LOAN CONSOLIDATION

Taranaki Daily News, 11 September 1935, Page 10

LOAN CONSOLIDATION

INGLEWOOD CONVERSION COUNTY COUNCIL’S DISCUSSION. SOUTH RIDING COMPENSATION. RIDING ACCOUNTS TO BE RETAINED The Inglewood County Council’s loans are to be converted and consolidated, the annual charges to be paid out of the general ‘county fund. This decisionjwas arrived at by the council yesterday after a lengthy discussion on the alternative proposals of converting and consolidating on either a county or a riding basis. As compensation . for the ratepayers of the south riding who will have to pay . a heavier share of the charges under t’hc county consolidation than under the riding basis, the council decided to make the upkeep of Tariki Road from Junction Road to the Ratapiko school and Kaimata South Road charges on the county fund. These charges have hitherto been borne by the riding ratepayers, who, it is thought, will be relieved of an. amount about equal to the extra loan charges. The question of abolishing riding accounts was also discussed at length, but it was decided to continue keeping these accounts.

There were present Crs. A. Corkill (chairman), J. Hunter, G. W. Gibson, J. Stachurski, H. Jones, E. A. Grigg, J. Grieve, W. N. Wiilans and J. F. Duschenskl.

The loan conversion proposals had been before the council on several occasions, said the chairman. The main feature was that there would be an annual saving of £llOO. It did not matter .what scheme of conversion was adopted, it would not work out perhaps quite fairly to every ratepayer, but with the saving in fhe annual interest payment 'and the possibility of a further reduction in the general rate next year/no ope would be asked to pay more in rates than had been the case in the past. The councillors were the trustees pf the ratepayers, and it was their duty therefore to do the best they could in the interests of all concerned. Some years ago the settlers of various districts raised money to metal roads to give them access, and the roads were seldom used except by the settlers themselves. Now those roads were all linked, up by a chain of roads and were carrying a lot of traffic, including lorries collecting cream and bobby calves, pnd delivering fertilisers, etc., that were using them as short cuts. By these reading facilities the cost of cartage to the settlers had been considerably reduced, in some cases over 100 per cent. Councillors therefore had now to view the position from a vastly different angle. Until the settlers on Bristol Road had raised a loan and’ built a costly concrete bridge over the Manganui River it had not been possible for the Taranaki County Council to send its road-making machinery out to the backblocks, as the wooden bridges on the main road were not able to carry them. Thus with the advent of facilities settlers derived other benefits. Cr. Corkill moved that steps be taken by the council to convert its loans, and that in future the annual loan charges be paid out of the county general fund. This was seconded by Cr. G. W. Gibson. TREASURER’S REPORT. The county treasurer, Mr.. H. W. Martin, in the course of a comprehensive statement, said the public debt at March 31 was £64,853 2s Bd. Assuming that conversion was effected resulting in a saving of approximately £llOO per anpum for 30 years, or £33,000 to the county as a whole, the question that chiefly interested councillors was the future incidence of rating to cover loan charges. Eor practical purposes conversion would leave only two courses: (a) Levying a uniform flat rate over the whole of the county; (b) levying a differential rate in ridings so that community of interest and sharing of taxation burdens was considered to begin and end in ridings. It was also possible, but not practicable, to convert and consolidate special loans and allow the present special rates to remain after conversion and to be paid to the consolidated interest account. That would involve no alteration in the present incidence of rating for the first few years, but would do so later on. Furthermore, certain very serious difficulties would arise as loans matured, Certain existing loans would ordinarily mature after expjry of the replacing conversion loans, and the law did not allow the collection of a special rate when the loan was paid off. While retaining- the present- incidence of rating for only a few years, the general account would eventually contribute a large sum for the benefit of special ratepayers, Thus the original intention of preserving the equity of the present special rating area system could not be adhered to. On the other hand, new special loans raised from time to time would perpetuate the system, and complete lack of uniformity would result. The old special rating area system had already, outlived its usefulness, and its defects would become more apparent. Due to the growth of motor transport, reading finance definitely required a broader viewpoint from that which suited 30 years ago. .The uniform rate had everything to commend it, provided, however, that undue fluctuations in the incidence of special rates and general rates were not brought about. A differential rate would cause fairly wide fluctuations to rate-

