LOCAL BODY FINANCE

Poverty Bay Herald, Volume LX, Issue 18253, 23 November 1933, Page 10

LOCAL BODY FINANCE

INTEREST & CONVERSION AMENDMENTS TO ACT OVERSEAS BONDHOLDERS (Per Press Association.) WELLINGTON, last, night. Explaining the Local Authorities Interest Reduction and Loans Conversion Amendment Bill, which was introduced in the House of Representatives by Governor-General’s message and read a Jirst time, the El. Hon. J. G. Coates said it was primarily for the purpose of giving effect to promises made to London authorities that the principal Act, passed last session, would be amended in the direction of exempting from the reduction of 20 per cent in interest thereby imposed, and from conversion, any securities of local authorities which had been sold in London prior to July 1, 1933. The bill, in effect, provided that the reduction of 20 per cent should not apply in respect of any securities disposed of in London prior to July 1, nor should those securities be liable to conversion under the principal Act. The position that arose following the passing of the principal Act, had been that London purchasers in good faith had acquired securities of New Zealand local bodies, believing them to bear the rate of interest stated in the securities', and, in fact, some sales had been effected prior to the passing of the principal Act. The principal Act had provided that the reduction of 20 per cent would take effect from April 1, 1933, and would apply to securities, interest on which as at January 1, 1933, was paid ip. New Zealand. Certain securities having an optional place of payment had been attractive to buyers on the London market, and these sales had taken place, the purchaser subsequently finding that as from April 1 the reduction of 20 per cent had come into force. SIMPLIFYING PROCEDURE The bill, in addition to exempting such securities, provided that if, and when, any future interest was paid in New Zealand, a reduction of 20 per cent should apply to such payment, (but if the London domicile was again reverted to. the reduction should not be operative. Shortly after the passing of tno principal Act, said tlie Minister, it had become evident that certain amendments wore desirable if local bodies were to obtain the maximum benefit front conversion. First and foremost, special area loans had presentod some difficulty, in that such loans could not be consolidated on conversion, but each had to be treated separately. These special area loans were numerous, particularly in the case of rural local bodies, and in the case of some boroughs, and it was most desirable that every effort should be made to simplify the administration, and avoid the necessity for striking innumerable speeial rates over definite areas. Circumstances had changed since many special urea loans had been raised, in that 'the interests of the ratepayers in those small areas were now the interests of the whole district, and in many cases there was no .reason why those securities should not be over the whole district. The bill provided machinery whereby the consolidation of special area loans might, be arranged on conversion, and the indications were that advantage would be freely taken of the powers conferred on local bodies which powers were permissive only. PAYMENT OF PREMIUMS Continuing, the Minister said that many local bodies did not take kindly to the idea of •issuing premium debentures in denominations of £5, as bad been intended when the principal Act was passed. The bill provided machinery whereby local bodies might borrow on the market the aggregate amount of premiums payable on conversion by the issue of new securities in the usual denominations of £IOO or more. Such loan money would then be used for the payment of premiums to individual bondholders. On this same point, the bill provided that where any local authority had unexpended loan money on hand in respect of loans heretofore raised, that money might also be used for the payment of premiums in cash to existing debenture holders.

It had also been found in many cases that local authorities had assumed the liabilitv of other local authorities and had, in fact, taken over the whole loans raised. This had occurred more frequently in the case of electric power boards which had, in many cases, taken over electric, light loans on constituent local bodies. The principal Act had provided only for the conversion of securities by 'local authorities which had issued them, and it had been felt desirable to provide machinery to enable the local authority which had assumed the liability, to undertake the conversion of the loans in question. The remaining clauses of the bill were more or less of a machinery nature. “Perhaps I shoxild make it clear in conclusion," said the Minister, “that the bill has no reference whatever to the question of the payment of London loans in New Zealand currency or in sterling, that is a matter quite outside the scope of this amending bill.” LABOR MEMBERS SUSPICIOUS

Replying to interjections, the Minister said the bill made no provision with respect to local purchasers of local authority securities prior to thb passing of the principal Act. Mr. W. E. Parry (Lab., Auckland C.) : But you must look after the other fellow ? „

Mr. Coates : The good name of the Do. minion must ho maintained overseas

Mr. J. A. Lee (Lab., Grey Lynn) said he felt that the bill was not as innocent us it might appear. He suggested that it was to protect those people who had bought securities locally, and transferred them overseas in the course of the exchange speculation. “Why should they be protected?” be asked. “We have got to be more loyal to John Bull, who has just defaulted to America, than wo are to be to ourselves,” he added. Mr. H. G. R. Mason (Lab., Auckland Sub.) said it seemed to be fairly certain that some people had been rather smart, and, hud sold securities overseas by suppressing the truth, if not actually by making a false representation, and the country now had to make it up to the innocent purchaser. He asked why those individuals should not ho compelled to bear this burden instead of turning it into a dead loss to the country. Mr. F Langstone (Lab., Waimarino) said that surely Parliament was not going to protect people who had been speculating in exchange. Mr. R. McKeen (Lab., Wellington S.) asked whether the Minister had been in consultation with local bodies in regard to the bill, and whether he proposed to refer it to the Local Bills Commitce.