THE CITY FINANCES.

Colonist, Volume LI, Issue 12501, 30 March 1909, Page 2

THE CITY FINANCES.

m* SPECIAL MEETING OF THE COUNCIL. COUNCILLOR HAMPSON'S - SCHEME. REFERRED TO THE FINANCE COMMITTEE. A special meeting of the City Council was held last night to consider the question of placing the finances of the city oil a proper basis, in the terms of yy. Hampson' s resolution carried at last meeting, and to discuss the proposal of that gentleman to raise a consolidating loan of £200,000. Details of the scheme have already appeared in these columns. There were present: The Mayor (Mr J. Piper),. and Councillors. W. K. Turner, J. D. Robertson, T. Pettit, Wm. McConchie, A. A. Grace, W. S, Hampson, A. H. Bis-ley,-and T. A. Field. In opening the debate, Cr. Hampson spoke to the following effect :— I do not think I need waste time proving , to this Council that the time has arrived, and in fact is long since past, when a radical change should be made in the conduct of our city finances. A glance at tlie city's banking account for the past ten j-ears will show that ' we have been floundering along "in a i haphazard fashion, and year after I year getting deeper into the mire I kay^S increased our 'overdraft from ' £d 584 to something like £19,000, apart from the sums which have been voted for special purposes by the ratepayers amounting to £89,250. The total debtA of the city at the 31st March, 1899, was £48,484; while now it is, rough ly, £150,000, after allowing for accrued sinking funds. I think you will agree with me that it is time to caira halt, review the position thoughtfully, and see whether or not it is possible to establish a sound system of finance by permanently bringing the income and expenditure of the -city.withm measurable distance of each other. This can be done only in three ways as far as I can see i— (lst ) 1 By considerably- increasing the taxation, so as to provide sufficient funds to_meet the city's needs, and to'p'ro- ■ vide a surplus to gradually decrease ' it* floating liabilities ; (2nd!) to prac- • tically stop improvements in all deP o rtments, and keep the expenditure ■ well within the limits of the income, so as to have a surplus each j'ear to Z wards our floating liabilities: (3rd ) by borrowing BtiU further upon the oest terms, and at lowest rates, suffi- ■ ciently to complete all the required ■ permanent improvements in the city s . rest its finances, and by means of a 1 sink'ng fund gradually reduce the ' city's indebtedness. lam sure that the hrst proposition will not meet with the approval of the ratepayers. During the past five years the rates have L-een gradually increasing, until a 3s 4-i rate is the lowest that can safely be considered by the incoming Council, and I feel certain that any excess upon this will be resisted by:the majority of the ratepayers. Secondly, can >. the Council reduce its expenditure in . any department at the present time, i without doing serious injury to the i city. Considerable expenditure must be faced on streets and bridges, and ■ new water reticulation must be seriously considered in the face of the weaknesses exposed by the additional pressure from the new weir. We shall be told that all this can be done piecemeal, and over a series of years, but I hold that this is the policy that has i been fatal during the past few years to Nelson. I hold that the time has . come when the greatest' economy to the city is to plan your work, count ; the cost, raise the money, and take a 1 peiiod of rest, which brings me to my i third proposition, viz., to put the finances of the city, in order, get per- . 'mission from the ratepayers to borrow a sufficient sum to put the city in permanent repair for years to come, and the scheme which I submit to you tonight, is one that will enable all this to ho done. I have shown you that the present indebtedness of the city is £152,150, bearing interest to the amount of £6923, or„an average of £4 ■ lis per cent per annum. To fund this at 4 per cent per annum would absorb about £157,000 of the new bonds, requiring a yearly, charge of £6280, so that the saving upon this transaction alone would be about £643 per annum. My proposal ,is to float a loan in London with a quotation upon the London Stock Exchange of £200,000, but at the present^ juncture only to issue £175,000. Upon my calculation, which I think is a liberal one, we should require about £157,000 to liquidate the present liabilities of the city, leaving : £18,000 for general permanent improvements spread over, say, the next two or three j'ears. I estimate that it would form and make in a' permanent manner 20 to 25 miles of streets, place ou:: bridges either by renewal or repair in first-class condition, and reticulate "our water supply. In the meantime it would place the Council in a position to complete the drainage connections by loaning ti -those who require sums spread over, say, two to five years, repayable in quarterly instalments under the Municipal Corporations Act, 1908. In place of the present overdraft, which in. the face of possibilities is a constant menace, liable to be called in, or the (nterest rate increased at anj time, the ratepayers would have at 'command to meet any urgent necessity- £2500 worth of 4 per cent bonds, that could be realised at a few days notice at an 3' time after the ratepayers" had sanctioned the same. It would also. enable the Council to place all their accounts on an absolutely independent footing. I have allowed liboral margins for expenditure in every case, the only deductions being streets and footpaths. I have the authority of the City Engineer for saying that if such an expenditure upon the streets was undertaken as proposed, in a pudicious manner, the allocation of £1500 per year would be ample for the next eight or ten. years to keep clean, renew and repair streets and footpaths in the suburbsrr*ln estimating receipts, the only amount that requires any explanation, is the proposed allocation of £2000 per annum from the gas : account, or say 5. per cent upon its valuation, which is in the neighbourhood, of £40,000, and if the gas works revenue cannot afford to pay 5 per cent upou the capital invested in them the sooner we sell them to a company that can run them more Erofitably the better. But I- know from gures at command that this account will not only do this, but provide a further sum amply sufficient for renewals and depreciations of plant, and I ■ believe a reduction in the price of gas.: In conclusion, I* am confident if niy scheme is carried put it .will be an immense boon to the city. My .figures a show a surplus of over £700 per annum, and in addition, I believe, that from the water account there will be' a considerably higher revenue than my estimate, which is. based upon the revenue of 1907^8,' before the new bylaws wereenforced. Some ratepayers fear that if the present overdraft is paid off it will only induce other Councils to pile up another, and in the face , of past experience I can hardly blame them. To remedy this, I would sugjgest a by-law prohibiting- any Council . from . borrowing, by way of overdraft, any more money in one year than its rates accruing. in that year. Then at ; thi end of any financial year the Bank ; overdraft could not exceed the rates ■ in arrears for that year. , Cr. Hampson then moved that the principle of funding the city's indebtedness be . affirmed ; that the details proposed be submitted to the Finance Committee for consideration; and that the Committee place a scheme : , before the Council. . . Cr Grace seconded, the"motion. He said he had listened to Cr. Hampson' s ( speech with great interest. Although ] he was .not in agreement with Cr. i Hampson^ on all points, he had heard ) an elucidation of accounts ,by a prof es- i sional man in such matters, and in l ] committee he thought they could pro- 1 duce a workable scheme. He thought ] the principle of funding the indebted- '. ness was, a sound one, and' if by doing .< so they could get. cheaper money it 1 would be good business. The question i was how mnch theyshould raise. Per- i sonallyf he thought was I rather a large sum v He did not think t for an instant that they need consider i

