THE Hauraki Plains Gazette With which is incorporated THE OHINEMURI GAZETTE. Motto: Public Service. MONDAY, WEDNESDAY, & FRIDAY. MONDAY, JUNE 19, 1922. LOCAL BODIES’ FINANCE.

Hauraki Plains Gazette, Volume XXXIII, Issue 4429, 19 June 1922, Page 2

THE Hauraki Plains Gazette With which is incorporated THE OHINEMURI GAZETTE. Motto: Public Service. MONDAY, WEDNESDAY, & FRIDAY. MONDAY, JUNE 19, 1922. LOCAL BODIES’ FINANCE.

. * Though the various local bodies have dealt with their antecedent liabilities as required by the new legislation, there are still problems confronting them and their ratepayers. The purpose of the Local Bodies Finance Act, 192122, put on the statute book at the last session of Parliament, is, as stated therein, to provide and limit borrowing by local bodies for revenue purposes, the presumption being that the existing legislation providing for local bodies’ overdraft and borrowing powers was defective and possibly obsolete. The intention of this Act is to alter and improve the conditions existing prior to the enactment. Considering what is an improvement, it may not necessarily mean that to give the local bodies increased borrowing powers would be an improvement, as it may be to the detriment of the State as a whole. It is provided that local bodies can only borrow in a manner laid down in the Act, and the Act provides and limits the borrowing for revenue purposes. Revenue is defined to mean all moneys receivable by a local authority during any financial year other than moneys which are the proceeds of loans raised, by or on behalf of such authority. The essence of the whole Act is contained in section 9, which says, subject to the Act, every local authority shall provide for its ordinary obligations and engagements in any year out of its revenue for that year, and where it enters into contracts that by the nature thereof extend over more than a year the local authority shall, , as far as possible, estimate the amount required for any such contract in each year, and make provision in each year accordingly. Estimates of expenditure to be incurred must be made, ■ and also provision for recurring expenditure. A rate must then be levied to cover the estimated expenditure for that year. It is the intention that the local bodies shall obtain in advance the rates which are payable 14 days after the demands have been issued. Having got the rates the bodies may carry ..out the works for which they levy them. In practice, however, it is found that the rates cannot be collected in advance. It is also found tliat

works must go on, and to cover that there has been power given from time to time to the local authorities to borrow by way of overdraft in anticipation of the revenue levied coming to hand for that year. That provision has been such that local bodies have, generally speaking, used that power to borrow within an easy distance of their limits. It has often been found extremely difficult to pay off that overdraft which has been carried forward from year to year. It could not have been the intention of the Legislature that the power given to borrow in anticipation of revenue should have been created a continuous and heavy overdraft. Possibly one of the reasons for the local bodies getting into that state is the restrictions that have been imposed by Statute on local bodies raising money by loan for capital expenditure and the comparatively easy method of paying for it out of overdraft. With the advance in the methods .of the construction of works within their respective jurisdiction local bodies have found it compulsory to procure certain plant, such as road rollers, tractors, quarry plant, and other machinery. It is quite easy to pay for it out of the overdraft, but it is sometimes difficult to obtain it by loan. A large portion of the Hauraki Plains County overdraft has been made up of capital expenditure, such as the purchase of punts, quarries, tractors, graders, horses and drays, and housing expenditure. In the case of other local bodies the floating debt or overdraft has been created by unusually heavy expenditure, such as flood damage, bridge repairs, and Royal Commissions. No doubt the Local Bodies Finance Act, 1921-22, is an endeavour by Parliament to remedy the position, and incidentally to free a large floating debt (possibly over £2,000,000) being carried by the banks. This large amount will now be partly freed for industrial purposes. A large amount of money will be borrowed outside New Zealand, so that generally speaking the intended result of this Act will be to ease the financial position of the country, and it will compel the local bodies to get back into the position that the Legislature intended that they should be in when it gave them power to borrow by overdraft—namely, to borrow solely in anticipation of the current year’s revenue. This Act in its limitation of the power of local bodies provides that they may, in anticipation of revenue, borrow from their bankers/ or any person or persons, by way of overdraft a sum not exceeding three-fourths of the revenue for the preceding year, and it must not owe at the end of the financial year more than such part of the revenue as then remains outstanding. One defect in the Act is that while at the end of the year the local bodies can have an overdraft not greater than the revenue for that year outstanding, the following year a local authority would have to collect not only sufficient to provide for its expenditure for that year, but also sufficient to pay off the greater part of the newly created overdraft, because at the end of the second year the amount of the overdraft would be governed by the amounts of the second year’s rates outstanding. ■

There is also added what was not existent before, and that is a personal liability on each member of the local authority if the limit prescribed by the Act is exceeded. From now on, if the local bodies are to carry out the purposes of their existence they must obtain payment of 'their rates in advance or within a short period after striking their rates, otherwise they will be m the position of having to close down their works under a penalty of personal liability through a breach of the Act. It therefore behoves all ratepayers to not only pay their rates as soon as possible, and thus save bank interest, which indirectly falls back on the ratepayers, but also to induce their fellow ratepayers to pay promptly, otherwise it will be a case of the willing horse having to carry the added load of bank interest and the defaulting ratepayers.