ELECTRICITY LOAN

Bay of Plenty Beacon, Volume 1, Issue 54, 25 August 1939, Page 5

ELECTRICITY LOAN

BOROUGH PLAN ; £7500 TO RAISED ; NO ADDITION TO RATES CHARGES MAY BE LOWER Notification appears in our adverf Rising columns of the intention uf "the Whakatane Borough Council > consider the Taising of a £7500 loan \to meet necessary extensions of the system which can no long, -er be financed from revenue. On being approached tWe Mayor, Mr B. S. Barry, made the following state:.ment: — -"The heavy and Sustained deman'l i'or expenditure has developed to a considerable extent over the past two years, rnd may be attribute-! the development and growth of Hrthe borough and the development of the demand v for electricity for commercial and domestic purposes. To .illustrate the development of the borough since 1934 it may be stated flthat 134 new dwellings have been Jbuilt, 32 new businesses ,-and.-other -premises, and there have been 242 alterations and additions to existing premises, the total value being r£215,040. Subdivision has been, "correspondingly considerable and has involved the reticulation of new streets, and the erection of buildings on such lightly or unreticulated .-.areas as Hillcrest has necessitated -further relatively considerable expenditure. FAILINGS OF ORIGINAL SCHEME '•'Possibly in 1922 when the original scheme was installed the future demand for electricity was not fully visualised,'* said Mr Barry". "The reticulation particularly of the residential portion was designed mainly for lighting purposes and in the last rfew years lines, transformers and y 'other equipment have proved insufficient for the loading, necessitating Tewiring and additional wiring with .larger capacity lines. The growth r of the load is evidenced by the fac'. vthat the maximum demand in 1933 was 295 K.V.A. in 1937 it was 508 K.V.A. and in July, 1939, it wa s 508 K.V.A. Comparing, (expenditure for first four months of the current ; P -financial year, it may be shown that £4460 has already been spent out of \ ran estimate of £9469. Thus, if Uiis . rate is maintained the estimates will "be greatly exceeded. ''The growth of the borough continues unabated," said Mr Barry. "The shortage of dwellings is still acute, and the Department of Hous. : ~ing Construction has purchased or is negotiating for land for sites of ' 11 upward of 50 new houses, and this 1 land will require to be reticulated with electricity. The council esti- ' mates that £6646 will be needed to J meet the expenditure necessary over the next three years including £700 for Heads extension. ManV smaller " items such as insulators, cross arms, street lights, etc. are not included 1 in the estimate, but will cost some 1 "hundreds of pounds. 1

.REVENUE INSUFFICIENT. '"Ordinary revenue will be insufficient to meet the expenditure this year and the anticipated expenditure in the near future appears to be reaching proportions which the revenue of the undertaking cannot vea -.sonably be called on to bear," he ••added. "The alternatives are increased charges to consumers, but this must be ruled out as consumers are. * entitled to look for some reduction Tin view of the trend by neighbouring authorities in this direction. I Special rates struck in security for ctricity loans could be levied. but 7T is thought that this is unreasonable and inequitable. The third alternative is the raising of loan, rmoneys to meet a major portion o$ 'capital expenditure and this would •seem the sounder method which •would give the required relief. NO RATING—LOWER CHARGES. "Although it would be necessary formally to strike a rate as security for any loan, it can be definitely stated that no portion of such a: rate would require to be collected, ~ because the annual loan charges «could be met from revenues with ease, and actually after meeting the loa n charges the relief afforded the ; account would enable the council to consider reducing its charges to consumers,'' emphasised Mr Barry. "The -council will raise a £7500 loan, its .term being 15 repay '(Continued at foot of next column)

able annually by the redemption of debentures to the value of £400.'' said Mr V Barry. ''The method of hypothecating the debentures with its bankers as security for an advance will probably be followed. FLEXIBLE METHOD. ''This latter method would provide the advantages of funds being available as required, also, the flcxibiliW of such an arrangement respecting drawing on the bank account a:ul the repayment of advances, would enable interest charges to be kept at a minimum. I understand that the bank's interest charge would be at its lowest current ratt for advances, namely 4y 2 per cent at present, and thus the annual loan charges would amount to a maximum of £400 per annum for capital repayment or reduction, plus 4% per cent interest upon the amount of the advance. At advance £3000 the annual charge would be £535, at &4000' £580 and so on. "The present expansion of the system is no doubt abmornal, and the consequent while necessary at present, also is for the benefit of future years y and as this is so it is not reasonable to expect the con sumer of the present day to bear the. whole of the cost of the present :Icvelopmcnt and extension of the scheme. The spreading of this cost can, most fairly be effected by the raising of loan monies," he concluded.