CITY FINANCES

Evening Star, Issue 20136, 28 March 1929, Page 11

CITY FINANCES

Reduction of Rates Recommended Illuminating Report by Town Clerk Dunedin’s Favourable Position The meeting of the City Council on Wcdnesda night will have befoi it for consideration the estimates of receipts and expenditure for the year ending March, 1930, the duet feature of which is a recommendation by the Finance Committee that the rates bo reduced from 4s 6d in the £ to 4s 4RI.

The Finance Committee reports that a report by th town clerk deals in detail with the financial position, and also furnishes interesting tables giving a comparative analysis of the items ot receipt and expenditure over a period of years, giving in addition statistical matin - relating to the rating and borrowing in the tom chief centres. It should he noted, states the committee, that fho statement was compiled prior lo the recent flood Allocation of funds for flood relict and preventive measures will, however, ho required to stand a ion and be provided for by other means. The figures set out indicate that it will bo possible to meet requireinents ior the incoming year by reducing the general rate by one penny in the pound —i.c., from 2s Id to 2s. It lias been found possibl to meet the demand of the Hospital Board with a rate of s}d in the £ in lien of txl in the £ to give flie total sum ot £B,IOO. The water rate will statu tu at present, and the present drainage rate will also suffice for the incoming year '['ho rates to brie vied this year arc therefore as follows. those for last year being given for comparative purposes:— 1929-30. J 928-29 s. d. s. d. General rate ... 2 0 2 1 "Water rate ... 0 0 0 0 Drainage rare ... 1 2 I 2 Hospital rate ... 0 -if (I 6 Totals ... 4 -H 1 0 UNEMPLOYMENT RELIEF Prefacing his estimates of the receipts and expenditure for the year beginning next month, the town, clerk mentions that the past year’s income of the genera! account was estimated oy him a year ago within £IOO of the actual income of £199,234. Ho was almost equally accurate in regard to the expenditure, disregarding £5,02U spent on unemployment relief the previous year, which was made a charge on the closing year’s expenditure; disregarding also £3,230 similarly spent this year out of the council’s funds (swollen by Government subsidy to £0,772). This £3,230 is being made a charge against the coming year’s income. The policy of charging relief work to income and distributing its cost by charging some of it to the future is preferred to borrowing for relief work. ‘’To impose a sufficient rate to find the money for relief of unemployment year after year (he proceeds), when that rate must ol necessity be imposed uniformly and without the least discrimination, on all rateable property is to inqio.se a portion of the charge upon the very people who are themselves amongst the ranks of the work-seekers, and who may not even he absorbed by the work tints created, to say nothing ol the lar greater number who arc on the border Jins owing to their limited financial resources. This very serious drawback in the statutory provisions by which we are supplied with the finance necessary to manage our cities has been mentioned on many occasions. What is required is some system that is more closely akin to the principles underlying the State income tax. With some such system there would be loss excuse for the ‘ save the rates ’ slogan than is the case at present. RATE REDUCTION POSSIBLE “ Attention may now be directed to the draft statement which constitutes the budget for the incoming year. Referring, in the first place, to the estimated income, the matter of prime importance no doubt will be in regard to the product of the - rate. Last year the council imposed a general rate of 2s Id, or an advance of one penny over the rata collected for the previous year. The additional penny was to repay to the account the expenditure on relief employment for the year ended -March, 1928. This rate of*2s Id for the year about to close produced an income ol £120,500. The same basic rate on this year's assessments would amount Lo £135,205. The draft statement has been drawn, however, on the assumption that the additional penny added last year would not be' continued during the incoming year, and this is made possible by the increase in the rateable valuation of the city. Whereas on last year’s valuation figures a rate of 2s Id produced £126,500, on this year’s valuation a rate of 2s produces £129,797. it would seem, therefore, that if the draft expenditure as submitted be regarded as reasonably likely to meet the requirements for the year it is quite possible to revert to a general rate of 2s in lieu of the 2s Id imposed last year, in spite of the fact that £3,230 of the income of the new year has been spent in advance, as already explained. INCREASED INTEREST CHARGES M The attention of the committee lias been frequently directed timing recent years to the steady increase in the demand on the genial account to meet the interest and oilier charges on the borrowed money expended on the works covered by this account The works in question, it should hardly be necessary to explain, arc those so-called non-productive works, such as street construction, in contra-distinction to the activities of the several- trading branches of the council’s business. The interest ami, all other charges in reaped of this latter class are paid from the respective trading accounts direct, and have no connection with the general account with which I am now dealing. “ fn the figures of the year just drawing to a close this charge for interest, sinking fund, and incidental charges on loan moneys is represented by the total of £54,009; the estimated demand for a like purpose for the incoming year is £57,360, or an increase of £3.351. As provision is made for practically the whole of the authorised loan moneys in respect of this account in the sum named, this year’s demand can be regarded as having reached just about its maximum under the loan liability of the general account as it stands to-day. The total income of a rate of 2s in the £ is shown as £129,797,

