BOROUGH FINANCE

Wairarapa Age, 18 July 1934, Page 5

BOROUGH FINANCE

LOAN CONVERSION SCHEME OUTLINED. ' ANTICIPATED SAVING OP £9OOO. REDUCTION IN SPECIAL RATES. Steps preliminary to the conversion of the Borough loans were taken at last night’s meeting of the Masterton Borough Council, the Mayor (Mr. T. Jordan) describing the proposals as a move to clean up the indebtedness of the borough by 1960. After deducting certain of the sinking funds and adding the premium payable, the total to be converted amounts to £182,050. An actual saving of £9OOO is anticipated as a result of the conversion proposals, which were prepared by Mr. D. T. Herbert, Borough Accountant. After a lengthy statement by Mr- Jordan, the council approved of the proposal to separate the Lansdowne Drainage Loan from the other loans and to consolidate the remaining loans. Briefly, the scheme is as follows:— After deducting certain of the borough sinking funds and adding the’ premiums payable, the total to be- converted amounts to £182,050. The present arrangement is to pay to the Borough ©inking Fund Commissioners a certain stipulated amount each year to partly cover the loan at maturity date. On those funds the council receives 3| per cent, per annum. Under the proposed scheme the annual payments will be utilised' in the yearly redemption of debentures on which the borough will save three-quarters per cent. In addition, as the interest payments are reduced each year, a corresponding increase is made in the debentures redeemed and in the ca&e of No. 1 scheme the whole of the loan monies will be repaid by 1960 and in 1964 in connection with No. 2 scheme. The ratepayers will save the difference between per cent, on each debenture re- ' deemed and 3* per cent, which is allowed by the Sinking Fund Commissioners. Over the period of the conversion the actual saving will amount to approximately £9OOO. Apart, however, from the financial saving. the conversion of the borough loans. it was stated, offered three very important advantages: (1) The placing of the borough’s finances on a sound footing enabling the gradual extinction of the loans; (2) the stabilisation of interest rates for the currency of the loans; and (3) the equitable adjustment of yearly interest and sinking fund I payments. In the course of a lengthy review of the conversion proposals, Mr. Jordan said that Mr. Herbert’s scheme providfcke payment of a definite sum each year—£4ooo for the first four years, £5OOO for the next five years, £6OOO Jot the next five years, £7OOO for the next nine years, and £BOOO for the last four years—so that in 1960 the present debt of the borough would have disappeared. That had been made possible by using the annual contribution to the sinking fund, together with the interest on the sinking funds in the hands of the Public Trustee, to pay off debentures. That would provide £3OOO in the next four years. “At the prei eent time,” added Mr. Jordan, “we < have seven State loans amounting to approximately £64,000, the last of which matures in 1960. There are 28 others amounting to £158,815, the la-st of which matures in 1968. Of the seven State loans, all but one are at 4f per cent, or under and are accordingly outside the scope of the conversion. The one exception is a State Advances Loan and this will have to be the subject of a special conversion.” One of the difficulties, he continued, had been the ccmsolidation of all loans over the whole area, e.g., Lansdowne loans over the whole borough, and the South Ward loans over Lansdowne. It would have been desirable to do that for convenience and facility of conversion and economy of collection, but owing to the fact that the six State loans were outside the scheme and thus would remain a charge on the South Ward only it X““ ld been unfair to ask ’ the 1k , Ward to carry its share of all other loans and in addition the whole burden of those seven loans. To even “ att ere up, Mr. Herbert had omitted ItortrT? Lansdowne Drainage Loan, £16,1/0 from the consolidation and had se P arate conversion of the k T °, ea - se the burden slightly on that heavily-rated area, his proposal was to give them four years longer to r eb \ The " ±OIC was subject to the consent of the Ix»ns Board and also had to be adopt MV to H PeCla ‘ ° rder th<3 COa u£l. ed thf t an poulted out that, if adopt®d ’ scheme would mean a savingin XX to S ° Uth Ward of between id and jd m the £, and in the thp Tt r ° f a PP rox >matelv 2d in £?* T h « Action in the NorJh rt. ad I * ea ™ ade g reat er by spreadtug the payment of the drainage loan over an additional four vXs rf l SCh 7 e WiU taite effeet ; *s irom September 1, 1934, to V< the' <>Oun<,iUor9 which Mr. HeXrt L “ proposals. ad prepared the