Borough Amalgamation

Waikato Times, Volume 87, Issue 13272, 30 August 1916, Page 7

Borough Amalgamation

BETWEEN HAMILTON AND . FRANKTON. Mi; ill ' ULI'UKT. jjTlin.Niin -I I'l-uKI- I'lU'I'nSAL. lilSiNL:— Ml. I 1H 'l'- Al'Y'tCATEl'. NV e base r.e.MNed a eopv of Hi- re- ; port supplied to the I'rankb.n borough Council by Mr A. >. Ihss. of Wllm*lou, iu connection with th.- amalgamation proposals, from which we have been permitted I ake the lollow.ng summary:— After detailing Hie data supplied and instructions given, Mr Hiss summarises the latter as follows:Scope of Report ••i. To comment mi lh- l,!,:i1 " '"'' pOSItlOll of l!h |\\o bol'oll-IIS at 31sl March 1'.'15, will' ' U ew lo venfMiu ..r ■•lli-r-Wise the statements thai ha\e been mad.- m cim-ction with Hie amalgamation. ■ ■•> ■(-,, report on .no d-amalieii ol the lin.die.- of lie two b-r uu.et.sasalalsl M.urh. f'lo ••;;. To report generally -n th" amalgamation, baling v>'e ' [her, in no "I'inmn. d is -ei viable or uol. and backing up my oi.imoi.s wit! i" ~:' ~r against the propos d. . • Assets and Liabilities. •I'i.r the purpose ol o mp inn-' tlnaneial position of tie lw.. h-mindiS, one must take all the assets .[id Labilities into account, and - hj"« Compare will. lh< M-d capital x due of the borough. Hid ewn ibis lest is not a tinal one m decidm- whether the basis of amalgamation is \a.v b> mdh parties, as, under Hie prop— l seiieinc, certain loans, I presume, ar- imt to be included in Hi.- l"H>im- of acciiuU. The dual test, therefore, WoUld be :,:| follows:- -Take all the a-S-ds on I , borough and ail the loans ;md j Other liabilities Whicll al'- I" I"' l:lU '' 11 over by the joint l-.r-imh. H'-" ■'»- . i , ~...,.,1 1 r .|. Hie surplus certain what pel. > m '-' " bears to the rateable value of each borough. In the figure.- Ihal base nee published the have olllv r.ilOUlated the percentage of hab.hlies lo the rateable value, and, through ignoring the principal assets, lune coin", to quite a wrong Conclusion as lo whaL would be an ctuitable basis for ammunition. Applying Ihe first b'St id .Hst March, lyia, we find the following !■• be the position: — Position at March 31, 1916. £ Hamilton has a total nelt hability of .. •• •• l '°'' ),s ° Against which it can show, after writing off 1125,000 from endowments, assets , i , t . . 160,811 estimated at Showing an excess of liabilities amounting to • • 10 >' ' Frankton has a total nett lia- , .... ~ . 05,2 ( JJ bihty of • • Against which she can show assets estimated at • • -"•'• ll " Showing an excess of liabilities amounting to • ■ °' l3l -These work out in proportion to tin rateable values as follows : Hamilton. Frankton Liabilities, percent. 18.21 JS.CB Assets, per cent. .. 17.09 Excess liabilities over assets, per cent. .. ■• l.« ~' 3 'Therefore, the present ftnaneia position of Hamilton is stronger thai that of Frankton, as its proportion o liabilities over assets to rateable valu 1S Mr Biss points out that he has ignor ed value of streets and drainage works hut the foregoing statement refers t the two boroughs as they stand i present, all their assets and liabihtie being taken in, his object being t replv to criticism that has taken plac on the relative status of the two boi oughs, and is therefore an answer 1 the first portion of his instructions. Position on March 31, 1916. Dealing with the finances of the tv bodies as at 3ist March, 1916. tl position is put as follows :-r Hamilton. Frankto £ *

