LOCAL GOVERNMENT LOANS BOARD REVIEW OF OPERATIONS FOR THE YEAR ENDED 31st MARCH, 1948

Appendix to the Journals of the House of Representatives, 1948 Session I, B-17

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1948 NEW ZEALAND

LOCAL GOVERNMENT LOANS BOARD REVIEW OF OPERATIONS FOR THE YEAR ENDED 31st MARCH, 1948

Laid on the Table of the House of Representatives by Leave

To the Right Hon. the Minister of Finance. The Local Government Loans Board presents hereunder a review of its operations for the year ended 31st March, 1948. The Board was constituted under the Local Government Loans Board Act, 1926, and commenced to function on Ist April, 1927. It has thus been in operation for a period of twenty-one years, and the statistical tables which are incorporated in this report reflect the effect on the local-body debt of the Board's administration during that period. The Board has endeavoured to assist local bodies where the proposals covered essential works. On a number of occasions the Secretary has with good results visited a local authority and discussed with its officers the particular problem under review. This helpful and constructive aspect of the Board's activities is now much more widely recognized among local authorities. At the same time, by exercising a restraining influence on doubtful undertakings or by withholding its sanction where it appeared the financial burden would be beyond the immediate capacity of the ratepayers, it has endeavoured to keep local-body finance on a sound basis. The net result is a reduction in the total debt from a peak of £72,600,000 at 31st March, 1931, to £57,700,000 at the 31st March, 1947, being the latest statistical figure available. Repayment of the whole of the debt has also been provided for by sinking funds or annual repayments within the estimated life of the assets to be created out of the loan expenditure. The work of the Board for the year ended 31st March, 1948, again reflects the increased activity that is taking place in the capital programmes of local authorities. The loan proposals considered by the Board again exceeded £10,000,000 for the year. Materials generally are now in better supply, and, despite the labour shortage, many local authorities are putting in hand capital works postponed from the war years. In as far as buildings are concerned, it would seem that although the raising of the requisite loan-moneys has been approved, some time must elapse in many cases before the work can proceed. Applications considered by the Board amounted to £10,347,679, of which £8,324,579 represented new applications and £2,023,100 amounts not finally disposed of previously. The amount sanctioned for new works was £6,022,034 and for renewal loans £1,459,880. The balance of £2,865,765 was referred back or decision was deferred pending further investigation.

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Details of the year's operations are summarized in the following table, together with particulars of the previous year for comparative purposes 1946-47. 1947-48. £ '. £ £ £ Applications .. .. .. ... 9,843,543 8,324,579 Previously referred back .. .. 879,350 2,023,100 £10,722,893 £10,347,679 Sanctioned — New Loans* .. .. .. 7,289,436 6,022,034 Renewal loans .. .. .. 1,006,430 1,459,880 Referred back .. .. ..2,427,027 2,865,765 £10,722,893 : £10,347,679 1946-47 1947-48. *Mew loans — £ £ Waterworks .. .. .. 155,465 923,730 Drainage and sewerage .. .. 386,120 525,080 Roads and bridges (counties) .. .. 42,629 187,850 Street works (boroughs)- .. .. 369,050 873,850 Municipal buildings, offices, <fec. .. 86,315 70,218 Recreational facilities .. .. 312,480 39,100 Transport .. .. .. .. 1,018,000 54,840 Housing— £ £ Permanent .. .. .. 341,017 86,110 Transit .. .. .. 147,850 53,500 488,867 139,610 Electric supply—Power Boards .. .. .. 1,011,500 1,344,200 Other .. .. .. .. 460,400 1,471,900 1,344,200 Hospital works .. .. .. 1,502,005 1,499,500 Harbour-works .. .. .. 1,065,000 110,000 Fire Board loans .. .. .. 39,500 3,700 Gasworks .. .. .. .. 32,000 83,000 Abattoirs .. .. .. .. 107,900 29,060 Education authorities .. .. 17.425 29,690 Machinery .. .. .. .. 54,730 49,650 Miscellaneous .. .. .. 140,050 42,106 Mood damage or protection works .. .. 16,850 £7,289,436 £6,022,034 Approval was given under section 47, Finance Act, 1929, to the diversion of the unexpended balances of loans amounting to £8,675, and the use of capital moneys amounting to £43,171 was approved under section 20, Finance Act, 1934. Loans of Hospital Boards and Electric-power Boards were again very substantial and accounted for approximately half the borrowing of all local authorities. The high cost of building is one of the factors contributing to the large amount required by Hospital Boards, whilst the call for additional ward accommodation arising from the greater use of hospital beds is also important. As a result of an accelerated housing programme and industrial development, Electric-power Boards are required to extend and increase the carrying-capacity of lines despite the greatly increased cost of the imported material —e.g., cables. The establishment of the Rural Electrical Reticulation Council with funds at its disposal for subsidizing uneconomic rural lines has enabled some Boards to undertake such extensions. During the year the Board has felt it necessary to discuss with the Health Department the trend of some features of hospital development, and with the State Hydro-electric Department the relationship between the power shortage and Electric-power Board extensions into new areas. Water-supply and street works show a substantial increase, largely resulting from major schemes in both categories in Auckland, estimated to cost £1,100,000. The amount referred back (£2,865,765) is much above the average, and consists largely of Hospital Board and Electric-power Board proposals in respect of which the Board desired further information. The majority of these proposals were subsequently sanctioned. A number of water-supply and sewerage proposals were referred back as the Board was of the opinion that the cost was beyond the financial resources of the local authorities concerned.

