LOCAL GOVERNMENT LOANS BOARD. REVIEW OF OPERATIONS FOR THE YEAR ENDED 31st MARCH, 1939.

Appendix to the Journals of the House of Representatives, 1939 Session I, B-03

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1939. NEW ZEALAND.

LOCAL GOVERNMENT LOANS BOARD. REVIEW OF OPERATIONS FOR THE YEAR ENDED 31st MARCH, 1939.

Presented to both Houses of the General Assembly by Command of His Excellency.

The Local Government Loans Board, constituted under the Local Government Loans Board Act, 1926, comprises seven members, of whom two are officers of the Public Service, being the persons for the time being holding the offices of Secretary to the Treasury and Engineer-in-Chief of the Public Works Department The remaining five members are appointed by the Governor-General to hold office during his pleasure. In general the Act provides that it shall not be lawful for any local authority to borrow any money without the precedent consent of the Governor-General m Council given after compliance with the provisions of the Act, which further provides that every local authority which proposes to borrow any moneys, otherwise than in anticipation of its revenues, shall submit to the Local Government Loans Board an application and statement giving such information and particulars as may be required by the Board. After proper investigation the Loans Board may : («) Sanction the proposal, either wholly or in part, and unconditionally or subject to such terms, conditions, and stipulations as it thinks fit ; or ... lb) Require the local body to divide the loan proposal into constituent items to the intent that the ratepayers may vote separately on each item; or . (c) Refer the application back to the applicant local authority lor modification or amendment; or (d) Decline to sanction the proposed loan. The Board has been in existence since 1927, and the report of its operations for the year ended 31st March, 1939, is appended During the year proposals to borrow involving £5,138,917 came under the purview of the Board, and of this amount £4,875,584 represented new applications and the balance of £263,333 amounts previously referred back or declined. Of the total amount considered, new loans and renewal loans totalling £3,013,872 and £1,188,525 respectively were sanctioned, whilst £936,520 was referred back for reconsideration or declined.

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The following is a summary and analysis of the loans for new works as compared with similar items for the previous year :— Summary for 1938-39 — £ s. d. £ s. d. Total new applications 4,875,584 9 2 Previously referred 263,333 6 8 back 5,138,917 15 10 Sanctioned — New loans .. .. 3,013,872 9 2 Renewal loans .. 1,188,525 0 0 Referred back or declined . . 936,520 6 8 5,138,917 15 10 1938-39. 1937-38. Analysis of new loans — £ / no . City and borough works .. fL ''. ~ Electric-power Board loans .. 923,800 ' Waterworks in counties .. 99,170 147 '!L n Roads and bridges .. •• 276 '® ~® : „ Harbour-works .. •• 340,000 407 000 Hospitals '55,430 Fire Board loans .. •• ®o-'cnn Overdraft accommodation . . 41,075 30, suu Miscellaneous .. •• 28,914 21,310 3 Per Cent. Housing loans .. 204,875 256,9J) £3,013,872 £3,098,445 The renewal loans, £1,188,525, sanctioned for repayment of maturing loans take the place of previous debt of £l 314,400

For comparative purposes the following schedule is given showing tne amou dealt with and the amount sanctioned both for new works and redemption loa since the inception of the Board :

The difference, £4,588,573, represents amounts declined or referred back by the Board during the period.

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Sanctioned. Total Applications. New Works. I Redemptions. £ £ £ 1927-28 •• 4,636,649 3,212,185 i' 048 '??? 1928-29 •• 6,007,045 3,866,551 809,221 •" 4. 918 730 3 563,842 967,875 1929-30 ■■ • • •• 4,218, 73U ? ncl ozl 838 901 1Q oA_oi 3,840,505 1,766,256 838,901 1931-32 " •• 3,412,365 781,195 2 > 483 ' 8^ iqoo o.> 2,951,645 406,521 2,348,231 o cq4 IQ'2 917,560 2,744,245 1933-34 .. 3,884,132 ° '" q « 1Q04. 3,859,363 1,585,440 2,379,955 \fotfa ■■ " . 4,061,076 1,550,690 2,051,790 !S£1? ■' . 2 804,308 2,411,358 430,313 " " . 3,362.173 3,098,445 122,758 1938-39 •• 5,138,917 3,013,872 1,188,525 £26,173,915 £17,414,420 V y ' £43,588,335

