THE ABATTOIRS LOAN.

Dominion, Volume 2, Issue 544, 26 June 1909, Page 3

THE ABATTOIRS LOAN.

Sir,—la sprto of much explanation there wo two pouts in connection with this matte: which stiU appear to to misunderstood The first one is tho effect on the district fund of the combined l operations for converting the old £61,000 loan and for raising the £15,000 abattoirs loan Tho unfortunately alarming tono of tho Mayor's original statement, and his omission of any detailed explanation have wrongly led many ■ people to believe that tho / whole £15,000 raised for abattoirs purposes was mysteriously and irrevocably dissipated, and that, therefore, 'the whole of -this amount would have to be provided afresh out.of tho district fund It is a curious comment on tho amount of wit with which the world is governed, that several experienced. councillors blindly accepted this bald ..statement without further examination , , It is now perfectly clear that tho result of the various transactions was to give tho wuncil £7506 in cash towards putting the abattoirs fund in crodit. And they still have this sum in tho district account, 1 less any disbursements sinco madVfor abattoirs purposes. Tho ( remaining £7<"94 du6 to the vbattoira fund was'provided for'in tho shape if, £6400 worth of unscjd debentures, together with a proposed payment from the district fund of £1094 When thw part .of ' the transaction is completed by sale of theso debentures, the £1094 payable from 'district 1 fund will be increased by tho discount on such sale, wihich is variously estnmated at from £200 to £100 Tho point I wish to emphasise, therefore, is that the total sum to be ultimately debited to tho district fund over' the whole transaction will be, not the i whole amount of tho abattoirs loan, but merely this sum of from £1294 to £1494. As this clearly represents the cost of oonverswn of tho old £51,000 loan,' it follows that the district account will eventually be in exact]} tho same position,' as if tho abattoirs loan had.been paid into a separate account from the first. If this fact were more generally understood it should completely reassure these ratepayers whoso confidence has been so unjustifiably disturbed. That you are of the same opinion is evident from your editorial note this morning. But „ your illogical remark that "the right thing was done in • wrong way " (brings me to my second pomt. And that'"is, that the procedure actually followed has been much tho most economical. Your contention 'that the abattoirs loan should have been paid into a ; separate account may oronay not be xech-nv-aily correct, but I sincerely hope J it is cot an indication of the'financial principles governing "the business management of your paper. 'If that had been done, £15,000, on* , which interest at the rate of 4} per cent, was , being paid, would have been uselessly locked up for soveral months, until it was required. Simultaneously, the district account overdraft would have been increased by the same amount 1 , subject to a somewhat higher interest charge. The city during all, this tune would, therefore, have,been in the unhappy position of paying two'lots of'interest for one lot of capital; This extravagant absurdity has been avoided by keeping the money m, the district account until it is actually required for its own spectfio purposo , '"" It seems to me that BUch zealous economists aa yourself 'and tho present Mayor should be only too glad to congratulate those whose 'ingennrty has resulted in this largo saving to the city.—l am, etc., , „ ~~ ' \ ' 'VINDEX. June 22, 1909 < > ' [Our i correspondent apparently is unable to see the danger attached to the very viciqus principle"of diverting public funds raised for a specific purposo to some other purpose, even though that may be only a i- temporary diversion. In the case under discussion, this diversion took place, and it is possible that something was saved in the way of interest charges by the course followed But a saving could have been mado without committing tho technical breaoh which occurred. It /is surely a reflection con tho'Ute Mayor and council—though not intended as such—to suggest that they would have allowed the £15,000 abattoirs loan to ' lie idle' iri the bank until required, when it could have i been placed on deposit at the current rates of interest Mr Hislop is too keen a, business man to have overlooked this Our "illogical remark," as "Vindex" is pleased to that "the right thing 1 was done in'a wrong way," appears to exactly fit the case It may interest Our correspondent and the- pubbc < generally i to know that, under.Scctlon 26 of tae.Loans to Local Bodies Act, it is specifically provided that: "All moneys raised under this Act by a local authority shall bo paid into a ■ separate account in the name of the special loan at the bank where tho'local fund.is kept, and shall not'bo drawn out of such account or expended except for the special purposes of the loan." Clause 49 of the SEX 'P 1071^68 a penalty not exceeding £100 against,every member of the Borough i Council who consents to the expenditure of ' such loan money in any manner or foVany purpose other than that for which is was borrowed This aspect of the matter has not yet been raised] '