Hamilton's excess hail increased IY-uin iio.;; i in l'.'le, due principally In Up' drainage loan which shows as ; , liability; but the drainage work eantiol h- shown as an asset. Though the relative financial position of each Imroimli had materially changed durinu the \ear, it is safe to assume that j the increased indebtedness of Hamilton is represented by extra value in drainage, waterworks, and gasworks. Difficulties of Comparison. In indicating the financial position as ii would be affected by amalgamation, Mr Riss points out that he is faced with lh" difficult} of not having received anv indication as to what loans will he pooled and what loans will remain a charge on the separate districts, an important question which should have hern settled before the pi.ll was taken, lie therefore has left i.ul loans which he considers should 1,,,1 |„. ponied, and from the total indebtedness of Hamilton on .'Mst March, I'.ilii £201,7i'.G , lie deducts £100,040, made up of the following:—Five vanmis loans, streets loan, 18S6 loan, two bridge loans, two Hlaudeiands loans, Mexandra street hem, and four drainage loans. All loans ijuch as waterworks, gasworks, Hoinain Board, etc., should form part of the debt of the combined boroughs, as they represent services which can be made of general use In the whole community, and peril i|-s the same applies to the drainage I is. In showing the assets and liability s, which will form part of the ! lint; sehein", he has excluded the Frankton bridge loan of £IOOO, which will onie into Ihe general fund of the bridge loans for which Hamilton is responsible and are also included. As the result of the suggested adjustment the unalgaiuated borough will take over the Mowing assets and liabilities: Assets. Liabilities. £ £ I Hamilton .. 100,23: 110,013 I (•'ranktoii .. 30,100 27,841 | i Total . . 190,417 137,854 The proportion of these to the pre- j U.-nl rah able \alue of each borough is: Assets. Liabilities. ! I.l.iuiltoii .. .. 17.15 11.34 Frankton .. . . 13.39 12.36 Valuation of Endowments. I nthe assets of Hamilton endowments are valued at £IOO,OOO, but as lli.-v only earn about £I3OO a year, Mr Miss thinks it may be inadvisable to place so high a capital value on them, ,nd until higher rents are obtained lhe> should perhaps be considered as representing, say £75,000 only. This wuiild not affect the question seriously, is there is a balance of capital in favour of Hamilton, so they can afford to iiscoimt the endowments by at least >;> per cent. Though the Municipal Corporations \el stipulates that all the assets and labilities of the two boroughs shall ,eeome the property of the united ■ orough, if this is not deemed equitble and it is desired to keep out ceriin loans a private Act may be secured o give effect to this, as has been done n other eases. Depreciation on Gas Works. Commenting on the suggestion by a Councillor that it will be necessary in die "near future to write off probably £20,000 on the gas works, which loss Frankton will have to share," the report points out that this was merelj i book entry, and would not require tc be supported by cash. The loans wil! be paid off out of earnings, and the works can be written down regardles* : . of the amount that is owing in respeel 1 to the gas loans. 1 The Probable General Rate. Dealing with income and expenditun of rates necessary to provide interes - on the pooled loans, Mr Biss, basin* ;, his calculations on the estimates fo o the current year, anticipates that th< it position will be as follows: s Hamilton. Franktor o Estimated expendi- £ £ e ture .. • • 10,369 2,525 '- Estimated receipts, ,o excluding rates 4,724 I'.OOO To be raised by general rate .. 5,645 1,525 to The total amount required by th ic joint borough from general rate therefore £7170, and a general rate < tt. IJd would produce £7380, while I iddltion special rates would be requii L 5 ed over the respective area* to provic 58 interest on loan* not pooled.

■•give my reasons fur recommending amalgamation. Auyoiie taking a gen-

er... v view of Urn two boroughs must realise that they have many interests | in common, and ... no one can deny that an amalgamation must take place sooner or later. With this fact well established, it must be equally obvious that an amalgamation now would present less difficulty than later on, when the various services will have assumed larger proportions. If there is so much discord and difference of opinion now when the sums involved are only a few thousand pounds, ! hew much more diflicult will it be J when many thousands have been ! added to the indebtedness, new services established or the present ones extended. 1 have already endeavoured to show that the objections to amalgamation are based on an entirely wrong assumption regarding the respective financial positions of the two boroughs." Healing with the gas works, Mr Biss says there is no doubt in his mind that lliey are over-capitalised. Though the works are shown in the assets at £48,000, the loans raised total £59,000, far too large a sum for a town like Hamilton to have invested in gas works when compared with the position in other towns. Frankton can, however, be in no way seriously prejudiced by allowing the works to be taken over at £48,000 and the loans to come into the general pool, as the receipts are sufficient to pay interest and sinking fund on the loans: but if in the future the receipts did not do this and the shortage had to be made up by levying a rate, then Frankton might be affected. It is the consumers who. by having to pay a higher rate for their gas to cover the interest charges, are suffering, and not the general public. However, the postponement of amalgamation would not remedy this. Uniformity of Management. Mr LSiss gives as his second reasor. for advocating amalgamation the securing of uniformity of management of the boroughs. It has been the experience that one large borough can be better managed than two small ones. The residents take a keener interest in municipal affairs, as they are conducted on a larger scae, while the officials have a greater incentive to excel in their work if they are handling the affairs of a large town instead of two small ones, and by being able to pay higher salaries, better work naturally results. Overlapping and Partnership. As his third reason Mr Biss says: ■ "There are several cases now of serj vices overlapping, and there is already i a partnership existing in a minor de- \ gree." As instances of this he cites — The sharing in septic tank construci lion. Frankton supplying Hamilton with j electricity and Hamilton supplying i Frankton with gas.