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Applications dealt with by the Board since it was constituted on Ist April, 1927, have been as follows :

The difference (£12,346,674) represents amounts declined or referred back by the Board during the period of twenty-one years. The following table shows the movement of gross local-authority debt:— £ " £ 1915 .. .. 24,538,721 1942 .. .. 66,645,990 1920 .. .. 30,187,942 1943 .. .. 65,131,074 1925 .. .. 53,353,466 1944 .. .. 63,262,828 1930 .. .. 71,207,539 1945 .. .. 61,237,937 1935 .. .. 71,245,458 1946 .. .. 60,025,864 1940 .. .. 69,486,970 1947 .. .. 57,765,453 1941 .. .. 67,974,687 The domicile of local-authority debt has been as follows :

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Sanctioned. Total New Applications. Works. Redemptions. £ £ £ 1927-28 4,636,649 3,212,185 1,048,796 1928-29 6,007,045 3,866,551 809,221 1929-30 4,218,730 3,563,842 967,875 1930-31 3,840,505 1,766,256 838,901 1931-32 3,412,365 781,195 2,483,810 1932-33 2,951,645 406,521 2,348,231 1933-34 3,884,132 917,560 2,744,245 1934-35 3,859,363 1,585,440 2,379,955 1935-36 4,061,076 1,550,690 2,051,790 1936-37 2,804,308 2,411,358 430,313 1937-38 3,362,173 3,098,445 122,758 1938-39 5,138,917 3,013,872 1,188,525 1939-40 2,674,450 1,701,460 355,800 1940-41 5,336,640 2,709,505 1,602,670 1941-42 4,589,653 1,898,096 1,391,728 1942-43 3,336,770 1,497,120 1,121,000 1943-44 .. .. 3,999,665 1,349,335 2,359,755 1944-45 3,242,327 1,737,807 698,120 1945-46 3,497,820 2,643,935 243,235 1946-47 9,843,543 7,289,436 1,006,430 1947-48 8,324,579 6,022,034 1,459,880 93,022,355 53,022,643 27,653,038 80,675,681

31st March, London. Australia. New Zealand. Total. 1 £ £ £ £ 1931 17,533,425 - 8,574,529 46,578,082 72,686,036 1935 16,088,525 2,564,693 52,592,240 71,245,458 1940 12,284,225 2,264,220 54,938,525 69,486,970 1941 9,893,025 2,198,211 55,883,451 67,974,687 1942 9,381,825 2,043,718 55,220,447 66,645,990 1943 8,461,325 1,851,273 53,656,498 63,969,096 1944 7,837,225 1,624,458 53,801,145 63,262,828 1945 7,074,925 1,544,382 52,618,630 61,237,937 1946 6,604,725 1,484,400 51,936,739 , 60,025,864 1947 5,990,325 1,286,783 1 * 50,488,345 57,765,453

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Some years ago lenders were loath to provide loan-moneys for long terms, and many loans were raised at 3| per cent, for a term of ten years. Those loans are now maturing,, and in the majority of cases a renewal loan for a further ten years at 3J per cent, is arranged. Many local authorities are therefore redeeming loan liabilities in twenty years, although a longer term might have been sanctioned originally. As the local authority elections were held in November, 1947, the Board was asked to consider more than the usual number of loan proposals involving a poll of the ratepayers as required by the Local Bodies' Loans Act, 1926. It is significant that when loan polls are held in conjunction with elections polling is heavy, but that in other instances the percentage who vote is very low. The figures range from 6 per cent, to 90 per cent., with an over-all average over the past few years of 30 per cent. Interest payable by local authorities continues at rates varying from 3 per cent, to 3J per cent. In view of these continued low rates and their effect on the earningpower of sinking-fund investments, the Board reviewed its requirements as to the annual payment to new sinking funds. The Board now bases the annual contribution to a sinking fund on an assumed earning-power of the capital of 3 per cent, in lieu of the former 3J per cent. This results in slightly higher annual charges, but helps to ensure that on maturity of the loan the sinking fund is sufficient to effect redemption without recourse to further borrowing. The majority of loans are, however, now raised on the preferable basis of annual repayments, thus avoiding the necessity for establishing a sinking fund. The Board again desires to place on record the extent to which local authorities have co-operated with it in the handling of loan proposals. It also expresses its appreciation of the assistance received from the Government Departments which submit reports for its information. E. L. Gkeensmith, for Chairman. The Treasury, Wellington, New Zealand, 28th May, 1948.

Approximate Cost of Paper.—Preparation, not given; printing (568 copies), £9.

By Authority: E. V. Paul, Government Printer, Wellington.—l94B.

Price 3d.]

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