Age of Spending

Sun (Auckland), Volume II, Issue 423, 3 August 1928, Page 8

Age of Spending

Is Local Body Debt Too Intense ?

THE past decade, besides bei] development, has embrai nomenal borrcrwin" and spen< activities will constitute of the local ratepayer for in< legislation, however, working pietion of many programme tendency to discourage the ] necessary projects.

fig an age of extensive general ced a period of almost pheding, and the record of local e a millstone around the neck any years ahead. Restrictive : coincidentally with the comes of local works, shows a raising of loans for any blit

It .is freely denied that the increase of 140 per cent, in local body indebtedness in the 11 years prior to 1926 was in any way warranted, but it must not be overlooked that the past 10 or 12 years have been years of rapid progression, not only in the development and extension of hydroelectricity and the phenomenal expansion of motor transport, but alsq in the systematic provision of permanent public facilities. The rapidity of development has, in fact, provoked a suggestion that local rates are too intensely assessed, and impose an inordinate burden upon the present generation; and, while this contention is substantiated in a measure by the tendency of recent

legislation to insist upon early repayment, it frequently fades into fallacy in practice.

Until two years ago practically no restriction—short of the voice of the ratepayers, of course—was placed upon the borrowing activities of a local body, but with the institution of the Local Bodies’ Loans Board, the tendency of municipalities to carry out extensive work with money from outside has been arrested in some degree. This check has been a moral rather than a physical one, however, for the board, by insisting upon an overwhelmingly large sinking fund, has nullified many of the benefits for the sake of rapid repayments—with a corresponding discouragement of ambitious bodies.

| Much depends upon the trend jof thought of the members of | the local authority operating the sinkj ing funds, as no specific law exists ! compelling them to leave untouched j the money legally allocated toward re- ! payment. MATURING LOANS Borrowing has been exceptional- in recent years, and although many local bodies are approaching the end of their roading, water and drainage pro- ; grammes, and will not require outside ; finance for some time, the provision of ! inadequate sinking funds against ; loans raised many years ago has kept j the special rates pressing heavily upon I the head of the ratepayer. Ordinarily ‘ a special rate would cease immedi- | atelv a loan is repaid, but renewals | are frequently found to be essential—with a commensurate extension of the burden. In support of the contention that the present generation is paying more than its share of developmental costs, the dates of maturity of the collective loans throughout New Zealand are given here in groups of 10 years. £ During 1928 908,191 1929-38 10,972,748 1939-48 8,736,122 1949-58 2,914,089 After 1958 2,076,189 COSTS INCREASE The vital change in the value of money has affected the borrowing statistics to an extensive degree, the substantial drop in the value of the pound sterling having added approximately 50 per cent, to overhead costs. Since 1915, 25 per cent, of borrowed money has been expended in electric supplies —which incidentally pay for themselves and impose no extra burden upon the community—l 9 per cent was directed to harbour works, 18 per cent, to water and drainage projects, and 17 per cent, to roads, bridges, streets and footpaths. Parks and reserves took only .6 per cent., and municipal buildings 1.6 per cent The disconcerting fact was revealed by the Prime Minister recently that, from 1919 to 1927, the cost of roads rose in greater proportion than the growth of population. £3 17s a head being paid now in place of £1 17s a head eight years ago. In justification of this he infers that the local bodies throughout the Dominion, in the ripening experience of heavy expenditure, are providing elemental necessities for another age, and are using their facilities not as an end but as a means. Even the State authorities, however, in their desire to stimulate the application of serious thought to the problem, cannot afford to disregard the effect of their own legislation, which, in this specific instance, has intensified rather than alleviated the taxation difficulties of the people of today.