The Guardian And Evening Star, with which is incorporated the West Coast Times. WEDNESDAY, AUGUST 4, 1926. LOCAL BODY LOANS.

Hokitika Guardian, 4 August 1926, Page 2

The Guardian And Evening Star, with which is incorporated the West Coast Times. WEDNESDAY, AUGUST 4, 1926. LOCAL BODY LOANS.

The Local Government Loans’-Bill now ' before Parliament, and which passed its second reading last week, is designed to limit borrowing. It is a useful step to take, but there would be more satisfaction if the Government were beginning nearer home and were designing legislation to restrict their own borrowing methods. At the same time the rate of borrowing by local bodies lias l>een increasing enormously. Within the last ten years the local body debt has almost doubled. This is accounted for mainly by the borrowing of boroughs and electric power boards. The borrowing by boroughs has been for social services relating to sanitation, lighting etc., and the power boards have been borrowing for the development of power and the reticulation of light and power. The counties hav§

borrowed largely, also, for road purposes, indeed it is necessary to do so, if the provision of the Government Highways Act is to be of advantage to the local bodies. At tlie same time all local body loans arc subject to revision by the ratepayers at a special poll for the purpose, so that there is a limit to borrowing in the hands of the ratepayers themselves, but that is not restrictive judging by the marvellous manner in which local body borrowing lias progressed. As a matter of fact there are rather few proposals to borrow- turned down. This may be attributed to the wisdom of the local bodies, which have been careful in the main to put forward proposals which justify themselves, and are therefore prone to meet the approval of tho electors. It is a fact, also, that local body loans are well safeguarded by sinking fund provisions, so that tlieir ultimate repayment without renewals is assured. All loans are secured by special rates, which must needs be collected where the cost of the loan is not provided for otherwise. Loans for light and power, tramways, harbour works, etc., are intended to be reproductive in any case, and to bo both interest earning and lucrative enough to repay the capital cost. Where that does not come to pass, there is the- collection of the rate for ultimate security. In discussing tho Bill in Parliament last woek, the Prime Minister questioned the policy- of borrowing for roads on long terms, and instanced the fact that before the loans had been paid off evidence of the money expended had disappeared, and new material provided out of revenue had replaced that laid down with the borrowed money. It is, of course, not possible for local bodies to construct their roads out of revenue. The demands for maintenance for roads already in existence preclude that. Tt is interesting in connection with the Prime Minister's remarks to note that many miles of road are constructed out of Government grants, the money in thfe main for which is so often found out of Government loan money. And Government loans are not always paid off at due date, but have to be renewed. That process means fresh borrowing to make good money spent on roads, the original principal of which has long disappeared by tho wear and tear of traffic. There was not much opposition to the Bill because it was realised that anything that could be done to limit borrowing was a wise policy- to pursue. The proposed Board will have a restricted effect no doubt, as all such boards must have to justify their existence. But we do not know the position is going to be solved thereby. There is the best test of all in the ratepayers’ poll, which is not held till full publicity of the proposal is broadcasted. At the same time we should hope with the dearer money now prevailing and the completion of many of the larger schemes pertaining to the introduction of electricity, there will lie a natural curtailment of local body borrowing at least for a time.