Scheme for obtaining water from a new source, both boroughs having contributed to a report on same. Hamilton requires and can obtain from Frankton better water pressure for fire prevention purposes at very I trifling cost. i Frankton requires water of better quality, and can obtain this through the Hamilton supply. There would be further overlapping if Frankton, as has been suggested, de-

cides to gei lis waier ssuyyiy uum - 1 river. These overlappings and joint work- ; ings, it is pointed out, are capable of causing friction so long as the boroughs are separate constitutions. Amalgamation would remove this risk. Frankton's Interest In Hamilton. "Hamilton city," continues the report," is essential to Frankton, as it provides Frankton with a business centre for purposes of trade. Frankton residents, therefore, are interested in the welfare of the Hamilton business eentre ... and £are interested just as much as Hamilton residents in the management of the Hamilton business centre On this account they should have a voice in the election of the Council who control the destinies of this area. They can only obtain this by amalgamation." The Representation Bogey. The argument for not. amalgamating that Frankton cannot be certain of > securing representation in toe new Council hat been used in regard to every amalgamation to*t hu «»Jp», b urn. b**r mm «** ft* ft* W*

to find any such cases, while in some instance* the exact opposite has happened, and he points out that Claudelands has always been strongly represented in the Hamilton Council. Very soon after amalgamation this question of representation settles down and local jealousies die out. Fulfilment of Promises. As to the further objection to amalgamation that Frankton has no guarantee that future Hamilton Councillors will carry out promises made by the present Council, Mr Biss said this holds good in all amalgamations, but in no ease does lie know of repudiation, and he cannot conceive any reason why there should be in Hamilton. Interest on Loans. "1 notice," says Mr Biss, "that the majority of the Hamilton loans are at 4£ per cent., three are at 34 and apparently only one is at 5 per cent., whereas at Frankton the lowest rate of interest is 4 h per cent., and there are several loans at f> per cent, and some at £5 12s 2d per cent 1 feel sure that if the two boroughs had been amalgamated when the Frankton loans were raised they would have saved very considerably in interest, as they would probably have got their money at i per cent, lower rates." The Electric Works. Mr Bibb is of opinion that a considerably increased revenue from the electric works cannot be secured without adding to the present plant. At any rate, judging from experience in other places, should there be a surplus the electors will at once clamour for a reduction in the price charged for light and power. The Government Subsidy. As to the present Government subsidy of £lB7 10s which will be lost to Frankton on amalgamation, Mr Biss considers this a trifling matter as compared with the advantages gained in other directions. Gas and Electric Extension. Under amalgamation Mr Biss says he should expect to see electric light substituted for gas in street lighting in Hamilton, securing economy and more efficiency. It is also reasonable that as electricity replaces gas for lighting the latter will replace wood and coal for cooking and heating purposes, and these two services can best be supplied by one body. Cost of Bridge Maintenance. Under the combined revenue accounts the bridge maintenance will come out of the general fund, and Frankton will therefore pay more tha» its present 5 per cent., but this cannot make any appreciable difference to the general rate so far as Frankton is concerned. But as Hamilton has an income of nearly £IOOO from license fees, as against Frankton's little over , £IOO, the surplus received by Hamilton is a set-off against the above. Other Advantages of Amalgamation. In detailing other advantages to be derived from amalgamation, Mr Biss mentions the cost of administration, whereas if in installing its drainage system, estimated to cost £15,000 to £20,000, Frankton is able to save i per cent in interest, it will mean £IOO a year, while other economies might be 'effected, and a better service secured if the system is combined with that of

Hamilton. If amalgamation is secured, Frankten ; residents will be able to take a keener • interest in the Domain and Sports • Grounds. Further Sports Grounds are bound to be required as Frankton orows, and the acquisition and forma- ' tion of these would be easier if underC taken bv one central authority. Business Methods Suggested. In concluding his report Mr Biss says: ' 'I would point out that too much reliance must not be placed on the Gas and Elecric Accounts as published. In - neither case do the published accounts t enable vou to ascertain the profits, as s they are merelv statements of receipts and disbursements. Outstanding ac- "" counts are not brought in, and in each d case the disbursements include capital 8 expenditure, which of course has notnd ing to do with a revenue account. I n would strongly advise each Borough to ■_ follow the example of Wellington and „ other cities, and publish a Profit and '* Loss Account, on commercial lines. >f which is now allowed by the Govern- » ment Audit office. This account shoulc in also show depreciation. I am inclinec to think that if full depreciation is al lowed lor, neither Electric Light noi Gas Account will show much profit *g Frankton, apparently does not chargi of for street lighting against the genera • rate. Hamilton, on the other nan< to charges street lighting to general ac count, art* mffl* amounts- tojjas ,m count.. fMi lis thecorrect method, i •d this course it wffl in

crease the profit of electrical works, but at the same time it will increase the expenditure on general account. "In perusing Mr Ellis' letter of ldtn March, and his criticism on the water accounts, I might say I agree with a good deal of what he says. It should also be borne in mind that as between the Electric and Water Supply Department the Electricity Account is being credited with £420, which represents 3d for water supply, while Hamilton only pays 3d less 25 per cent. The effect of charging 3d and not allowing the 25 per cent discount is to increase the profits of the Electrical Department at the expense of the Water Supply Department. ~