based on this year's increased rateable values, the charge for interest, sinking fund, and other standing ebarges on loan money is £57,360; that is to say that 44 per cent, of the product of the general rate is absorbed in covering the charges on borrowed money. Expressed in another way, it means that 8s 9Jd of each 20s contributed lo tlic general Account as direct rate is required for I the purpose named. Apart then from this heavy call for standing charges on borrowed money ami its effect on the rate income the only untoward circumstance that calls for notice in respect of the receipts side of the statement has reference to the transfers from the trading accounts. TRAMWAY ACCOUNT In last year’s report on the estimates f expressed apprehension regarding the ability of the tramway account to withstand the transfer in relief of rates on the basis then prevailing. That apprehension, unlortnnatoly, has been proved to be fully sustained, and while the actual position of the several departments at balancing date cannot be definitely stated, it is quite apparent that this year the tramways will not mini sufficient to make, a transler of £6,652 to the general account. On the. draft the amount suggested for transfer is £4,682, or a reduction of £2,()UU. To retain the total of £31,940 as the amount, to bo contributed by the combined trading brandies to the general 1 account, the additional sum of £2,000 lias been levied on the gas and water accounts on the expedient that each of these is able to hear the ransier. The alternative is to curb the expenditure side of the draft or to raise the £2,000 by other means. A revision of the general rate appeal's the only source from which such additional income could bo obtained. WORKS EXPENDITURE “ In the matter of the requisitions made by the spending branches, tlic first to call for notice is that by the Public Works Committee. The vote to this committee last year was £54,860. The actual expenditure by the end of the year may be a few pounds in excess of that sum, but generally speaking the vote lias not been seriously overspent, in spite of a certain amount ot special expenditure due to the damage done by the heavy rains during January, This year the requisitioned for a vote of £62,314, or nearly £3.1)00 in advance of last year's allocations. On the clralt the sum of £58,000, or £3,000 above last year's figure has been tentatively shown as the utmost that can be provided on the basis of a general rate of 2,5. Last year we received the sum of ,£5,732 by way of our share of the Petrol Tax. This is new revenue ami is specifically earmarked for expenditure on city streets which arc a continuation of main highways. It is from this fund that iho reconstruction of George street is being done, and earlier in the year .some expenditure was made on the South road from a like smite. It is thought that the relief that will be afforded from the proceeds of the Petrol Tax together with in increased vote of £3,000 over last year’s allocations should meet the position for the incoming year. In the matter of what might be called street main wan ice it is further to be noted that this year’s list contains a total of £1,825 ns contributions by tlio city towards the upkeep of roads outside our boundary. £I,OOO is allocated to the Portobello road, £325 to the Green Island road, and £SOO to the West HarbourPort Chalmers road. These contributions in reality have the effect of curtailing the expenditure on our own streets, and give emphasis to (ho increasing difficulties that are presented under the head of street inaiuteiMme. “ The requisition for .sanitary services is up by a shade over £1,600. duo to the increased cost of disposal of house refuse. This is explained by the fact that a new dumping ground has to be provided, and this entails a longer carting distance and the call for increased plant. There is no possibility of the use of the pruning knife in connection with this item. RESERVES DEPARTMENT “ The total vote for which the Reserves Committee requisitioned was reduced this year by some £1,900 on last year’s figures. That is due to the fact that last year we expended £2,700 on the pavilion on Logan Park, in addition to some £520 expended on drainage for certain playing areas. The only outstanding item in this year’s figures for this branch is .the sura of £I,OOO for a dressing v i I ion on the Bogan Park area. Tlic building proposed is to cost £2,00(1, and the other half of the cost is being found from sources outside ouy funds. For that reason it seems desirable to retain the item. While it is to" be admitted that a very large sum of money has come in this way from outside sources towards tho conversion of the Logan Park area into a playing field, it is also evident that tlu extension of the playing areas and tho addition of new areas must obviously impose a growing demand lor their yearly maintenance. HOSPITAL BOARD DEMANDS “ In taking a comparative view ot the budget requirements for tho year it becomes necessary to enquire regarding the probable demands by the two local bodies, who, in pursuance of the statutory powers, call upon tlic city to collect their rates for the year. Last year the Hospital Board’s demand for £29,596 was met by a separate rata of sixpence in the £. Wo have not yet received the board’s demand for the incoming year, but inquiry indicates that the amount for which we are to be responsible will he about tlic same as last year. Should that prove to be the ease the sum this year can ho mot by a rate of oid, due to tho increased rateable valuation ot the city. A similar fortunate circumstance applies to the Drainage Board,