the suggestion to raise money for loan » Ii r rfc? c ? a -' erS for drainage purposes. All that was needed for that purposo could come oiit of the general account, lhe scheme should be considered in all could be devised it would greatly lightenthe work of future Councils. S could £ £ . .tvh ° v f ht . scheme coum be devised to improve tho fi nances, but he was notaltogether in favour of the present one. He Tues turned if bondholders would consent hJ:r S °^ P^ ia S-oS of loans S had a long time to run. Or. lettit favoured sendine tlm ™?fr c 1° . the , committee. It^aTl Sdered^ t^ X™** ««3W that the debt went up. Prior to WW they could notdo £ Se np A g e^v\?cU' U t°e nS Md stiinnVbad posS 1J and th e^r a ! T-uZ WaS - res P°nsible for it. Cr Hampson seemed to think that +& gas works account had never b^nt credit, but that was not so Th?U St rt c ace .? unt wou] d 4e in vater'accJunt^Th? V" 9 "^ the "" me gas and water ouesions 4<= *jses , t __s_s : ?s s S' f °? tliink tne people Sf„f» t ?S* <1 no ' iK_i_?*'?S-_'__fi* gerous position,, but they hatf ™*_ «i_ councils. When only a thirH „f Spv^T "° rS Wellt ° v * eveS yeaf nnf y ° P ! m a S°°d position. He did not want any finance now and ht would oppose the scheme ' dhe nf>L i.?" 1 * ,quostioiied the accuracy of the Mayor's remarks regarding extravagance in contracts. The?™ said that since k st year thfe Jfe had gone up from £14,000 to £1900? S\? cn ° d the ? ¥ d ™ contracts bpf„ la 7° r replled that £4000 had Cr ffi? rep f ir f, the uew ' da ™ case!* 1S was not the the Mayor that the present system of election was not as. good as the eld theVwJ° mtroducni g Proposals as the Council was going out of office, he thought that a retiring Council va_ fir mi !i h better i? osition to go into finance, than a new Council, which had to gam experience. He had not brought up thenroposal with the idea that it would be accepted in all its details but he thought something acceptable could be evolved from it He agreed that the gas account was going to do well this year, but expenditure would be necessary there; for one thing a new gasholder would be required very soon. As far as the bondholders were concerned, they were getting something infinitely bettev than they had now... They- would have bonds that would have a value oh the London Stock Exchange, and that they would not have toliawk all over New Zealand if they wished to sell, lhe scheme was no new one. Dunedin and Auckland had done theh same i *?,?' and llad S ot a premium of ten shillings. Even if they only funded their present loans they would save money. About 25 years ago Napier funded its indebtedness of £50,000, and to-day had in its sinking funds between £17,000 and £18,000, winch was .money saved. The motion was carried on the fol-lowing-division :— Ayes (5) : Crs. Field, Pettit, Bisley, Hampson and. Grace. Noes. (4) : The Mayor, and Crs. Turner, Robertson, and McConchie.