PRICE OF STATE ADVANCES.

Dominion, Volume 6, Issue 1726, 17 April 1913, Page 9

PRICE OF STATE ADVANCES.

WHANGAKEI'S PREDICAMENT. (By Telezraph.—Special Correspondent.) Auckland, April IG. Can a contract be' broken by a State Department under the authority of an Act of Parliament? This is tue question that is now engaging the serious attention of the Whangarei Borough Council. It has arisen as a result of the operation of tlic retrospective legislation lust year, by which provision is made that the gross rate oi interest (it winch tho money is obtained by the State Guaranteed Advances Office, with an addition of one-eighth per cent, to cover the cost of administration, is 'to be the rate at which' the advances are to be niadc by the Department. The matter is one oi wide interest to all other local bodies who' during the last few years have obtained loans from the New Zealand State Guaranteed Advances Department. In June, 11)11, tho AYhangarei Borough Council decided to raise a loan of for street improvement purposes, and borrowed the money from the Advances Office at !ii per cent, interest, with an addition of 14 per cent, for sinking fund. The council arranged that the money should be. advanced in instalments of ,£IOOO a year for four years, with a final payment in the fifth year of ,£3200. This arrangement was made because it was estimated that the expenditure of tho whole amount would occupy five years, and had the council accepted the loan in ono sum it would not have been able to reinvest the money at a remunerative rate. The council has received and expended the first two instalments cf the loan, but it now finds that according to the New Zealand State Guaranteed Advances Amendment Act, 1912, the rate of interest for tho remainder of the loan has been advanced to -li per cent. Correspondence with the Department has elicited the information that the rate of interest had to be increased on account of the stringency of the money market. The New Zealand Municipal Association lias also been communicated with, and a legal opinion has been obtained that the balance of the loan was . simply held in trust, and that the increased rate' of interest was illegal. The-Municipal-Association has also suggested that the local body should ask the Superintendent of the Advances Office to join with it in obtaining a declaratory judgment from the Court of Appeal interpreting the Advances Amendment Act nf 191!!. Some little time ago the Dr.rgavillc Borough Council found itself in a similar predicament, but it solved the difficulty by striking a rate to cover the increased interest, asked by the Department. . „ , „ ... If the Whangarei Borough Council is unsuccessful in the present negotiations with tho Advances Department for joinlo action to secure an interpretation of the amending Aot, it intends to carry the case to the Appeal Court.