CITY COUNCIL LOANS.

Star (Christchurch), Volume LXIV, Issue 939, 8 December 1933, Page 3

CITY COUNCIL LOANS.

Report on Consolidation in Preparation.

QUESTION OF CONVERSION

The question of consolidating the special loans raised by the City Council for work done in special rating areas is at present under consideration by the Finance Committee as a preliminary to the preparation of a scheme for the conversion of the loans under the Local Authorities Loans Conversion and Interest Reduction Act.

Because of the exceptionally large number of separate loans raised for special rating areas there are special difficulties in the way of adopting a conversion scheme until the question of consolidation is decided, but it is probable that it will be some time yet before a decision will be reached in regard to either question. One of the main objections to consolidation of loans is that it would result in increasing the burden of rates in the inner area while providing relief in the outer areas. One suggestion that has been made is that there should be two consolidations, one applying to all the special loans in the inner area, and the other to the loans raised for the whole of the outer areas. The adoption of this suggestion would reduce the degree of inequality in the spreading of the burden and would simplify the work of the council’s officers in preparing the rate demands, but it would still result in relief being granted to some ratepayers at the expense of others. The cities of Auckland, Wellington. Dunedin, Invercargill and Wanganui have all followed the principle of consolidating loans, but the Christchurch City Council has steadily pursued the policy of creating special rating areas when loans are required for work in a particular district only. The Burden of Interest. When the question was mentioned to the Rev J. K. Archer, chairman of the Finance Committee, to-day, he said that he was not yet convinced that consolidation of loans was in the best interests of the city, as it would appear to imply that a number of loans that would otherwise mature in the next few years would run on for a longer period. “My idea in regard to dealing with the question of loans,” he said, “ is that we should aim at an immediate reduction of interest by a substantial amount with the ultimate object of getting rid of the burden altogether. I think we might be putting a noose round our necks by consolidation and conversion. My theory is that the burden of debt which is crushing the world has got to be lightened and eventually got rid of, and the sooner the better, otherwise there is little hope, of future progress.” Regarding the question of conversion, Mr Archer said that the same amount of money would have to be paid, but the period of time would be lengthened. lie felt that it might be better to let the existing loans mature on the due dates and pay them cff. If there was insufficient money in the sinking funds it would, of course, be necessary to raise redemption loans, but he believed that those loans could be raised at a lower rate, of interest than the conversion rate of 4 } per cent. At the present time, for instance, new loans could be raised at 4 per cent—a saving of i per cent on the conversion rate—and it was conceivable that in the future the rate would fall even lower. In an3' case he was prepared to take the risk of a rise in the rats.