CITY FINANCE

Evening Star, Issue 22451, 23 September 1936, Page 10

CITY FINANCE

TOWN CLERK'S ANNUAL REPORT LOW INTEREST LEVEL FOR LOANS FINANCIAL RESULTS REFLECT IMPROVED CONDITIONS Provisions for the necessary loan requirements for the year have agam been “ easy ” (states Mr G. A. Lenin, town clerk, in his annual report tor the year ending March.3l last). The new low level of interest current at the opening of the year, April, 1935 continued for the greater part of that year, but moved up a shade at the cl»s? of the fiscal year at March, 1936 The upward tendency, however, was not particularly pronounced, and we were successful with the balance of the water extension loan at that time. The amount required was £130,000, and this was raised at an interest rate of 3} per cent, for the full sanctioned term of 2o jears, as against 3i per cent the rate prevailing during the greater part of the previous year. It would seem, however that the low rate of 3i per cent, had broken, and we were exceptionally fortunate in needing loan accommodation at the period of the record low level rate. The details of the loan raising operations of the period are worthy of a place in these records. They are as follows; — -m SSSSSs s c ggqqsq W. ■ P -<? _jT r*T cT cT O Oi s Sow «§ « si a Hwn 2 <i cS es eS : ft) * • U , 'Ji » oa' • w *o_ T? o p 1C .2 m NWSI (N H Q to . a * CS Of* *44 -f* -M if U ** « CO w w o w o _ a a g ®, v P%gl • a g 3 OS 3 £ B o « ,® ■ o S « -3d rH ft ss S 53 j- c - . . Q ® '— ' d . *3 1111 a I T 8 ■® ® g s,k jca j e too Sf, s l 53 a g 5S S s .2 >,.= .2 3 . ° »§SSS®S ft) S H r " 1 rH -a jJ i: . Q aWh “H ls[llgrtO^ Ry comparison with any _ record of car past loan raising activities the figures are unique, and, 'while it may be regarded as a rather bold statement ■ to make, 1 venture the opinion that, unless the future provides an example of a “ triumph of hope over experience,” they will long be so regarded. There is an old Scotch adage quoted / as a guide to investors the effect that, when interest is low, “ buy short, while,’ when interest is high buy Jong.” The wisdom of the advice is fainy obvious, and to be equally prudent, the converse course should govern the action of the borrower. Ihe table above explains itself. The downward trend of interest rates on the city’s loan liability has been strikingly marked during recent years, and the average rate over the whole of our loans fot the respective years may be shown as follows;—1930, £3 5s Id per cent.; 1931, £5 4s 9Jd per cent.; 1932, £5 3s 2fd per cent.; 1933, £4 8s o|d per cent.; 1934, £ABs Oid per cent.; 1935, £4 3s 3|d per cent.; 1936, £4 3s OJd per cent. During the year the total loan liability of the City Council was reduced by the redemption of a £17,000 loan held by the water department, and by the first instalment of annual redemption of debentures under the conversion scheme. On April 1, 1935, debentures to the amount of £112,600 matured and were redeemd. A further amount of £IOO,OOO was similarly dealt with on • pril 1, 1936. THE FINANCIAL RESULTS. The operations of the several branches nr the service in respect of the financial results are worthy of perusal. The declared surplus of £56,925 for the whole of the trading branches, while lower by £12,802 by comparison with last year’s £69,727, must in all the circumstances be regarded as satisfactory. The drop in net profit was spread over practically the whole of the branches, and was chiefly accounted for by the restoration of the balance of the salary and wages “ cut ” imposed in 1931. The full “ cut ” then imposed was 10 per cent.; of this, 2i per cent, was restored at April, 1934, a further 2J per cent, at April, 1935, and the balance of 5 per cent, at October 1. It will therefore be apparent that the lion’s share of the cost of restoration fell on last year’s revenue. Of the total of £12,800 in the drop of net income, £5,957 was accounted for by a decline from £41,451 - at March, 1935, to £35,494 at March, 1936, in the figures of the electrical department. Having regard to the fact that concessions to consumers, estimated to represent about £IO,OOO, were made during the year, and that the first payment to the State in respect of the purchase of bulk supply from Waitaki finds a place in the year’s accounts, the excellent result attained by this branch is at once demonstrated. Indeed, the demand for supply on the undertaking made a remarkable recovery, and the contract with the State more than justified itself in any analysis that could lie applied to it. The other two main branches of the council’s trading—viz., the gas and the tramways—while taking the extra burden cast upon them fairly well, indicate in comparison much less buoyancy in income. The fact is manifest from the relative figures of income, and a perusal of the figures clearly indicates i the steady downward trend, particulary in respect of the gas department. Indeed, the drastic drop" in the net surplus of this department calls for special consideration, and is explained in part at least by the increasing pressure of the electrical branch. A declared surplus of between 10 per cent) and 13 I per cent", on loan capital of 10 years ago is now diminished to about 2 per cent., accounted for to some extent by the increase of capital expenditure, coupled with an income that remains more nr less stationary. I