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In addition to the above, a total of £30,506 was dealt with during 1938-39, representing applications in respect of the diversion of unexpended loan-moneys under section 47 of the Finance Act, 1929, and £45,290 in respect of the disposal of capital moneys under section 20 of the Finance Act, 1934. Prior to 1927, when the Loans Board came into being, local authorities were borrowing approximately £5,000,000 per annum, and in a large number of cases inadequate provision was made for the liquidation of the debt incurred ; but indiscriminate borrowing has now been effectively checked, and local bodies are compelled to provide for repayment of loans within the effective life of the respective assets created. Since the coming into operation of the Board the amount of loans sanctioned annually has been consistently below the amount previously raised by local authorities when no effective control was exercised over their borrowing. This has been particularly noticeable during the years immediately following 1927, when an average of £3,000,000 per annum was authorized. During the depression years the applications received by the Loans Board dropped considerably, but with the return of prosperity greater activity in this field has been evident. Two classes of local bodies whose borrowing has shown abnormal increases over the past two years are Electric-power Boards and Hospital Boards. In the first of these classes the increase has no doubt been caused by the unprecedented demand for electricity due to the more prosperous conditions now ruling throughout the Dominion. As regards Hospital Boards, however, it would seem that modern technique in the administration of hospitals and treatment of patients, together with increases in staff due to the reduction in working hours, has imposed on Hospital Boards the duty of increasing accommodation generally by the erection of up-to-date buildings. Although additional loan works are being undertaken, the gross local-body debt is steadily declining, accounted for no doubt by the more adequate repayment provisions which are imposed by the Loans Board and the result of the operations of the conversion legislation. The gross debt of local authorities reached its peak in 1931, when it stood at £72,686,036, whereas seven years later it had dropped to £68,061,551. The following table shows the amount of the gross debt outstanding at 31st March in each of the years indicated : — £ £ 1915 .. .. 24,538,721 1931 .. .. 72,686,036 1920 .. .. 30,187,942 1932 .. .. 72,402,282 1925 .. .. 53,353,466 1933 .. .. 72,476,056 1926 .. .. 59,419,754 1934 .. 71,969,387 1927 .. .. 64,012,247 1935 .. .. 71,245,458 1928 .. .. 66,404,172 1936 .. .. 70,400,176 1929 .. .. 69,294,619 1937 .. .. 68,559,750 1930 .. .. 71,207,539 1938 .. .. 68,061,551 Another matter to which reference can well be made in this report is the result of the conversion operations undertaken from 1933 to 1935. There is no doubt that local authorities do not yet, and probably never will, realize to the full the tremendous benefits that have accrued to the people of their constituent districts as a result of the conversion schemes which placed practically the whole of the local-body debt domiciled in the Dominion on a satisfactory basis with regard to the rate of interest, the arrangement of maturity dates, and provision for repayment. The old system of accumulating sinking funds was largely departed from and, as a result of conversion operations, repayment of a large proportion of the local-body debt was placed on the basis of the annual redemption of debentures, while a further substantial amount was placed on the instalment-repayment system. The total of loans arranged on these two bases was approximately £44,000,000. The balance of approximately £24,000,000 of debt is repayable on fixed maturity dates and represents principally debt domiciled outside the Dominion and not subject to conversion, together with non-convertible debt held in New Zealand.

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The figures regarding the domicile of local-body debt indicate a tendency for New Zealand to arrange its own finance within the Dominion. The amount of debt outstanding in the United Kingdom and in Australia has steadily the tmoltXLiaS^Se^ted oKingdom'0Kingdom' £ shown as just under £14,000.000, a reduction of St hid of loans only in New Zealand, the tendency will be to increase still further the holdings in New Zealand and to reduce overseas indebtedness as existing loans due and are paid off from sinking funds. The Board desires to acknowledge the valuable assistance it derives both from the comprehensive reports prepared by the Public Works, Health, Internal Affairs and other Government Departments, and from the data so efficiently compiled a presented for its consideration by the staff of the Treasury detailed from time to time for duties connected with its operations. ,111 The Board also desires to acknowledge the ready co-operation of the focal bodies concerned which greatly facilitates the smooth admmistration of the legislation governing local-body borrowing. The Treasury, Wellington, Bth August, 1939. B. C. Ash win, Chairman, Local Government Loans Board.

Approximate Cost of Paper— Preparation, not given ; printing (1,200 copies), £4 10s.

Bv Authority: E. V. Paul, Government Printer, Wellington. —1939.

Pri:e 3d.]