The Hokitika Guardian FRIDAY, MARCH 31st, 1922. LOCAL BODIES FINANCE ACT.

Hokitika Guardian, 31 March 1922, Page 2

The Hokitika Guardian FRIDAY, MARCH 31st, 1922. LOCAL BODIES FINANCE ACT.

The Local Bodies Finance Act passed during last session was devised to limit the borrowing powers pf local bodies. Although it does accomplish that object in a sense its provisions open the way at the outset foi local bodies to secure additional hanking Hccomnvodatjio'n. In effect the measure provides that all overdrafts of local bodies at to-day’s date—which is the close of the financial year—shall (a loner with any deposits held by local bodies) be deemed to be the antecedent liability,” and as such the bankers are transferring this overdraft amount to a new account, which tho local body is called upon to liquidate h v loan or otherwise within a reasonable time. If by loan, the local body has to obtain the approval of the authorities to the conditions for borrowing, and may strike a security rate over the whole district, to cover the liability. Or, the local body may determine to pay the amount off within seven years by equal payments from money derived from revenue or a special rate. To that extent the original overdraft is determined but meantime a further overdraft may be obtained from the local body’s bankers to carry on. The legal limit of this overdraft is 73 per cent of the previous year’s revenue, and may not exceed at any time the revenue uncollected and outstanding. Therefore, to-morrow the local bodies throughout the Dominion will be in the comfortable position of being able to secure considerable fresh credit with their bankers if such be required and with the financial position easy, will be for the time at least in a contented position, In this regard it is rather interesting to note that “antecedent liability” refers only to actual overdraft as at this date. If

a local body has a number of tinpresent cheques or cheques held back because under the overdraft to Ik; closed to-day, the limit of debit may already be reached, these cheques, do not come within the definition of the "antecedent liability” and to-inortinv they will be a debit against the new accounts to be opened. In some cases this might be of assistance to local bodies which through the limit of overdraft being readied, have found the financial position very stringent. At all events for a brief interval the} will enjoy financial relief up to the amount of the new credit the bankers will grant. ‘When the local bodies set about the liquidation of tho “antecedent liabilities” by loan there will be a heavy demand for money, and this demand which is sure to exceed

the supply readily available, will mean a hardenng of lending rates. Ljooal bodies are not likely to pay more for the money than current bank rates, and the alternative to borrowing in that event would be local taxation to wipe out the debt within seven years. Whichever course the local bodies have to resort to, the conditions will lie more or less, irksome, and will Tinpose additional expense in the administration. The legislature appears to have adopted a clumsy course to attain the object in view. It would have been more simple to have enacted a law defining the specific limit of overdraft and local bodies in excess of that could be called on to pay off the difference between the limit and the excess and then attempt to live within their means. There would be less dislocation of the money market and less credit for the local bodies suddenly to operate upon as they will have the chance tomorrow when the new accounts are opened.