payers in the incidence of special rates, e.g., the differential special rate over the east, riding would approximate lid in the £1 Unimproved value, and in the north, west and south.. ridings 1.16/100d, 1.6/100d and id respectively. Under either scheme of consolidation of rating the effect would be that the main roads ratepayer and those others who had raised and paid off their special loans would now help the back country settlei whose special Joans had some time to run. Certain anomalies could not be avoided, but the majority of ratepayers would benefit and it was the interest of the general body of ratepayers that should be considered. In any case, many anomalies in rating did exist under the present system. The largest fluctuations as between ratepayers would arise by converting in ridings on a differential basis, e.g., east riding ratepayers not subjected to special rates at present would pay a differential special rate of nearly lid. _ Special ratepayers on Aiutawa and Pita Roads 3d, Otaraoa Road sd, Oapui Road 21d, would benefit. A similar position would arise in the north and west ridings. By converting on a uniform basis the flat special rate over the whole county would be 7-Bd, or less, depending on the degree of extension of maturity date of the consolidating loan. Obviously the uniform rate was preferable, provided, however, that the south riding was compensated for the heavier special rate. The east riding' would receive considerably greater benefit than either the north or west ridings, but as east riding accounted for only l-14th of the total county valuation,, such benefit did . not affect the wealthier' ridings to any extent. The charges for both differential and unifpfm rating would be as follows: — North Riding:—Unimproved rateable value, £143,104; total special rates, £693 10s; differential rate, 1 16-100 d; cost per £lOOO unimproved value, £4 16s 8d; uniform rate, 88-100 d; cost per £lOOO unimproved value, £3 13s; decrease on uniform rate, 28-100 d. South riding: £229,688, £4BO 16s sd, id, £2 Is Bd, uniform rate 88-100 d, £3 13s, 38-100 d (increase). East riding: £41,448, £169 13s 7d, 1 48-IOOd, £6 3s 4d, 88-100 d, £3 13s, 60-100 d. West riding: £232,962, £1035 2s, 1 6-100 d, £4 8s ’4d, 88-100 d, £3 13s, 18-100 d. The compensation required by the south riding to reduce the general rate was £349 per annum and might be given by charging to the general account certain south riding roads and any bridges over 20ft. in span. Over the past three years the maintenance of Tariki, Ratapiko and Kaimata Roads have averaged £276, £l3O and £B6 per annum respectively, a total average per annum of £492. The prospect of a £1 for £1 subsidy out of petrol taxation on those roads would reduce the value of the benefit, but if so Norfolk or Durham Roads could be taken over by general account. The adoptiofi of the uniform rate with toe adjustments would keep at a minimum fluctuations in rates as between individual ratepayers. The fluctuations were rather severe on the comparatively few ■ ratepayers not subject to special rates, chiefly those fronting the main highways. These ' ratepayers, however, had long enjoyed advantages denied to those on the side roads. The back country man had always felt he had paid more than his fair share of the total rating burden considering the benefits he had received. Valuations seemed to be based more on the productive capacity of the land than on proximity to town and railway. The suggested declaration of main county roads and bridges should reduce the general rate so. that the nett flat special rate in the south riding would flot cost more than the M in £1 or £2 Is 8d per £lOOO unimproved value. The cost of average road maintenance in the various ridings over the past six years was as follows:—North £697, necessitating a rate of 1 16-100 d in £1; south £1152, 1 20-100 d; east £236, 1 36-100 d; west £1143, 1 17-100 d. The average cost over all ridings had been .1 19-100 d in £l, the higher east riding figure being relatively important when spread over the whole county. RIDING ABOLITION SUGGESTED. The declaration of main roads and the consolidation of special rates into one uniform rate over the whole county was a step towards the new policy of abolishing riding accounts, and as that measure was so intimately connected with the question of conversion and consolidation of loans, he drew attention to aspects of both matters. If the council levied the uniform rate he would Very strongly . suggest _ the abolition' of ridings; Abolition "of riding accounts should tend to assist economical 'administration' by making funds available where most needed at the time. The recent' flood daipage' affected the west riding principally but "was. there any really good reason why community of interest should be considered to begin and end at the riding boundary, Mountain Road? Two years ago ratepayers on the north side of Junction Road paying 3d in £1 general rate, while on the south side they were paying 21d. There did not appear to be any strong reasons for not taking the broader view and administering the county as a whole and thus spreading any extraordinary burden such, as floods. The burden so spread over' a large number did not have the crippling effect on ratepayers as if confined to a comparative few. Community

