THE CORPORATION FINANCES.

Evening Star, Volume IX, Issue 2693, 4 October 1871, Page 2

THE CORPORATION FINANCES.

A special and fully attended meeting of the City Council was held last evening to consider a resolution in accordance with an arrangement made with the manager of the Union Bank to borrow LIO,OOO on the credit of the city rates. The Mayor presided. The business opened by the Town Clerk, reading the resolution arrived at by the Finance committee, which was to borrow LIO.OOO on the credit of the city rates, in terms of sec. 98 of the Otago Municipal Corporation’s Ordinance, in 1860, The draft agreement proposed to be sent to the Bank was in effect as follows :—l. That the Bank was to allow the Corporation an immediate overdraft of LSOOO, which, by the end of the year might possibly amount to HO,OOO, but temporarily the average necessary overdraft to be computed at L >OOO. 2. Interest to be charged on the overdraft at the rate of 8 per cent per annum. 3 The Council, on their part, undertake to deposit with the Bank a security for any sum borrowed, City Bonds to a like amount, bearing inteie.t at the rate of 7 per cent per annum, subject to a condition that such bonds cannot be sold without the consent of the Council, except on the Council’s receiving three months notice of the Bank’s intention to realise npon the bonds. 4. In the event of the Bulk selling the bonds, the Council undertakes to guarantee" it from any loss through the possibility of their having to be sold below par. On the documents being read, Councillors Thonemau and Livingston gave expression to the opinion that the arrangement had been hurriedly entered into. The former said he understood that the Finance Committee should call upon the manager of the Union Bank to ascertain what terms could be made, and that the matter would then be submitted to the Council Instead of that, an agreement had been actually entered into. The Mayor explained that the resolution of the Finance Committee, recommending the transference of the bank account, had been endorsed by the Council at its last meeting. Mr Livingston still thought there had been undue haste in the matter. He considered the Finance Committee had no more right to take the steps they had taken than the Public Works Committee would have to spend L2OOO without the consent of the Council. He thought justice bad not been done to the Bank of Utago ; for it should not be forgotten that when that bank took over the Corporation account they could not get assistance elsewhere, and he had heard that Mr Larnach was prepared to offer better terms than any other bank. He should move that the matter be referred back to the Finance Committee, to ascertain if the Corporation could not make belter terms with the Bank of Otago than had been made with the Union Bank. Mr Cakoix-l said Mr Livingston bod spoken under a misapprehension of the facts —had he not done so he would not have made such strong statements. Nothing had been done hastily, and the decision of the Finance Committee was only arrived at after careful consideration. He deprecated the argument that the matter should have been publicly discussed by the Council before any arrangement was entered into; such a course would have placed all parties interested at a disadvantage. It would certainly place t{ie bankers at a disadvantage, because negotiations of that sort were always of a confidential character. The Council would be placed in a somewhat difficult pqsition, because if if; were decided tfiat such matters should be discussed publi ly, it would stand very much in the way of the Council making terras that could be made otherwise. The facts of tfip case were these :—At a meeting of the Finance Committee, held some time ago, the state of the Corporation accounts was carefully considered; a statement of the assets and liabilities, and of the inpoipe and' proposed expenditure of the Council for a few months, was brought forward; ‘ and it wasf alaq foupd that a good deal of accommodation would be required f rq:n the Bapfi. The Mayor then informed the Finance Committee that he had been considering hqw the high rate of interest which the Corporation was paying—ten per cent, per annuifi—coulq be reduced j that be had made it the subject) of conversation with the Corporation bank; ers; that he understood the m a fi a ger of the Bank of Otago would pot make apy cqncesj sion; and that he (the Mayor) had ascertained that another Bank of good standing in the City was prepaied to make a reduction of two per cent, in the rate of interest. Well, the Finance Committee, after having carefully considered all the circumstances 01 the case, resolved not to make any chang6 in regard to the Bank apeoupt, untu a full opportunity had been given tq thq Bank of Otago to make a concession. Ip accordance with a resolution adopted by the Committee, a letter was addressed to the manager of the Bank of Otago, stating that the Committee were of opinion that eight per cent, was a sufficient rate of interest to pay for overdrafts, and requesting him to state whether he would be prepared to reduce his charge to that extent, intimating, at the same time, that the Committee had reason to believe that an account could be opened elsewhere, and that money could be obtained at eight per cent. The reply was a distinct refusal to make any concession. It was not stated in tfiat letter tfiat tfie pift" nagenf the JPipk of Otago Would make reduction equal to that which wight be made by any other Bank : the reply simply contained a distinct refusal, without the offer of any .concession whatever. The correspondence with the Bank of Otago was read. In a letter bearing date September 1, the Town Clerk enquires if the Bank would reduce its rate for the Corporation overdraft to eight per cent., and on the 22ud ult. the acting manager replied it would not give overdrafts at a lower rate than ten per cent. On September 30 Mr Larnach wrote expressing surprise at the withdrawal of the account, stating tfiat fie would have bten prepared to Offer as good'terms as any other bank iu the City; and also that he understood that no change would haye been made until he was a second time communicated wfifi. The action of tfie Fipapce Committee further defended by Councillors Cargill, Mercer, and Neale, and by the Mayor, who went ifito the history of tfie transaction j and ultimately Mr Livingston withdrew all opposition to the report, which was adopted. '