LOCAL BODIES LOANS.

Dominion, Volume 3, Issue 868, 14 July 1910, Page 6

LOCAL BODIES LOANS.

INVESTMENT OF THE SINKING FUNDS. MR. SIDEY'S BILL. Mr. SIDEY (Dunedin South), in explaining the object of his Loans to Local Bodies Amendment Hill, said that it proposed to exempt the Dunedin Corporation from tho operations of that provision in tho law which stated that tho sinking funds on loans borrowed by lucal bodies from the State must be invested with the Public Trustee in Government securities It would be rcmcinlierod that when Hit! corporation brought (he matter before I ho House last session by petition, it was told by Ministers and members that the proper course to adopt was to bring up the matter by way of a Bill. Ho went on to say that for 37 years tho sinking funds of the corporation had been invested by commissioners who made no charge for their services. As a result of their operations thero had been a net revenue of i\ per cent, over tlio whole of that time. It was his opinion that the most that could bo expected if the funds wero invested through the Public Trustee was .1 per cent, to 31 per cent. Tho direction of the legislation i:i question was to take power out of the hands of tho local bodies. It had to be remembered that the local market wan robW if the funds were invested in Government securities. Tie hoped thai members would approach (he Bill with an open mind and vole impartially. Local or Public Bill. Mr. "RUSSELL (Avon) raised tho point of order as lo whether the Bill was or was nol a. local Bill. Mr. Sitlev contended that: (lie deci.-ions were clear on tint point-it «■«.» a public Bill in Unit it amended a public Act. ■rj, u spEJj£liß, Raid that he bad ao

hesitation in ruling that the Bill was a public Bill. There was nothing (he added) to prevent tho insertion of the names or other corporations in tho title of tho Bill if it got into Committee. Mr. Massey: Or strike out Uunedin. (Laughter.) Jii conclusion, Mr. Sidey slated that tho amount accrued in connection with the Dunedin corporation's sinking funds was ever .L' 300,000. Mr. GLOVER (Auckland Central) said Auckland was affected to the extent of .£130,0(10. The sinking funds there were capably administered by gentlemen ivlin took a delight in I heir work. The funds in Auckland were earning 5} per cent. Views of Mr. Myers. Mr. MYERS (Auckland East) said the municipal authorities resented very much these funds being taken out of their hands. In this case centralisation was in no way justifiable. The last two loans floated by the Auckland City Council were floated at £VS net to the council, and the rate of interest was four, per cent. If the Government took out of local bodies the functions rightly appertaining to them, it would lower tho standard of civic activity at a time when it was desirable, by making the duties as attractive as possible, to encourage the best men to come forward. He hoped the Bill would bo amended so that other local authorities who desired to obtain the benefit conferred by it wonld bo able to do so. Mr. LUKE (Wellington Suburbs) said that when the Wellington City Council asked for a loan under last year's Act for tho construction of the Wadestown tramway the Prime Minister stated that that, loan measure was not for the purpose of assisting tramway construction so much as for the extension of drainage and water .works, etc. If a city like Wellington was kept out of the provisions of the Act it was only right and proper that the larger municipalities should have the control of their sinking funds, lis had never heard of anything in regard to these funds being other than right and fair. The Wellington City Council had set aside sinking funds at a considerably improved interest compared with what the Government were prepared to givo under the new Act. Mr. E. M. THOMSON (Dunedin North) supported the Bill, and expressed the opinion that the Public Trustee could not deal better with these funds than did tho city councils. Prime Minister's Attitude. Tlio PRIME MINISTER said he had never reflected upon the way in which tho local trustees had invested sinking funds. The Act of last year referred to new loans only. They should recognise the tremendous and uniquo advantage that, was being conferred on local bodies by the new law. It was no use comparing interest on investments under the two systems, and saying that tlio average was reduced from 51 per cent, to (Si per cont. Tho average of 5J per cent, was taken ovor the whole period of investment, and during tho last ten years tho fall in tho rate of interest had been phenomenal. Tho advances to local public bodies, including tho authorisations of tlio State Guarantco Advances Department up to the end of last month, amounted, without subsidies, to about .£4,700,000. The security of the State was a great advantage to the local body, and the rate of interest obtained was such that local bodies should hesitate before they attempted to alter the basis of the whole scheme. They could not exclude one cityalone from a system which was designed for the purpose of obtaining cheap money for advancement to local bodies. If they wero to include Dunedin in the Bill other towns would want to be included, and the measure, which was now a local Bill, could be made a general Bill in Committee by the inclusion of other towns that wanted to invest their own sinking funds. It was not fair that these municipalities should bo able to ask the Government for money at 3.V per cent, and annual subsidies, and that the investment of future sinking funds should not be with the Public Trustee. The loans granted to Auckland local bodies in the last fewmonths totalled probably .£IOO,OOO, and yet this proposal was supported by Auckland members. If those members were willing under a schedule to the Act to have their municipalities excluded from the advantages he had referred to they could do so. Mr. Massey: In that case you collar tho sinking fund. Sir Joseph Ward: Then I will make a provision that we shall not collar it. It was not right to say that all tho local bodies were in favour of the system that obtained prior to last year's Act. He would not. bo bound by any resolution of a conference when he knew that the matter had not been discussed by all tho public bodies of. the country, and that their opinions could not be represented by the resolution. Local bodies could not have their loan cake and eat it. Tho same conference had asked for advances from the Guaranteed Advances Department at 31 per cent, to pay off all their loans, aggregating several millions sterling. The tendency of the Bill was to ask Parliament to. keep up the rate of interest, locally in the interest of the lenders, even though the lenders were municipalities, and ho did not think tho tendency was a good one. It was to the general advantage that there should bo a lower level of interest. Was it right, also, that there should be ono system for tho principal municipalities and another for lesser local bodies? In New South Wales tho whole of tho sinking funds were invested in, Government securities to assure to tho world at large that the security of the country as a whole was behind the investment of these finds. Strong Opponent of the Bill. Mr. FISHER (Wellington Central) was opposed to tho Bill. If members knew as much about, sinking funds as ho did they would vote against it. Tho original Bill was entirely justified, and before it was brought, down, he discussed a similar proposal with tho Attorney-General who said that he would bring it under the notice of tho Government. If Mr. Luke would get certain letters from the Wellington City Corporation he (Mr. Fisher) would let members judge on certain information which was in his possession. The not result from the investment of sinking funds in Wellington hud been £i 17s. 6d., but there had been losses in tho way of delays in making investment's and the fact that some of tho investments might be doubtful. To his mind it was improper that two of the sinking fund commissioners for a corporation should be the Mayor and the Town Clerk. It was not tho position in tho case of Christchurch Mr. Myers: Nor in Auckland. Mr. Fisher went on to refer to sinking fund transactions by the AV'ollington City Council, which, he said, wero a complete justification for the introduction of the original Bill. There were even now members of that council who did not know the full details in regard to any one negotiation undertaken by the sinking fund commissioners. Mr. Myers: In Auckland a quarterly statement to the council has been required since I took office as Mayor. Sir Joseph Ward: Hear, hear. Mr. Luko (to Mr. Fisher): You wero on the City Council at the time. Mr. Fisher: No, I should have been delighted if such had been the case. In conclusion, Mr. Fisher referred to f t loan on a flax property. That his views on the question of the security were not incorrect had since been shown by the fact that the advance had not been renewed. The I'RTME MINISTER said he wished it lo be clearly under.-Umd that the Act passed last year was mil brought forward in cnnseciuouco of trouble that had occurred in Wellington. The proposal had been in his mind three years before. Remarks by Mr. Wilford. Mr. WILFORD (Ilutt) criticised the Prime Ministers justification of the Government's action in annexing (he sinking funds of local bodies. If all the members were likely to bring their municipalities under this Bill, I hat seemed to be on argument in favour of tlio measure, anil for the repeal of last year's Act. It indicated that local bodies were not convinced that the legislation of last year was to thpir advantage. The | Municipal Conference had not asked the Government to advance the money to wipe out local bodies' loans, but (o assist {hem to negoliale for loans through the Government 's agents and advisers at Home. Ho did not: see why votes should not be made lo road boards and other minor boilics. as they had been in tho past withnul any reference to this measure, In Reply to Mr. Fisher. Willi reference to a Karon loan transaction, referred to by Mr. Visiter, it had in )« remarked that tlio then.