of interest was considered to exist at present in regard to the items chargeable to general account so that the purely arbitrary boundaries between ridings could be eliminated and thus clarify the whole outlook on the administration of the county. Riding expenditure was not now entirely for the benefit of ratepayers living within the riding boundaries. The change over to motor transport had completely altered the outlook. To-day, practically all the important roads in the county were metalled and were available for and used by both internal and external traffic. Under the proposed system the council’s share of the cost of all road works, maintenance and construction, would be a charge on the general account. FUTURE LOANS POSSIBLE. A further reason was that if in future having adopted a uniform rate the council raised loans under the new legislation which allowed the dispensing. with polls of ratepayers and charging the Interest and' principal to general account, the riding so benefiting from the expenditure of the loan money would have an unfair advantage over another riding which carried out new works out of its own general rate revenue. In the event of consolidating special rates the council was completely changing the existing order of loan finance and departing from the previous policy of making settlers pay for road improvements, In changing the financial policy relating to capital" charges of roads, to be consistent it was advisable to similarly change the policy relating to the maintenance- charges, ,as. capital .and maintenance charges were complementary and inseparable. If riding accounts were abolished the riding boundaries would exist for electoral purposes only. The outstanding advantages to be gamed from the abolition of riding accounts werp:— . , , , The advantages which had accrued more to some ridings than to others since the inception of the main highways and main roads system would be more evenly distributed. . Provision for adequate maintenance ot all roads in order of urgency would be made in each year’s estimates. Complete uniformity of rating for cost of‘maintenance and construction of roads and bridges and cost of loan charges would place ratepayers on an equitable footing in accordance with the valuation of their respective properties. Reverting to the conversion of loans and the suggested levy of a uniform special rate it should be noticed there was provision to consolidate the security rate for any non-convertible loans otherwise an inequitable position would arise. Nonconvertible securities were the Win, Oapui, Wortley, Upland North, Egmont North No. 2, Bristol West, Maunganui, Durham West and Ratapiko No. 3, loans totalling £6262. Inscribed loans totalling £1165 18s on Surrey No. 2, Lincoln West and North, Motukawa No. 2, Mana and Egmont North No.. 1, expired on February T, 1936, and were not included. The saving to the general body of ratepayers of conversion was £1075 per annum, based on a 30 years term. The annual charges prior to March 31, 1933, were £4302 10s 7d and at present (receiving 20 per cent, reduction) they were £3833 17s lid. On conversion they would be £3227. The extra saving by effecting conversion was £607. . There were also the charges totalling £286 6s lOd on nonconvertible .securities. The gross debt service upon consolidation would amount to £3513 per annum. A rate in £1 of of 1.43-100 d would be required providing interest on main roads and all other loan charges were paid out of the general account. Of the sinking funds £6030 was to be u=ed towards redeeming £29,685 securities owned by the Public Trustee. New securities would then be issued to the Public Trustee as a premium. Other debenture loans held by the general public (£3074 10s 6d) were replaced by conversion securities, the premiums required being paid out of sinking funds. State Advances loans amounting to £26,246 2s would be replaced by new debentures increased by the premium. The new conversion loan could be kept at the round figure of £54,400. The old system of accumulating a sinking fund for replacement of loans on expiry in 20 or 30 years time had not proved a success. The earning capacity of the fund could not be relied upon throughout such a long period, and upon maturity refinancing had to' be resorted to. The council' now had the opportunity qf putting eventual redemption of all loans on a secure basis.. He mentioned the main roads loan,'Where, the sinking fund for the first issue of £5OOO dqe in 1948 would have ■ produced ' only £4236 on maturity. Somewhat similar results would have appeared on expiry of other issues owing to the '-educed earning power of the funds ancj the insufficient rate Originally fixed. The sinking fund was still retained but th- balance thereon was not allowed to exceed £lOO at any time,' instalments being paid out to redeem the debt and thus earn the same rate of interest payable on the loans.