The allocation of the income of the combine,d branches of £553,520. read with the comparable figures for the past 13 years, should prove interesting. This year’s allocation to working expenses absorbed 40.02 per cent, of the income cf £553,520, }is compared with 45.93 i~

per cent, of last year’s figure of £547,568. Interest took 17.78 per cent., in comparison with 18.51 per cent, for 1935. The renewal and depreciation figures call for some reference, as a portion (£32,000) of the regular allocation under this head was used to provide a special fund to subsidise the pay of the relief workers.

DEPARTMENTAL REVENUE. 1935. 1936. Gas £96,950 £96,964 Water ... £60,233 £61,229 Electric £227,570 £230,998 City trams £133,492 £135,024 Mornington and Roslyn trams ... £29,323 £29,305 CONCLUSION. In concluding a record of the salient features of another year’s operations of the City Council, it is again my privilege to express thanks to the staff in all branches on the results of the year’s activities. It is gratifying to be able here to refer, if only briefly, to the conclusive evidence of a gradual return to better economic conditions, and this is reflected in quite a number of the financial results of the city’s functions. The readjustments that have been made possible as the result of the better times have called for the solution of new problems, entailing a large measure of co-ordination amongst the several departments. In a service so widespread as that which falls within the scope of our administration the task has necessitated dealing with a great variety of matters, the satisfactory solution of which could be attained only by the close co-operation of the heads of departments, to whom once again I desire to express thanks for their readv assistance. The chief clerk, Mr R. A. Johnston, is responsible for the work of assembling the data herein set out, and in that task he has again, shown his customary industry. In the name and on behalf of the staff generally, I wish to express thanks to the mayor and the members of the council for continued consideration and encouragement in many ways. The foregoing record completes the twenty-sixth, annual report with the compilation of which I'havo been concerned. As the duties of my office shall have passed into other hands before the time arrives for the presentation of the records of another year’s activities, 1 may perhaps be permitted the briefest of reference in a retrospective mood.

The progress of the city’s operations over, the past quarter of a century can be most, convincingly shown by a few statistics taken from my first annual report to March, 1911, and set side by side with the relative figures for the year to March, 1936. In the latter figures those of the Drainage Board are included, as in the interval the affairs of that body were included in the city for the purpose of administration. The figures I have extracted are as fol-

lows:— 1911. 1936. £ £ Rateable value of city ... 421,574 (a)l,121,659 Gross income— City 181,234 796,308 Board 20,432 83,147 Loan liability— City 1,177,127 3,274,576 Board 400,000 1,101,500 Accrued Sinking Fund— 28,755 . 504,984 Board 500 78,944 Renewal, Accident, and other liquid reserve funds40,179 594,210 Board Nil 34,481 (a) Mornington, Roslyn, Maori Hill, and Anderson’s Bay added to the city in 1916.