Mayor's firm were the solicitors to the .suburban corporation. Then, again, it had to be borne in mind that the commission would have had to be paid to someone. As regards the advance on the ilax property, it; would be well to point out that it find since been repaid. Those, then, were the only instances that Mr. Fisher had quoted. It was his personal opinion that tho Mayor should not hold ollice as a sinking fund commissioner, and since ho became Mayor of Wellington he had given notice in that direction. Mr. SIJJEY. ii. reply, wanted to knowhow the Government could lend out moneys to the local bodies at 31 per cent, if they were to get -i per cent, on their sinking funds. Sir Joseph: We don't lend out those moneys. Mr. Sidey went on to say that he did not believe that the Advances scheme introduced last year was conceived when it was decided to have the sinking funds of local bodies invested in Government securities. Upon a division, the second reading of tlio Bill wis lost by 35 votes to 2S. The division list was as follows:— Ayes, 58.—Anderson, Arnold, Bollard, Buchanan, Buick, Buxton, Divo, Field, Eraser, Glover, Guthrie, Hardy, Herdman, Herries, Lang, Luke, M'Lareu, Malcolm, M under. Musscy, Myers, .Newman, Nosworthy, Okey, Poole, Sidey, G. M. Thomson, Wilford. Noes, 35.—Brown, Buddo, Colvin, Craigie, Davey, Dillon, Hon. T. Duncan, Ell, Fisher, ' Forbes, Graham, Greonslade, Hall, Hanan, Hogan, Hogg, Jennings, Lawry, Macdonald, Hon. R. M'Kcnzic, Millar,' Parata, Poland, Heed, Boss, Russell, Seddon, Smith. Stallworthy, Steward, E. H. Taylor, J. C. Thomson, Ward, Witty, Wright Tlio House then debated Mr. Newman's Bill to abolish tho bookmaker. A report, of the discussion will be found in another part of litis issue.