DUNEDIN MUNICIPAL TRADING INVESTMENTS.

Otago Witness, Issue 2815, 26 February 1908, Page 36

DUNEDIN MUNICIPAL TRADING INVESTMENTS.

A comprehensive report on the financial working of the Dunedin municipal trading ■ departments — electric power, tramways, gaswork.-, and water supply — has been prepared by Mr J. Small, chairman of the Finance Committee. Generally, the tenor of the report is to the effect that sufficient allowance is not made for depreciation, and that the Sinking Fund, which should go towards meeting the leans for carrying on the City Council trading departments, is inadequate. Mr \ Small -gives the following SUMMARY OF THE POSITION. Summing up into one table the figures at which I have arrived in my consideration of the foregoing trading departments of the Dunedin City Council, the following are the I results : — ■£"* ■** ' to 'i~* p. >x 3 . ■ii-i iai ■ Department a M §a S Profit. Loss.

That -is to say, that after providing for an annual estimated, charge for sinking fund and depreciation of £30,000, the city will make an estimated net profit, to be utilised as the council see fit, of £14,648. CITY'S TRADE LOAN INDEBTEDNESS. Our loans hi connection with our trading concern*, when the new gas loans are floated, and when the additional loans that will yet be required to complete the "first installation of the Waipori scheme are ar- i ranged for, will be as follow : —

This is, if not an alarming, a very eignij ficant amount. Nor is this all. There is i Another heritage of debt to which we will ultimately become heir— viz., the indebtedness of the Drainage Board of £400,000,— against which there is no sinking Ixmd provision. Together, these will amount to about £1,200,000. With such a prospect, it is our imperative duty as representatives ' or the ratepayers and prudent business men, to at once Bet about making adequate provision for lightening this very responsible burden by adapting it to the measure of our capacity. HOW TO PAY IT. Of this large sum, about £444,000 falls due in 14 years. In the meantime the only provision that is being made for meeting that amount is an annual payment of £1500, which at the time the loans fall due will, with what has already accumulated, amount to about £35,000. With such a lajge amount falling due on one day, and with such utterly inadequate provision for meeting it. the then City Council will be hea%ily handicapped in its endeavour to renew, even if it succeeds in doing so at all. If the. council adopt the proposals I have made, the amount available when the above amount falls due would be about £94,000. Three years after the above-mentioned £440,000 falls due, other loans to the extent of £124.725 become payable, against which ( there is now being set aside each year the | munificent sum of £33. • We often hear of the splendid benefits posterity will receive from the undertakings that will be handed down to them, but if the cityV sinking fund arrangements are not altered, what posterity will receive, as far as the tram 6 and Waipori are concerned, will bp two trading concerns that cost £600.000, half worn out, with the original debt intact. A similar comment will apply to the balance of our trade loan indebtedness, amounting to £280,000. SUGGESTIONS AS TO THE FUTURE. With regard to the invest ment of the sums to be set apart for depreciation, I beg to make the following suggestions: — As the property of the ratepayers is responsible not only for the repayment of : the £880,000 borrowed for the construction . of these works, but for payment of the in- : terest thereon, and for any deficiency that may arise at any time in connection with the working of any or all of them, a certain percentage on the amount of the loans in : existence should be paid into the credit of ; the municipal account as partial security i against any sudden and large demand that < might at any time be. made iv connection ' with any of' these undertakings. Recently, ; in England, » tram accident entailed the imposition of a one-shilling rate. ] My proposal, then, is that a cum of about < £50,000 from the depreciation account ■> should be paid into the general account; that the general account should pay to the various departments, in proportion to the ■ ; amounts contributed, interest at the rate of , 3 per cent, oe the above amount, and that ■ renewals required in the various depart- , mente should be paid out of this amount, j i A saving of about £1000 per annum, would , j

result to the general account from this arrangement. The balance of _ the moneys derived from the depreciation account should be paid into the hands of the Sinking Fund Commissioners, if they would accept this additional duty, with the proviso that any sum required should be paid as soon as possible after demand, although such demand would only be made -after the sum paid into the general account by "each department" was exhausted. REMARKS. • . In making the proposal to increase the amount of the sinking fund contributions on the tramway, gas. and water loans, I am aware that a smaller rate is now being paid ; that we cannot be compelled to contribute more ; and that the loans fall in bcfoie the period contemplated in my suggestion. Btit thos« facts do not constitute a. bar to tho adoption of the arranpffcin<iiit I proposp, and when tho present loans fall duo we will have less to renew, and the enlarged sinking fund contribution will enable us to -renew the balanco on more favourable terms. "* Jas. Small, Chairman.

ramways Vaipori Vater .. ±'303,000 .. 232.000 .. 241,213 ... 107,000 £880,213

'runways £3,203 £9,535 \ 7 aipori .. 3,061 5,551 Vater . 2,532 ~ 2,412 his „, .. 2,675 , 1,070 £11,471 -dei 8,589 6,947 10,131 £17,078 X BSJO 1,544 £2,440