INTEREST DEFAULT.

Star (Christchurch), Volume XLIV, Issue 364, 4 March 1932, Page 6

INTEREST DEFAULT.

Financial Position of Thames Borough. EXTRAVAGANT BORROWING. (Special to the “ Star.”) MELBOURNE, February 16. Australian financial institutions and private investors who are holders of New Zealand municipal securities are perturbed by the prolonged period of suspension of interest payments by the Borough of Thames, near Auckland. Large amounts of Australian capital, and of funds controlled by life and other offices whose headquarters are in the Commonwealth, have been lent to local authorities in the Dominion. These investments have ranked as trustee stocks, and the failure of the New Zealand Government to take steps to adjust the serious position caused by the Thames default is shaking the confidence of Australian interests in the debenture issues generally (says a financial writer in the Melbourne “ Herald ”). The Borough of Thames got into financial difficulties in July last year, and has since been unable to pay any interest. Although a meeting of debentureholders was held in that month, and investigations have since been made by a committee and by a Government official, holders of the are still in the dark as to when any" interest can be expected, or as to the extent to which their investments can be safeguarded in the future. Extravagant loan expenditure by the Thames Council in the past was the direct cause of the suspension. The council’s loan liability totals £316,000, including the Harbour Board, but excluding an electricity undertaking. which is self-supporting. The large expenditure on works was proceeded with in the optimistic hope that the borough would continue to make good progress. Instead, it has gone back seriously, because of the decline of gold mining and of current economic difficulties experienced by agricultural and other industries. The rateable value of assets for taxing purposes was recently estimated at £300.000: but it has also been officially revealed that the council has borrowed an amount equivalent to 200 per cent on the unimproved rateable value. Rates Not Collected. In July last. Thames was faced with meeting £16,000 of charges, mainly interest and sinking fund, during the seven months before rates should again become payable in March this year. But all except approximately £IOOO of a limit of £20,000 bank overdraft accommodation allowed for the council had been expended. The 1200 ratepayers last year were required to contribute Is 10M in the £l. but this year, on reduced capital values, a rate of 3s has to be imposed to produce the revenue required. The council, however, finds itself incapable of collecting rates. Only about one-half has been received in the current year, although legal actions were taken against ratepayers. Recent reports received in Melbourne sound a warning as to the effect of high rates on property values. Properties which were worth from £6OO to £BOO in normal times are stated to have sold for as little as £SO. (A report of a discussion by the 1 Thames Borough Council appears on page 4.)