FINANCIAL SURVEY

Otago Daily Times, Issue 26176, 12 June 1946, Page 6

FINANCIAL SURVEY

A SELF-SUPPORTING SYSTEM NO RECOURSE TO RATING The financial aspects of the conversion of the city transport system to electric trolley bus operation are dealt with in a report by the Finance Committee which will be submitted to the special meeting of the City Council to morrow afternoon. Dealing in the first place with the outlay applicable to the Transport Department, totalling £739,730, the Finance Committee reports that it has carefully considered the financial aspect. and has fully reviewed the report of Mr H. H. Henderson (formerly city treasurer). The figures supplied by Mr Henderson indicate that it will be possible to make the change to trolley buses and operate the new system without recourse to any rating assistance and show a surplus of £5944. This result is based on a loan proposal of £700,000. The difference between that figure and the departmental estimate gf £739,780 would be provided out of accumulated renewal funds,

which will be largely freed on the termination of the tramway system. These funds, less those belonging to existing buildings and plant which would not be available for disposition, amounted to £92,988 at March 31 last. Interest on the proposed loan of £700,000 is calculated at 3i per cent., and will amount to £22,750 per annum, and the proposed term of the loan is 20 years, REPAYMENT AT MATURITY Sinking fund has been, calculated on a basis to ensure that as far as possible the charge will be lighter in the earlier years up to 1958. At the lastmentioned date the present tramway loans, which. come under the conversion scheme, will have been paid off, and thereafter the trolley bus system would be relieved of the annual charges on such loans, amounting to £24,000. With that substantial relief, the sinking fund contributions on the trolley buses can be increased to a figure that" will ensure full repayment at maturity of loan. On the foregoing basis, therefore, it is proposed that the sinking fund for the first 10 years be 2i per cent., or £15,750 per annum, and for the balance of the loan term an additional £23,000 per annum. The additional £23,000 will be available out of the above-mentioned saving of £24,000 per annum in respect to maturing tramway loans. Renewal funds are calculated on a life of 20 years for trolley buses, equivalent to 3J per cent., and on a life of 30 years for electrical equipment, equivalent to 2 per cent. These two items amount to £18,116 per annum. Existing Renewal Fund contributions on buildings and plant amounting to £796 per annum, would be additional to that figure. COSTS AND REVENUE The total outgoings for the trolley bus system, including also the abovementioned Loan and Renewal Fund charges, are estimated at £248,056, compared with those for the tramways and cable systems of £245,503. Total revenue is calculated at £254,000, which includes certain revenue on routes now operated by Diesel buses and which will be served‘by the trolley bus system. On the basis of the foregoing ' estimates it is shown that the trolley bus system, as proposed, can carry the existing tramway loans in addition to the present loan proposal of £700,000, meet all other charges and outgo, and operate successfully on the basis of the estimated revenue. PROVISION OF SECURITY

There would therefore appear to be no reason why the trolley bus section of the proposal, involving a loan of £700,000, should not be approved. It would be necessary formally to strike a special rate of 6Jd in the £ as security for the interest and sinking fund and repayment of the loan. It is, however, desired to point out that the change-over'should be so co-ordinated as to ensure that the raising pf loan moneys should be spread over the longest possible period, and that implies that the Transport Department will so plan its operations as to avoid over-burdening the department with unproductive loan capital charges in the earlier stages. Effectively to meet that possibility it is essential that the ordering and delivery of vehicles and material should be so arranged that quantities arriving will not exceed the capacity of the department to make immediate use of them in accordance with the programme of development by successive stages, as recommended by the Transport Committee. In the opinion of the committee, expenditure of the loan should be based on the consideration that it will take approximately five years to complete the change-over. With regard to the paragraph in the Transport Committee’s report relating to possible future extensions, it is proposed that any such work, when authorised, should be undertaken out of the resources which will be available to the department. These would comprise approximately £53,208, comprising balance available in Tramway Renewal Funds, plus such amount as may be realised from the sale of rails, sleepers, and tramway equipment. The transport engineer estimates that such realisation would be spread over a period of two years, and thatuthe amount accruing would be approximately £39,480. It is proposed, therefore, that these two sums should be earmarked for meeting any excess expenditure on the change-over, and providing for future extensions to the system. It would be necessary in due course to first obtain the sanction of the Controller and Auditor-general to the utilisation of the Tramway Renewal Funds in the directions hereinbefore proposed. POWER SUPPLY SERVICE It will be necessary for the Electricity Department to replace the existing converter plant in Cumberland street with rectifier stations in various parts of the city to provide suitable power supply service for the trolley buses. In the meantime, it may be stated that the cost will be between £50,000 and £60,000, a substantial portion of which would be available out of the appropriate departmental renewal funds.