Mr. Martin recommended the adoption of the scheme of complete consolidation of all rates struck for loan charges and the substitution of a uniform rate over the whole county coupled with the abolition of ridings. ’ This had the advantages of being sound inasmuch as provision was made for the definite redemption of debt on maturity and-further, the

additional reduction of £6OO per annum, bringing the gross saving to the general body of ratepayers up to £llOO per annum. NOT FAIR TO SOUTH RIDING. Cr. Grieve said it was a pity they did not have the clerk’s. statennent two oi three days before the meeting to study it. ~ Cr. Jones said that he would never agree to abolish the, riding accounts. While it might be more convenient to convert on a county basis, he considered that would not be fair to the south riding. He recognised that it was suggested by the present council that the riding should be compensated, but some future council might rescind that. ■ / Cr. Gibson considered that was a good reason for the consolidation on a county basis. Cr. Wiilans did hot see how the con* solidation of the loans and the abolition of the ridings would benefit the south riding. With the county in one riding it would not be possible to compensate the south riding. The clerk pointed out that there was the broad principle of county finance to consider. Why, for instance,, should the west riding have to meet the: whole cost of the flood damage? Cr. Wiilans said that was extraordinary damage. He agreed that a uniform rate over the whole county' was advis-. able, but if the riding , accounts were pooled it would not be possible to com-, pensate the riding by . declaring additional county roads, as all the roads would be county roads, Cr. Hunter said that the south riding had been fortunate in the past in having most of its bridges built out -of county funds, whereas in the north riding the Bristol Road bridge, built out of a district special loan, carried a lot of heavy traffic. The south riding also had the benefit of main roads. He admitted that the north riding also now had the benefit of some main roads, but at the same time its settlers had to meet .heavy charges for roads constructed out of district loans. Cr. Jones said the majority of ratepayers in the south riding would have to pay more rates. He therefore did not agree with the proposition that ratepayers in the south riding, who had paid off their loans, should be asked to pay for roads in other ridings. He was certainly not going to stand in the way of an annual saving of £llOO. The question of conversion should be put separately and not coupled with that of ridings. The chairman said that the two questions went hand in hand, especially if the council were to levy a uniform flat rate to meet the charges. Cr. Wiilans suggested that instead of striking a uniform rate the rate in the south riding should be struck at a halfpenny less than the other ridings. The clerk said the rate must either be struck on a basis uniform over the whole county or differential over each riding. BENEFITS OF POOL BASIS. The clerk said, the south riding roads were more expensive to maintain than those of the other ridings. The south riding, therefore, would benefit in that respect on a pooling basis. The engineer: I think what you lose on the slides you •’ make up on the roundabout. . . The south riding ratepayers were now paying -Id special rate for loans, remarked Cr. Jones, and it was now proposed to charge them another farthing to pay for the other fellows’. The chairman said the south riding would get the benefit of £4OO of the saving -of £llOO. The south riding represented 35 per cent, of the total valuation of the county and would therefore receive 35 per cent, of the savings. In addition to the savings in any of its own special loans there would also be its share of the saving on the general county work. ■ Mr. Martin: The south riding will be definitely better off under consolidation. Cr. Wiilans: Yes, but other ridings will be - better off still at the expense of the south riding, and that is what we want to offset. A councillor pointed out that there had been considerable expenditure of county funds in the south riding. The riding could not both have its cake and eat it. II should now try and help the other ridings. ’ " . Cr. Jones asked whether the south riding was the only one to be penalised. •Cr. Huriter pointed out that the bulk of the-bridge loan raised fiy the Tatar naki county: had been spent ip the south riding on Mountain and Tariki -roads. / The Manganui .and Mangaotea bridges wqre actually the only two constructed out of loan money in the south' riding, said Cr. Wiilans.’ Cr. '.Gibson ‘considered that it".was a good' move to cdhsolidate on a county basis. Everyone was now getting the benefit from roads that were originally only used by the settlers for whom they were constructed. Ratepayers had secured considerable benefit in. the shape of reduced costs of cream carting, etc. Consolidation of ridings would come sooner or later, and he thought the council should face it now.

“I am not opposed to conversion,” said Cr. Wiilans, “but the south riding should have some compensation.” “Can you suggest any way?” asked the chairman.

