SITUATION “UNIQUE AND DISTURBING”

Otago Daily Times, Issue 26793, 9 June 1948, Page 4

SITUATION “UNIQUE AND DISTURBING”

“Although this is the twentythird occasion on which I have presented a profit and loss statcmjfait to the council, it is the first time on which I have had to report a loss,” said Cr Taverner, the chairman of the Finance Committee, in presenting the report. “ The deterioration for the year was one of £132,194. “ The only biig.it feuuir: of the statement is that the Water Department derived £4096 from the sale of timber. Twelve thousand acres of exotic plantations were planted 40 years ago, and the earlier trees are now coming to the profit-bearing stage. We have every hope that year by year feiore timber will be coming in. “For a long period the presentation of the profit and loss statement has been a source of satisfaction -to the citizens, has reflected favourably on staff efficiency, and has been regarded by the council as a part of the settled order. The statements from time to time have been commented upon by successive Governments, and have produced pleasing references from local authorities. Even in times of severe depression charges were kept down and profits were made.” Cr Taverner continued. “The success of the municipal trading departments has been held up as an example of administration and staff service.'” Cr Taverner added that the surplus or net profit was earned on a relatively low capital investment, and also while the charges for the services rendered were the lowest in New Zealand. That period had ended. The revenue was now not sufficient to meet the cost, and the result for the year ended on March 31 was a loss amounting to a substantial figure. The result of the year’s work was aptly described by the city treasurer as “ a unique and disturbing situation in our municipal trading." No Authority for Rate

“ It is appropriate to refer to the question of providing financial assistance to the Transport Department by rating, because some people appear to have the idea that when the transport revenue is insufficient to meet the increasing expenditure, the shortage may be ‘ passed on to the ratepayers,’ ” Cr Taverner said. “ I desire to clear up this point by saying that there is no statutory authority for striking and collecting a transport rate. In effect, the law requires that those who ride shall pay, and not those that do not. All the tramway loans were incorporated in 1934 in the city conversion loan of £2,214,700, and that sum is secured by a special rate of 2s 9d, no part of which has been collected.” The speaker added that included in the conversion transaction was the balance of the .tramway loan of £254,000, and under the terms of the conversion this sum would be finally paid off in 1958. There was a small reserve in the renewal fund account, but only to an amount which would be a mere palliation under the present constantly-increasing cost .of operation. “All municipalities are caught in the spiral of ascending- costs, and this calls for immediate and substantial relief,” Cr Taverner said. “ The authorities should understand the liabilities and the limitations of municipalities such as ours. So far, little desire has been shown in this direction, or relief would have been provided. The responsible Government in local areas should be entitled, to the same facilities provided for. the departments of State.” Cr Taverner added that income must do a little more than balance expenditure, otherwise the position would be untenable. He said that , contributions to the renewal funds had ceased in some cases, and in others the same position would be created if the present trend continued. He said that contributions to the General Account for the relief of rates would either cease or would be substantially reduced, and renewal funds must be used to augment the bank accounts, first to abolish overdrafts and then to support the revenue accounts. If the renewal funds had to be used for “ bolstering up ” the revenue and making up deficiencies the time was not far distant when the cost of renewals of plant and equipment would require to be financed by new loans, which was ah altogether undesirable state of affairs and one which could not but produce far-reaching consequences. “That is ,the extrerre position, but if the ‘ unique situation ’ in w-hich we find ourselves is not materially altered, there is no alternative,” Cr Taverner said. “The city’s activities are publicly owned and are operated to serve our own people; no more could be

said of the Railways Department or the State hydro branch, and we have the right to expect consideration from State authorities to enable us to balance in a reasonable manner. We are bound by statute law, which in many respects limits our control. Price Control Criticised “We are required to ask for.the approval of the Price Control Division 1 before we can increase our charges, and to have such an application declined, as in the case of the Gas Department, or to accept a partial approval, as with the Transport Department, is cumbersome and unjust under present methods,” the speaker continued. “If we must continue to be controlled as if our trading activities were purely commercial and operated for the purpose of paying dividends, then some more adequate and speedy method 1 of adjudicating should be adopted. If this is not done, and if this appeal goes unheeded, we shall be forced to the conclusion that municipal enterprises in relation to essential services are no longer to be regarded as a desirable part of a city’s activities.” -

The speaker added that rigid economy would have to be observed in the Transport Department, and he hoped that a new application for an increase in fares would have better results than the last one. There was plenty of evidence to justify the application. He added that the motor buses operated at an increasing loss, and the department should look into this question.

Cr Barr, the chairman of the Gas Committee, speaking to the report, said that unless the council’s application to the Price Tribunal for an increase in the price of gas were successful, that department would show a loss on its trading next year. The chairman of the Electricity Committee, Cr Wright, said that at first glance the position in respect to the supply of power from Waipori all seemed to be one way, but it was a matter of convenience. Normally the city bought some power from the Goverenment, and at a reasonable price. The storing of water for the Government last year, when 30 per cent, cuts were in operation in electricity consumption, had caused a loss of £20,000, and the cuts themselves cost the city £28,000 in loss of revenue. Assurance from Government

Cr Wright added that he had gone to Wellington and had been given an assurance that if water were stored at Lake Mahinerangi for the Government this would be done at the Government’s expense, and would be paid for retrospectively from April 1, 1947. He said that he was convinced that the cuts in consumption would not reach 30 per cent, this winter, and that the balance should be a better one for this year’s trading. He did not think that as much power would be bought from the Government as last year, and this would be reflected in the accounts.

The chairman of the Transport Committee, Cr E. J. Anderson, said that it was obvious that his department must take steps to apply to the Price Tribunal for a further increase in fares. The operating of buses had already been scrutinised by the committee, and it was also obvious that if they could not be run except at a loss, there would have to be some curtailment of services.

Cr Ireland, the chairman of the Works Committee. - said that the troubles of the trading departments could be summarised in the words “ Price' Tribunal.” The only ray of light in the situation was that the citizens had not yet felt the seriousness of the position in their own pockets. He hoped that when further applications were made to the Price Tribunal that body would take a different view of the activities of municipalities in the light of their services to the public, and that they would treat applications from them as immediate. It appeared to him that the tribunal desired that municipalities should be brought into a worse financial position than at present before Action was taken. He added that the council should extend its afforestation scheme, although he had been told by Government officials that there was some opposition to it. He thought, however, that the plantations should be conducted in a different manner.-as hitherto they had largely been left to look after themselves. Cr Taverner, in closing the discussion. said that he had. no doubt that in 12 months the position would be much improved. The Mayor. Mr Cameron, and Crs Smith. Armitage, Sidey, Barnes. N. D. Anderson, Jolly, and Hayward were also present.