Local Bodies' Loans.

Star (Christchurch), Issue 5256, 11 May 1895, Page 7

Local Bodies' Loans.

(Prom the Lyttelton Times.)

Now that the rate oE interest on borrowed money has been permanently lowered, it is only natural that tbe public should desire to secure the ful) benefit of the change. The Advances to Settlers Act has, it is generally admitted, caused a drop of at least 1 per cent in the rate on good private securities, and the success of tbs Colonial Treasurer in floating a loan on tbe London market at 3 per cent has secured a reduction in the rate on moneys borrowed for colonial pnr poses. There is, however, another class of loans which should be affected by the supply of cheap monoy. "Wo refer to the loans of local governing bodies. Taking aB a basis the year 1893-4, wo find that at tho end of March, 1894, the local bodies of New Zealand had debentures and stock in circulation to the amount of £6,614,824. This huge sum was distributed as follows : —

Counties .£ll,OlO Boroughs 2,783,184 Town Boards 1,211 Road Boards 8,089 Saver Boards ... ... 45,880 Harbour Boards ... 3,610,450 Drainage Board ... 200,000

J5G,614,824

This amount, however, must be increased by .£550,364, to include the amount owing to the Government ur.dar the Q-overnznonfc Loans to Local Bodies Ac% 1886, and the repealed Boads and Budges Construction Act. Thia roiakafl a crand total at the date named of =£7,165,188 owing by tlie local bodies of the eo'.ony. The accrued sinking funds represented £432,880, and deducting theso from -tho gross total wo hs.ve a net indebtedness o£ £6732,308. The sum is a very largo one, aud forms an addition of about one- sixth to tbe bulk of the colonial debt of some forty millions. Taking it, however, on the basis of interest, it ig a much, greater increase of the burdens ot the colonists. The rates of intereat range from 4 to as high ae 8 per cent, about three millions being at 5, two and threequarter millions at 6, and £222,000 at 7 per cent. The average rate maybe roughly stated at 5| per cent, ana considering that the colony has just borrowed at about. .-S3 6a per.ceDt, it probably occurs to most of our readers tbat the payment of tbe former rate is an unnecessary burden upon tbo local bodies. In any case, the matter ia so pressing that something Bhould and must be done at an early date to relievo tbe taxpayers.

One of the most striking cases in the list of loeal bodies' loans is that oZ the Chrisfcchuvch Drainage Board. This bodv borrowed under legislative sanction "in 1877-8 .£200,000 for fifty years, at the then moderate bub now enormoua rate of 6 per cent, and in addition to thia high rate a sinking fund of 1 pßr cent was imposed. A rating power was granted over the rural districts as well as over the city. For a considerable time the city was able to bear the whole of the rate, but. as depression set in city properties decreased in value ; the expenditure on interest and maintenance increased ; and the Board waß compelled" to exerciße its power of rating tbe rural districts. Gradually the rate rose higher and higher, and now the Board finds itself in tbis position — it is compelled to levy tho maximum rate, not only on the city but also on the? suburban boroughs and the rural districts of Biccarton, Avon, Heathcote and Spreydon. It is scarcely a matter for surprise that there is in the rural districts a general feeling of bitterness and irritation regarding a drainage rate collected under such circumstances, and that farmers, dairymen and fruitgrowers are incensed at finding their properties depreciated by a drainage tax from which they have never received one penny of benefit, while the drains along thair own f rontageß are left unimproved. We must admit that for a numbar of yeara th© Drainage Board endeavoured to minimise tho burden by not Betting aside the linking fund. This was done with the tacit consent of the bondholders, or, at any rate, none of them objected. Bat a private action having been brought by a resident of Heathcote against the Board, it was ordered by the Supreme Court to maintain its sinking fund accretions, with the result that the rates had to be increased by about a year. As the city was already rated up to the maximum provided by the Aot, this increased burden was thrown upon the rural districts. To show the extent of the burden, we may state that the rate levied by the Drainage Board for 1894 amounted to £19,046, and that of this sum only were spent on works and charges, while the interest and sinking fund (and the charges connected therewith) amounted to .£14,515. Were this tax reduced by the abolition of the sinking fund and the lowering of the rate of interest to 4 por cent, a saving of some JBSOOO a year would be effected. Such a sum taken off the annual burdens of the taxpayers would at once improve the j value of all landed property in the j district.

Of course, relief is to be obtained only by conversion of the loans into longer-dated ones at a lower rate of interest. There are two methodo by which this might be accomplished. The first would be for the Government to bring in a measure to colonialise all existing local loanß, issue inscribed stock for them, and collect the interest as is now done with loans to local bodies for works under the Act of 1886. Ib is doubtful, however, i£ this method would meet with the approval of the Legislature. It would virtually lay down a principle of colonial guarantee for future local borrowing, as other districts which have not hitherto borrowed would demand similar concessions to those granted to past borrowers. Indeed, we fear that the fact of th© State colonialising and inscribing existing loans would mean opening the flood-gates of local borrowing, which would literally turn what waa meant to bea benefit into au evil. The other method would be for the local bodies to be self-reliant and convert their own loans. This would, however, under the existing Jaw, necessitate special legislative sanction in each case. Last session an Aofe was passed to

enable the Dunedin Oity Council to convert its loans, amounting to about ,£182,000 at 6 aud 7 per cont, into 4£ per cents. But a special appeal to the Legislature in each case of proposed conversion would manifestly be costly and inexpedient. The Colonial Treasurer has, therefore, at the request of the members for Riccarton and Chalmers, drafted a Bill which is meant to provide machinery for enabling local bodies to convert their loans without an appeal to Parliament. It is simple aud effective. It provides for existing loans being converted into stock paying not more than 4§ percent interest, and authorises so much as may be necessary of the accrued sinking funds to be expended in paying the premium on and costs of conversion, the balance to be handed over to the local body. Under this Bil), the Christchurch drainage Board should be able, by extending the period of its loan, to reduce tho interest and abolish the sinking fund. Its accrued sinking fund would be sufficient to pay all expenses of conversion and still leave a handsome margin in hand. The Looal Bodies Loans Conversion Bill thus offers special benefits to the residents of, Christchnrch and the rural districts, and will doubtless receive tha hearty support of the Canterbury members next session.