PUBLIC BODY FUNDS

Poverty Bay Herald, Volume LIX, Issue 17909, 13 October 1932, Page 8

PUBLIC BODY FUNDS

KEEN INVESTING POLICY INNOVATION VINDICATED BIG GAINS IN INTEREST 'l'lie umiomieumeut from Wellington of tile introduction of legislation to protect the l’tihlie Trustee against claims lor the immediate repayment of moneys entrusted to his department by public bodies bas created tbe greatest interest Jit Gisborne, for two main reasons. 'Tbe first is that (lie course of withdrawing money from tbe l'ublic Trustee’s bands and placing it under control of private commissioners for investment was taken two years ago by (lie Harbor Board, and tbe second is that tbe Poverty Bay Electric Power Board is one o! tbe inilny public bodies which are desirous of following a. similar course with regard to their sinking funds. Incidentally, it is understood that in recent correspondence with various local bodies on tbe subject of invested sinking funds tbe Public Trustee bas emphasised the (ilaim that bv a clause in tbe standard agreement form signed by tbe owners of tbe funds in banding them to his department the reclamation of the money is barred for the period of the respective loans to which (lie funds apply. Those business men who have followed tbe public announcements on the. subject are now wondering whether the introduction of special legislation marks the Public Trustee’s surrender of this contention.

Whatever action Parliament may take on the legislation introduced to the House of Representatives yesterday, members of the Gisborne Harbor Board will find' ample reason for satisfaction in tbe position of the board's sinking funds. In April, 1930. tbe board decided to remove the funds then in the bands of the Public Trustee to the supervision of private commissioners, and in due course £24.CCO wa? transferred, koine tbe sinking fund for the 1914-1944 loan of £200.030. Later the dredge reserve was also transferred, tbe amount of I Ids fund being 'approximately £16.000. The steps mentioned above were the result of K tudy of tbe private sinking fund commissioners’ investments of the redemption moneys sol aside for the £760.000 loan, raised in 1923. the board agreeing in April of 1930 that if suiiaftle investments were shown to he available through ordinary business channels, yielding a rate of interest higher (ban find allowed by the Public Trustee at that time, the’ funds should he taken over for private administration. ■ SERVING MUTUAL NEEDS.

During the period in which the 191444 loan fund was being built up,-interest was paid by the Public. Trustee on the accumulating sums at a rate of 5i per tent. The dredge reserve was invested with the Public Trustee’s common fund, and interest was accumulating on this inoiiov at the rate of 4-A per cent. day the amounts of both tbe loan fund and the dredge reserve have been substantially added to by interest which averages about 5-J per cent., while other funds in the hands of the private commissioners bring the aggregate oi investments through this channel to £75,598, on the whole of which the board collects interest at air aveiage of 6§ per cent. ... It was by bringing into lme the investing needs of the Harbor Board and the borrowing needs of tbe Cook County Council that the sinking fund investment policy was solidly founded. The Harbor Board thought that it could do better in interest than the s)j per cent, allowed by the Public Trustee at tbe time, and the Cook Comity Council was hopeful ol borrowing at less than the 6 per cent, which was tlm ruling price in the open market at that juncture. The two bodies felt themselves, well served by an agreement which gave the County Council the right to take up funds set aside hv tbe Harbor Board as sinking funds, at a rate of 5J per cent. The Cook County saved at least 1 per cent., and the Harbor Board gained A per cent. By a system of investing in local bodies debentures, the Harbor Board commissioners were able to dispose of the whole of their funds to advantage, and to-day the hoard is reaping a substantial benefit. Moreover, the ratepayers of the harbor districts are gaining to some extent by a saving of interest on debentures issued liy the Cook County Council. ' ‘An important feature of the system ol investment is that the harbor commissioners have contrived to place all their moneys at interest immediately they are sot asi do l»v the hoard, and th.it airamrements have been made for the absorption of all funds available for a period of years ahead.