for her© again it is possible to meet this year’s demand without increasing tho basic rate in spite of the fact that tho expenditure side of the statein the basic rate, and questions are ment. shows an advance of £4,265 on the current year’s outgo, of which amount the addition charge for interest and sinking fund accounts for £3.200. THE VALUATIONS On this subject of tbo proceeds of our rating income duo to the increase in the rateable valuation of the city the criticism is sometimes made that, despite tho increase in the assessments, one never hears of a reduction in the basic rate, and questions are asked regarding the disposal of this increased income. Comparison of the figures for 1923 with those of this statement are an answer to those inquiries In the first place, it is to hi noted that in 1923 the general rate was 2s 2d, on the present draft it is figured at 2s. 'That extra twopence on this year's assessments, if imposed to-day, would provide an additional £II.DUO. On the expenditure side tho total under the head of public works, lighting, and land purchase (almost entirely For street widening) has risen from £58.000 in 1923 to £71,000 this incoming year; yet the percentage of the total income of the account for the two years for which comparison is made is in favour of the earlier period. In 1923 we spent 42.43 per cent, of our income for the purposes mimed, while in the incoming year wo have shown on the draft only 35.07 per cent, on tills year’s higher income. The explanation is fairly patent; In 1923 interest and sinking funds accounted for £29,788, or 21.70 per cent, of that year’s income; for the coming year the figure has grown to £57,360, which is equal to 28.14 of tho £202,421 of estimated income for the year. It is a consideration of that fact that has impelled me on several occasions during recent years to direct, attention to the growing demand for standing charges on borrowed money for works of the class which, ior the want of a bettor phrase, we call “ non-produc-tive.” Mr Lcwin then goes on to quote tables which show that of the total income of £136,693 in 1923 the percentage ot the total was spent on various departments ns follows, the percentage of the .£202,421 estimated for 1930 being given in parentheses ;—General rate 66.56 (61.12), rents, fees, and charges 15.61 (14.77), sanitary charges 1.07 (.37), incidentals 1.6 S (2.05), cemetery, baths, etc. 1.91 (3.41), transfers from trading accounts 13.17 (15.25). On tho expenditure side lie shows that while in 1923 the percentage of the £58.000 spent on pnlilc works was 42.43 per cent, of the total, the percentage of the whole on the £7.1,000 estimated for 1930 would be only 35.07 per cent. In regard to interest and sinking funds he shows that in 1923 the £29,788 was 21.79 per cent, of tlic whole, while in 1930 tho £57,360 would he a substantial increase in representing 23.41 of the whole. CITIES COMPARED In other tallies Mr Town shows that Dunedin stands in a very favourable light whe nthe rating of the other three cities is considered. The rates per head of the tour cities are given as follows;—Wellington. £400; Auckland, £5,139; Christchurch, £3,520; Dunedin, £3.622. Tho net debts of the four cities arc: Wellington. £4,(155,002; Auckland. £5.8(57,0]3 ; Christchurch, £2,589,677; Dunedin, £3,005.696. A brief reference is necessary before it is possible to assimilate the figures in their true light. 'Take tlic total debt and compare, say, Wellington with Dunedin. Included in Wellington's £4,955.508 is £1,586.2Ui invested in productive undertakings trams, £559. ‘-’OO in electric supply, £BO,OOO in milk supply, and £15.000 in abattoirs. Deducting this productive borrowing leaves a balance of £3,369,301 as their iion-prodiictivc loan liability. Included in Dunedin’s £3_.299,715 of total debt wo had in 192 i, the year to ■which the figures refer, a total of £1.501.300 invested in directlv reproductive undertakings—£l47.2oo in gas, £434.000 in tramways, £9] 4.200 in electricity supply, and £B,BX) in abattoir. If’then we deduct this sum from the figure shown as our total it will be seen that olir position 'is greatly improved, inasmuch as while in our ease 45.5 nor cent, ot the total debt is invested in profit-earning ventures, in the ease ol the northern city with which tlic comparison is made the relative figure is 32 per cent. A fact to bo further noted is that in onr case the total debt includes the head works of the electricity bra neb, which does not occur iu any of tlic other centres. DRAINAGE BOARD ESTIMATES The estimates of the Dunedin Drainage and Sewerage Board show that the estimated receipts are £81,520, based upon the same basic rates as we levied last year. Last year’s rate income amounted to £75,600, and it is estimated that a similar basic rate this year w ill produce '£Bo,ooo. 'lbis is duo to the increased valuation ol rateable property in tho city. Tlic expenditure side indicates that the estimates for standing charges on loan money, ordinary jnaiiiteiiace, and provision for renewal fund of £2,->OO can be met, and the total kept within the compass of the estimated receipts. The yearly demand for interest and sinking fund for the incoming year will be increased by £3,200 over tho relative figures for last year. 'The draft statement now submitted lias no connection with the cost and provision for new works that may bo undertaken during the incoming year. There is an unspent loan authorisation of £84,666 still in hand, the balance of tho final authorisation of £250,600. If the policy of the board is to accelerate the progress of the works at a rate (hat would be likely to absorb more than this sum of £84,666 by, say, August or September of 1930.'then it would ho necessary to get authority from I’arliainent during the forthcoming session lor further borrowing powers. In view of tlic happenings of last week, it is worthy of note that since tho flood of 1923 the Drainage Board has expended a total of £281.334 within its area. Tho great bulk of this sum has been expended on the more adequate provisions for dealing with storm water disjios.il, the necessity for which camo to light in April, 1923. It is necesary to recommend the board to pass the usual resolutions calling upon, tlic local authorities concerned—that is, the City Council and St. Kikla Borough—to levy and collect the rates for tho incoming year.