THE LOAN CONVERSION SCHEME.

Otago Daily Times, Issue 10599, 20 February 1896, Page 2

THE LOAN CONVERSION SCHEME.

Sib,—lt is devoutedly to be hoped that yoM excellent and well-timed leader of Friday latt upon the' corporation finance,will have the effect of stirring np our laggald and dilatory mayor to a sense of bis responsibilities and the exigencies of the situation to the extent necessary to induce him to at once push on the con* version scheme and thus save the city a 6d or 9drate. If it has not that effect then it is to be hoped that the councillors will themselves take the matter iii hand and insist npon the conversion being proceeded with (without a moment's further delay. The mayor at the last meeting of the council laboured, heavily to show the council how not to do it. What necessity, may I ask, is there to delay the issue of the new bonds until the old ones are returned ? At preseiit th&y are in Lontlon in the hadtla of the Bank of New Zealand, and perfectly safe. Indeed, I fail to see the necessity of getting them back at all—to do so will involve a very serious expense if they are to ba insured at their full value; and there is nc reason whatever to prevent the council appointing two well-known and, reputable men in, London (the Agent-general might be one) to act with the manager of the bank and count, verify the numbers, and destroy them there, making afterwards a. statutory declaration that they have done so. But in any event to delay the conversion until these bonds are returned i« upon the face of it a palpable absurdity. Nor should any delay take place '1 in order to obtain an actuarial opinion as to the cost of the conversion. The late Mr Leary's actuarial calculations have by actual operations been proved to be more than correot—that is to say, they have turned oat better than, he reported,—and all the council now require to do is to .take the value of our 4 per cent, stock at 98 instead of 105, at which premium Mr Leary estimated the 4£ per cent, stock, allow for the lapse of time since his calculations were made, then take the price of the bonds we wish to convert as thej are now quoted in the London market, add the £2 loss on the new bonds to that price, and they then have tbe cost of conversion, minus bank charges, brokerage, printing, law costs, &c. All this our town clerk c;m do for tbe Finance Committee in a day, and no more money need be expended thereon. There is" nothing, to negotiate with the bank, for their charges are known, and, therefore, no delay need take place on tbat score. To show how peurile are the mayor's objections to the conversion,! may only refer to his attempt to depress and frighten the council by his reference co what ho called the failure of the attempted' conversion of 1878. Now, what are the lactß iv connection with thiß matter ? I expect very few people know, and many of those who did have probably forgotten them. I wiil narrate them a3 briefly as possible. When the 187? act was passed, the council had power under Provincial Ordinances and. General Assembly Acta to borrow the sum of £600,000, upon which tbey had operated to the extent, I think, of £370,000, leaving debentures unissued to the. amount of £229,100. Tbe whole of those negotiated carried interest at 6 and 7 fee cent., £53,300 bearing tho latter, and the remainder 6 per cent. The act of 1877 was termed.a consolidation act, bnt was really issued more for the purpose of floating the unissued portion of t'ae various loans, and bringing tbem under one act, than in the hope of converting the £370,000 . that had beeu already borrowed. This will be obvious to you when I say that of this ' amount tbe £53,300 of 7 per cent, debentures had then over 22 years to run, and that of the remaining £227,600 6 per cent, debentures £120,300 had over .£/ years to run, they had only been recently issued, having a 50 years' currency, and tho whole of the remainder having about 26 years to run. Now, Sir, under, these circumstances and the then state of-the money market, is there any wonder that only £83,000 was converted ? Indeed, tbe wonder is tr.at so large a sum was converted, and I am afraid it must have been at too great a cost. Bub, Sir, what earthly analogy is there between the position tben and now ? And yet tbe mayor used it as an argument against tbe present conversion. In connection with this matter, seeing that the Legislature has imposed a 10s per cent, sinking fund,; I do not think the council would be wise in attempting ta convert the £109,000 of waterworks debentures, which do not mature until 1925. To purchase them would cost about £22,000, and as the council would save only two or three hundred a year (seeing that these carry no sinking fund), it is hardly worth while.—l am, &c, ' Dunedin, February 17. Obsbeveb,