SincO tho public trusteo had reduced tho rate of o interest payable on sinking funds held by - him to 4 per cent, which was less than '• many privately administered funds were !• earning, some local bodies woro naturally t upset and desirod power to appoint their o own commissioners. The matter Was in the 0 hands of the Municipal Association, and s hp thought that tho letter should bo merely received. , In reply to a question, the Mayor said . that tho council was interested to the extent of about £200,000. 1 Tho letter was received. HIGHER INTEREST SOUGHT 5 PROPOSAL AT OTAHUHU A suggestion that tho Otahuhu Borough Council should appoint its own sinking fund commissioners in place of the Public Trustee was submitted in a report to tho Council by tho town clerk, Sir. R. F. W. Wood, last evening. Mr. Wood stated that according to advice from tho Public Trustee the rate of ' interest on sinking funds would be re--1 duced to 4 per cent. If the council was 1 only to receive this rate in future there would bo a shortage in a number of the sinking fund accounts when tho loans 1 in respect of which tho funds were established fell duo. In his- opinion tho council could do better by acting through its own commissioners. However, under the Local Bodies Loans Act, 1926, tho Public Trusteo would require to be the commissioner for loans totalling £18,600, these loans being raised through Government departments. "The chief advantage of having the Public Trustee as sinking fund security is an absolute guarantee of safety, as there is no question of loss upon any investk ment," said Mr. Wood. If, however, the suggestions ho outlined were carried out he thought tho council would be safe from loss on investments. At the present time the Government and various local bodies were offering debentures for sale at 5* per cent. If tho council limited the commissioners to bo appointed to Government stocks and approved local body debentures, there would be no risk of any loss. Later, when conditions were more stable, tho council could widen tho field of investment. The chairman of tho Financo Committee, Mr. J. Hunter, said the committee had approved the suggestion, but in view of the absence of the Mayor and other members of the council, he moved that . consideration be deferred. This was agreed to. '