LOCAL BODY DEBT

Otago Daily Times, Issue 23939, 14 October 1939, Page 2

LOCAL BODY DEBT

DECLINE IN RECENT YEARS REPAYMENT OF LOANS EXERCISE OF CONTROL OVER BORROWING A steady decline in the local body debt of the Dominion is recorded in the annual report of the Local Government Loans Board for the year ended March 31, 1939. The report states that the gross debt of local authorities reached its peak in 1931, when it stood at £72,686,036, whereas seven years later it had dropped to £68,0(51,551. Before 1927, the year the Loans Board was established, local authorities were borrowing approximately £5,000,000 a year, and in a large number of cases inadequate provision was made for the liquidation of the debt incurred, it is stated in the report that indiscriminate borrowing has now been effectively checked, and local bodies are compelled to provide for repayment of loans within the effective life of the assets created. " Since the coming into operation ot the board the amount of loans sanctioned annually has been consistently ttelow the amount previously raised by local authorities when no effective control was exercised over their borrowing," says the report. " This has been particularly noticeable during the years immediately following 1927, when an average of £3,000,000 per annum was authorised. During the depression vears the applications received by the Loans Board dropped considerably, but with the return of prosperity greater activity in thk field has been evident. Power Boards and Hospitals "Two classes of local bodies whose borrowing has shown abnormal increases over the past two years are electric power boards and hospital boards. In the first of these classes the increase has no doubt been caused by the unprecedented demand for electricity due to the more prosperous conditions now ruling throughout the Dominion. As regards hospital boards, however, it would seem that modern technique in the administration of hospitals and treatment of patients, together with increases in staff due to the reduction in working hours, has imposed on hospital boards the duty of increasing accommodation generally by the erection of up-to-date buildings." \ . ~, The report states that though additional loan works we-e being undertaken, the gross local body debt was steadily declining, accounted for, no doubt, by the more adequate repayment provisions which were imposed by the Loans Board and the result of the operations of the conversion legislation. The table shows the amount of the gross debt outstanding at March 31 in each of the following years:—

’ Conversion Operations Reference is made in the report to the result of the conversion operations undertaken from 1933 to 1935. “ There is no doubt,” it says, “that local authorities do not yet, and probably jiever will, realise to tne full the trernendous benefits that have accrued to the people of their constituent districts as a result of the conversion schemes which placed practically the whole of the local body debt domiciled in the Dominion oh a satisfactory basis with regard to the rate of interest, the arrangement of maturity dates, and provirion for repayment. , “The old system of accumulating sinking funds was largely departed from and, as a result of conversion operations, repayment of a large proportion of the local body debt was placed on the basis of the annual redemption of debentures, while a further substantial amount was placed on the instalment-repayment system. The total of loans arranged on these two bases was approximately £44,000,000. The balance of approximately £24,000,000 of debt is repayable on fixed maturity dates and represents principally debt domiciled outside the Dominion and not subject to conversion, together with non-convertible debt held in New Zealand.”

Locally Raise fl Loans

The figures regarding the domicile of local body debt indicate a tendency for New Zealand to arrange its own finance within the Dominion, adds the report. The amount of debt outstanding in the United Kingdom and in Australia had steadily decreased, and in the "Local Authorities Handbook ' for the year ended March 31, 1937. the amount domiciled in the United Kingdom was shown as just under £14,000.000, a reduction of £3.500.000 since 1931, the amount in Australia being slightly over £2,000,000, as against £8,500,000 in 1931. The remainder of the debt was held within the Dominion, and, in view of the present policy of authorising the raising of loans only in New Zealand,- the tendency would be to increase still further the holdings in New Zealand and to reduce overseas indebtedness as existing loans fell due and were paid off from sinking funds. During the year ended March 31. 1939. proposals to borrow involving £5.138,917 came under the purview of the board, and of this amount £4,875,584 represented new applications and the balance of £263,333 amounts previously referred back or declined. Of the total amount considered, new loans and renewal loans totalling £3,013,872 and £1,183.525 respectively were sanctioned, while £936,520 was referred back for reconsideration or declined.

1915 24,538,721 1920 .. 30.187,942 1925 1926 .. 53.353,466 .. 59,419,754 1927 .. 64,012,247 1928 .. 66,404,172 1929 .. 69.294,619 1930 .. 71,207.539 1931 .. 72,686,036 1932 1933 .. 72,402,282 .. 72,476,056 1934 .. 71.969,387 1935 .. 71,245,458 1936 70,400,176 1937 .. 68,559,750 1933 .. 68,061,551