“Well, it has been suggested in the cleric’s report that further county roads should be declared,” replied Cr. WilThe chairman pointed out that the Hawera County Council had abolished ridings with satisfactory results so far. Referring to the metalling of Tariki Road, the chairman said that expensive earthwork would first be required. A mile of the Razorback on Tariki Road from Junction Road could be. metalled perhaps, said Cr. Jones, but he added that metallifig the other portion would perhaps entail heavy expenditure on maintenance. The other would have to contribute towards that, said a councillor. Crs. Gregg and Stachurski considered that Tariki Road should be metalled right through and declared a main highway. It would carry a lot of traffic from thq south to Tarata and would also provide a round trip for the cream lorry. Justice could be done to the south riding by raising a county loan and expending the money in. the south riding, remarked the clerk. At present there was a limit of £lOOO on the. amount of loan money that could be raised at one ■time. . . ■ ■, ' “I am most concerned that the rate should not .be increased,” said Cr. Jones. The rate would be definitely decreased under consolidation, said the chairmap. < It would be awkward to explain to the ratepayers of the south riding why their late had not decreased more, said Cr. Jones. Cr.' Jones suggested that the resolution should be put in two sections, and this course was adopted. A resolution was then carried • deciding to convert the loans and pay the annual charges out of the. general fund. Cr. Stachurski asked .whether councillors who were interested could vote, as he noticed that point had been raised by Cp. Sheat at the Egmont county meeting. . . . The clerk expressed the opinion that councillors were not debarred. The chairman said that if any members objected to the abolition of riding accounts the majority should not force the position. Whatever was done should be done amicably and fairly. Cr. Wiilans: You desire that the council should be unanimous. UNANIMITY DESIRED. The chairman: That is what I would like. It is an important matter of which we do not know, what the results would be. - . Cr. Jones moved that the riding accounts. be retained and that it be placed definitely on record that the sdiith riding be compensated as suggested for agreeing to the pooling of the loan proposals. He thought that it should be left on record that Tariki, Ratapiko and Kaimata South roads were to be declared county roads. There were one or two difficulties in the way, said Cr. Wiilans in seconding. What would be the position, he said, if later on Tariki Road were declared a secondary highway, so that the south riding would thus lose part of its compensation. The chairman pointed out that if the I road were declared a secondary highway it would be subject to a subsidy of £3 'for £l. Three-quarters of the expenditure on the road would be refunded to the general account, so that the whole'county would benefit. He did not think Cr. Wiilans should “split straws.” Cr. Wiilans said that it was. also necessary to make sure that the proposals 'were not altered by a future council. Cr. Stachurski favoured declaring Tariki Road as far as the school and Kaimata South Road as country roads. Cr. Wiilans said that if the council decided to abolish riding accounts in the near future the south riding would be left in a hole as far as compensation was concerned. He would not mind if the riding accounts were abolished after, say, 15 years. The chairman said that from the discussion that day he rather thought that tlie council might abolish riding accounts next year. Cr. Jones said he would rather see Tariki Road left out than the Kaimata South Road. The engineer: Kaimata South Road is one of the hardest roads to maintain. KAIMATA ROAD TRAFFIC. Cr. Stachurski said . that even if . the Tariki Road wei‘e rhetalled the Kaimata South Road would still have to .carry j a lot of heavy traffic frqm the Ratapiko district as Well as round trip traffic. The chairman . considered . that when Tariki Road was metalled heavy through traffic would develop from Stratfdrd t<? the saleyards at Tarata as well as to Purahgi and Matau. ‘ ■ • Cr. Hunter considered that the. proposal would' give the south' - ridifig too great an advantage, as compared, with ratepayers -on the north side of Junction Road and the west side of Mountain Road. The upkeep of Tarjki and Kai'mata roads was a big part of the south : riding expenditure. The riding would be fairly treated if Tariki Road and the Ratapiko Road from Tariki Road to the school were declared county roads. In the future the ‘south riding would be able to strike a lower general rate. That was the object of the scheme, said Cr. Wiilans. The riding by striking a lower general rate was to be compen-

sated for having to pay s higher special rate under the consolidation scheme. The question of advantage could be ' reviewed from time to time, stated the chairman. He pointed out that there were only three members in the- riding and, if they were getting an undue advantage, the council could always outvote them. He did not think that there was anything to be gained by an amendment. Cr. Stachurski wondered what the west riding was going to get.' He considered Kaimata Road North and Bristol Road for a mile to its junction with the Everett Road should be declared a county road. Tourist traffic from Ratapikq and Tarata districts used that route to the Everett Road reserve.

The chairman: You would then upset the average we are trying to arrive at. Cr. Willans: Cr. Stachurski must real-' ise that under the pooling scheme the south riding is going to help the north riding in-the payment of its special rates to the extent of 28/100d, or practically 1-3 of a penny. ■