CONSOLIDATION OF BOROUGH LOANS.

Oamaru Mail, Volume X, Issue 4283, 4 December 1888, Page 3

CONSOLIDATION OF BOROUGH LOANS.

A special meeting of the Borough Council was held last evening for the purpose of considering a notice of motion given by Councillor Jones in reference to the consolidation of the borough loans. There were present—His Worship the Mayor, Councillors Brown, Dunn, Jones, Moss, Sanderson, Sumpter, and Waddell. Councillor Jones, on rising to propose his motion, said that he approached the subject with a sense of its importance and of his own wont of capacity to deal with it in a comprehensive manner. There was a diversity of opinioD, even amongst those who had soma knowledge of the subject, as to the practisability of the scheme and its probable results. If he succeeded in bringing about a full discuesion upon the question he would have accomplished his object. The first question was, Is it desirable to convert the borough loans into f.ur per can's, or whatever the amount might be ? He thought they would be agreed upon that point. He had prepared a simple statement of what he considered would be the position in regard to the borough loans. He took for his purpose the loans amounting to L 150.000 on which they were paying seven per cent, interest. As the loans bad an average duration of 20 years, they would have to pay interest amounting to L2lO 000, or with the principal a total of 1360.000. Now, if they converted their bund 3 into four per cents, by buying the existing debentures al Ll2O, they wonld add to their indebtedness the sum of L 30,000, and ai four per cent, the interest would in 20 years amount to L 144.000, and settiug down L2OOO for s-xpenres and adding the increased principal of LIBO 000. 'he total amount payable would be L 326.000, thus giving a balance in fnvor of the borough to the amount of 1,34,000. He must Bay that the amount of the balance really surprised him, and if he were in error he would be glad to bo set right. They were now paying L 9700 annually a3 interest, butif theyconverted their loans on the basis be h»d indicated the annual charge would be L 7200, and thcro would be effected a saving of over L2OOO a year. He was aware that thero would be some difficulty in eff-cting the operation, and that the bondholders, while indiaposed to Bell the present bonds at the price fixed upon, might be chary in taking up new bonds at four per cent. But they knew that the Gjvernment had succeeded in floating loans at four per cent., and if the matter were taken in hand by the Government, who could offer greater security and so enhance the value of tho new bonds, the prop sal conld be carried with advantage. He would make the scheme optional, so that local bodies should not be compelled to come under it, nor it be compulsory on the part of the Government to accept all who wished to take advantage of it. To those bodies whose loans were at five or six per cent, conversion might not offer any advantage. It would be a general misfortune if any local body made default, and he, therefore, thought that the Government had a material interest in averting any possibility of such- a calamity and In secaring for local bodies any measure of relief that might be obtainable. He desired that a circular upon the subject should be addressed to other local bodies, with a view to securing their co-operation. If there was anything that he had omitted he would be glad to answer any question. He did not aek that bis resolutions should be carried in their present form. All he desired was that the matter Bhoald receive careful coosideratiou, believing that something might be evolved that would have a good result. Nothing should be done in a hurry, and if the desirableneßß of the scheme ware affirmed, he would ask for the appointment of a Committee to give the subject further consideration. He conclnded by moving the first resolution of which he had given notice. Councillor Moss suggested that if they went into the market as buyers the bondholders would not be dispesad to sell even at Ll2O. Councillor Jones said he did not think it desirable to go upon the market with a scheme to be cirried out at once, but that an office should be opened in Lmdon where those who so desired could sell the old debentures and purchase the new at fixed prices. Councillor Sumpter, in seconding the motion, said he did not think that there conld be any question as to the desirableness of conversion. He had been surprised at the opposition which had pre* viously been shown to the proposal, for if it were properly thought over all would recognise its wisdom. As to the advantages that would be obtained, that was a question for actuaries to determine and for consultation with experts. The Dunedin Harbor Board had embarked upon a Bcbrme of conversion, and hid succeeded satisfactorily. He had no doubt that they would be equally successful. The Oamaru Harbor Board had, after cireful consideration, come to the conclusion that they would gain largely by the conversion of their loans, and they were greatly disappointed when the Legislative Council si rack out of the Bill the power to enter upon snch a scheme. If the Council went into fignre3 they must come to the conclusion that the result of the proposal would be advantageous. He had no doubt that the bondholders, if they saw that there was any danger of local bodies being unable to meet their engagements, would be glad to exchange their bonds for four per cents, having a Government guarantee. Hib idea had been that the Government, who ould get money at a low rate, should do the borrowing and lend to the local bodies at a slightly increased rate of interest. He had no donbt that if it were gone about carefully and judiciously the conversion of the borough loans conld be accomplished with advantage, but If they acted rashly they might get themselves into difficulties. The accomplishment of the scheme wonld take a long time, and they conld not hope to gain mnch immediate relief. But they might make some arrangement with the Government by which taxation could be reduced, and whenever there was a reduction of taxation they would see properly again assuming something like a certain value. As the Mayor had several times remarked, the valuation of properties being very low the taxation was not nearly so high as it appeared, but there still Btood the statement that the rates were bo mnch iu the pound. This, with the fact that they had done a good deal in the way of crying down their own property, had done very much injury. They were on the eve of better times and they should take a less despondent view of affairs. If they could only take advantage of a Bcheme by which a reduction of taxation might be obtained, they would speedily see a great change for the better. Councillor Moss said he did not think any disonssion necessary as Councillor Joues had intimated his intention of moving for the appointment of a Committee to further inquire into the subject. He was sure that every ratepayer would be glad to see something definite come out of the present effort. Councillor Dunn said he did not think that they Bbould pass any motion hastily, and that the question ahonld have the fullest consideration, and he was inclined to move the adjournment of the discussion.

The Mayor, having read the motion, aiia that it was only proposed to affirm the desirableness of steps being taken towards consolidation, and then to appoint a Committee of inquiry. Caaooillor Dunu said he woald support the adoption of that coarse, as be believed that relief might be obtained by the conversion of the loans and that farther was necessary. ' Councillor Waddell said he had not given the subject consideration, bat he believed that were the proposal carried

out it would be of great benefit to the Borough and indeed to every public body in the coloDy. Conversion bad always been a proper means of obtaining relief, aid if tile Government took the matter in hand it would be entirely successful. The Mayor eaid that there was an impression that the borough had some difficulty in meeting its engagements. This was a mistake, for they were now as well off as they ever had been since the completion of the waterworks. When speaking of the outgoings they should bear in mind that the bulk o£ their indebtedness was for water, and that they had obtained a quid pro quo for the money. The charge for water Bhould not b© viewed as a rate, for it was merely a payment for a commodity,!and"in other, places it was not treated as a rate. The borough had only one general rate. Sines he had been in office they had not had any difficulty in paying their way, and he hoped they would always be able to do so. He had always favored conversion, and felt sure that it the effect of relieving the borough. Councillor Jones' motion was then carried unanimously, and the following were appointed a committee to consider the subject and report The Mayor, Councillors Sumpter, Sanderson, Humphrey, Spence, and Jones.