BURDEN ON RATES

Timaru Herald, Volume CLV, Issue 22791, 15 January 1944, Page 4

BURDEN ON RATES

Shortening Of Loan*

Report By Town Clerk

Reference to a doubt which may mave crossed the minds of Timaru Borough councillors whether they had not gone rather far in the direction of shortening loans and theretorisked the imposition of too great a burden on the rates, was made by the Town Clerk (Mr E. A. S. Killick) in his report on the proposed loan of £70.000 for street improvements. “I have Investigated this matter." stated Mr Killick. “and find that when I took up my duties 15 years ago the annual amount of loan interest and capital repayments was £33.764—it is now £34.125—an increase of only £361 per annum, with this however. that in 1929 only £11.281 of the amount was for loan repayment and £22.483 for interest, whereas to-day it is £21,027 for loan repayment and only £13.098 for interest. In 1929 we were paying interest on some of our loans as high as 6 per cent., while sinking fund provision was as low- as J per cent., and something of course had to be done about it. Now that interest rates are low- the term of the loan is not so vital though, of course, it is desirable to get out of debt as early as reasonably possible. • “I have taken the rate of interest as 31 per cent. I think there is no doubt that we could raise the first £5OOO now at 3 per cent., but I can give no idea of whether w-e could raise the final £20.000 four years later at 3 per cent. I think it is, therefore, better to obtain authority from the Loans Board and the ratepavers to raise the money at 31 per cent’ but to endeavour to dispose of it at 3 ner cent if possible. The Minister of Finance has power to vary the fate of interest on any unraised portion of the loan, and it might, therefore, be argued that we should ask authority in the first instance to raise the loan at 3 per cent, and then, if we do not succeed in disposing of it at such rate, io apply for authority to Increase the rate of interest. I do not recommend that such a course be followed. We should ask the ratepayers to approve the rate that we consider we mav have to pay and not afterw-ards go to the Minister for authority to increase the rate.”