THE OAMARU DEFAULT.

Otago Witness, Issue 1966, 29 October 1891, Page 15

THE OAMARU DEFAULT.

♦ (Per Pbess Association.)

London, October 21. The Oamaru Harbour Board debentures are now quoted at 60. ! The Financial News says that the Harbour Board engaged upon works that were quite beyond the needs of the district's business, and that this was done in the true colonial way. October 22. On the default of the Oamaru Harbour Board * being announced the Wanganui Harbour Board stock fell 3£ per cent. The Financial Times denounces New Zealand for taking outsiders' capital when payment of interest was hampered by the labour troubles. The Financial Times contains a scathing article on the failure of the Oamaru Harbour Board to meet its engagements. October 24. The Economist < says that the Oamaru Harbour Board bondholders contracted for the loan with their eyes wide open, and at a high rate of interest to compensate them for the risk they ran. October 26. The Australian Trading World urges the exchange of the Oamaru Harbour Board's bonds for Government stock, on the ground that the railways have destroyed the revenue of the board. The former Oamaru loan has fallen 3 per cent.

Replying to a depntation from the Oamarn Harbour Board, the Premier said that although he deplored the Railway Commissioners' apparent policy of making the railways pay at the expense of local bodies, still were the board to represent the matter fully to the Government be would do all he possibly could in the interests of the board. The M >il states that the only loan in connection with which there is a probability of default being made in the payment of interest is the second loan of £100,000, which was borrowed at 6 per cent. ; and the board fully explained this and the whole of their circumstances in their communication to the bondholders, which has just reached them, and which has given rise to the present excitement. No difficulty is anticipated with the other loans. It may be explained that the security offered in connection with that loan waß the Burplus receipts after paying interest on prior loans. The surplus is insufficient to pay the interest on the last loan of £100,000, hence the prospective dafanlt. The North Ofcago Times gives the following as tha position of the Oamaru Harbour Board :— Under an act of 1874 the Oamaru Harbour Board borrowed the sum of £100,000 on the security of the lands held by the board and the rents, dues, &c, coming to the board. By an act of 1878 and an amendment act of 1879 the board was empowered to borrow a further sum of £100,000, the security b:ing the same as for the previous loan. The stcoud loan was therefore in the naturo of a second mortgage, and it is on this loan that tbe board has defaulted. By an act of 1882 tbe board was authorised to borrow the sum of £50,000 for harbour improvements on the security of a rate of 6d in the pound on the rateable value of the property in the harbour district; bub while this was done tbe ratepayers were distinctly told that only so much of tbe rate would be collected as would meet the interest on the loan. The interest od the loan is met by a3d rate, and there is, according to the value of the properties, usually a surplus of between £400 and £500, which is paid into the general fund. Thelastloan of £40,000, authorised by act in 1887, was>aieed on the security of a 3d rate, and from this rate there is a surplus of about £800. Thus the two rates produce a surplus of about £1300, which Is paid into the general fund. We mention this to show that the ratepayers have not been unmindful of their obligations. However, with regard to the rate cf6d, only one- half of which has been levied:, it is easy for Parliament, the Premier, and the Daily Times to tell the'board to txerciae its full rating power, but the board is mat by a legal difficulty. The amount raised by the rate is to be applied to a specific purpose, and if intended for any thing outside that purpose the ratepayers need not pay unless they choose to do so. We will at once admit that the ratepayers should meet their obligations, but an admission of this kind in any community would not, we are afraid, lead to the desired result unless there was legal force to back it up. In thi.i case, we believe, tho legal force could not be exercised, and. consequently ib would bo useless to attempt to levy a rate that could not be collected. Even if tbe board could and had " exercised its full rating powers," default would not have been averted, as owing to the disastrous season, the revenue of the board for the current year will show a shrinkage of close on £5000 compared with the previous year, which was also, owing to the indifferent harvest, not up to the average. Placed in a nutshell, the Oamaru Harbour Board would have to obtain the consent of the ratepayers before they conld levy and collect an additional rate, and another act of Parliament to legalise it. We may mention that with the exception of the £100,000 loan on wh ; ch default has been made, the interest on the others is fully covered by the rents, dues, rates, &c. pledged as security, and there is no probability of default being made in respeot to them. The Oamaru Harbour Board has come to financial grief through circumstances over which it has had no control, for who could have anticipated a disastrous season like the last one ? The board, with a desire to avoid defaulting, asked Parliament to give it certain powers so that money might be temporarily raised to pay its debts Parliament, however, refused to give it the powers asked for, and by its action forced toe board to default. Parliament blamed the

board for not exercising its full rating power, although, like the Premier, it did not tell the board how it was to get over the legal difficulty in the way of collecting the rate. The rate for the £50,000 loan was never intended to be levied and collected for the purpose of making up any deficiency in general revenue, and, according to the act, we believe this cannot be done ; so that instead of asking the Board to exercise its full rating powers, if these cheap advisers had given the board a similar power to that possessed by several other harbour boards nothing would have been heard of default.