LOAN MONEYS.

Taranaki Daily News, 5 April 1921, Page 5

LOAN MONEYS.

NEW PLYMOUTH'S PROBLEM. DOMINION LOAN IMPOSSIBLE, PROPOSAL TO GO OUTSIDE. RATE PROBABLY SEVEN PER CENT. “This is a question involving a momentous decision,” said the Mayor (Mr. F. E. Wilson), at last night’s meeting of the New Plymouth Borough Council, when opening a discussion on the raising of loan moneys for the hydroelectric works. A deputation consisting of the Mayor, the general manager (Mr. F. T. Bellringer), and Mr. 8. G. Smith, M.P., had proceeded to Wellington last week, and the result, as reported to last night’s meeting by Mr. Wilson, was that after enquiry from all possible sources, it was found impossible to secure finance. The only avenue apparently available to the council was to endeavour to negotiate a loan outside Njw Zealand, either in Australia or England, at a cost of probably 7 per cent., and after last night’s discussion the council propose to put this before the ratepayers at the municipal polls on the 27th inst. The only alternative left to the council was to decide on an immediate closing down of the works, and this was not favored by members. In detailing to the council the enquiries made by the deputation, the Mayor said that they approached a number of Government departments, but there was a negative result in every case. Those interviewed included the Public Trustee, the Government Insurance Commissioner, the Secretary to the Treasury, and the Prime Minister. Mr. Massey took up the attitude that there was no money to be had in New Zealand, and that he was determined that the rate of interest on any local body loans raised in the country should not exceed 6 per cent. In regard to money raised outside, he fixed no limit. The matter of the limit of the.rate of interest on a loan raised outside of New Zealand was mentioned in view of the fact that the Auckland City Council had succeeded in raising £300,000 ac 6£ per cent., plus expenses, outside of the Dominion, the loan being backed by a Government guarantee. GOVERNMENT GUARANTEE.

The Secretary to the Treasury (Colonel Campbell) told the deputation that a Government guarantee could not be given in connection with the securing of moneys for a loan of which a part had already been raised, and the only loan that could be guaranteed by the Government was the last one for which the council received authority from the ratepayers, namely, for £60,000, and for which no funds had been secured. There would be no difficulty however, in securing the guarantee for this, Colonel Campbell promising to recommend it*"to Cabinet. A guarantee for the balance of the loan of £72,000 could be secured at a later stage by treating it as a new loan and taking another poll of the ratepayers on the proposal. The Mayor pointed out that a Government guarantee would strengthen the hands of the council in any negotiations outside New Zealand, and there was a good prospect of a loan being raised. The deputation saw Mr. Buckleton, general manager of the Bank of New Zealand, who pointed out that while the Auckland Council had negotiated a loan outside of the country at 6| per cent., the New Plymouth Council could not hope to do quite as well, as the amount involved was smaller, and the cost of raising would be proportionately heavier, and there was also the fact that the council was probably not so well known as the Auckland Corporation. A course open to the council would be to put the raising of the loan in the hands of the bank >.o negotiate it for the council on the best possible terms. The interest rate would be not less than 6f per cent., according to Mr. Buckleton, and might amount to 6% per cent. With the expenses to be added, the cost to the council eventually would probably be 7 per cent. DRASTIC ALTERNATIVE.

Mr. Wilson said that if they did not adopt the course of raising the money of New Zealand, as he had outlined—and ■it seemed to be the only available source—the alternative was to shut down the works at once. Were the council to do this, not only would I the machinery and works in hand go | back (necessitating further expenditure at a future date), but the council would also have to find interest on the money 'already raised (£98,000), which would -have to be paid out o-f rates until it became revenue producing. There was a great possibility of securing the money outside of New Zealand, but it was at a rate of interest that they never dreamed of having to pay, and one which would most of the profit which it was anticipated would be received from the works. Personally, he believed that tif possible the council ought to go ahead. The proposed poll to be taken on the 27th inst. authorising the raising of the rate of interest to 6 per cent, would have to be abandoned, and Colonel Campbell’s suggestion was to apply to the ratepayers for power to raise the money, leaving the rate of interest indefinite or stipulated at not exceeding 6| per cent. The Mayor said he was in favor of leaving the rate o-f interest indefinite. Ratepayers could be assured that the council was not going to spend more than was absolutely necessary, but would go on with the works, even if it cost 7 per cent., assuming that the ratepayers favored the proposal. He did not think there would be anv money available for local body loans in New Zealand within the nex*t twelve .months at the earliest. The deputation found a feeling of depression existing in Wellington, and their experience was borne out by the opinions of other visitors. If the council was going to close down they would have to act at once, but they would be paying £4500 per annum in interest on the idle capital. CLOSING OPPOSED.

The electrical engineer (Mr. R. H. Bartley) said there was another aspect the proposal to sloifl down* SMt a

course would liot only mean the losing of revenue from the sale of current, but also cut off other sources of income which, he thought, would he available when there was power to sell. The general manager said there was also the question of meeting current expenses till a decision was given If they continued operations in the meantime, and the ratepayers turned the proposal down, it would certainly cripple the council. While the payment of 7 per cent, interest would take a good deal o-f the profits which it was hoped to receive, he did not think it would absorb the whole of them. The department would certainly not make £6OOO as it had done last year. In reply to Cr. J. Kibby, the general manager said it would cost about £5OOO to carry on until the end of May. Touching on this aspect the Mayor said that if the loan was not approved then the sum mentioned would have to be met out of general account; it would have to come off the streets.

Cr. V. Griffiths said it appeared that the council was faced with the position of meeting expenses for the hydrt works till May, on the extreme chance of the loan not being raised. If it was only the possibility of having to pay £5OOO out of the general account, he favored pressing on with the works. He asked if there were no means locally of raising some money, and expressed the opinion that there ought to be a number of sufficiently public spirited citizens who would help the council when they stood between the possibility of closing down the loan works and the progress of Taranaki. The Mayor remarked that the trouble was the pioney could not be got in cash. Crs. Parkin and Griffiths favored push, ing on with the works. POLL TO BE TAKEN. It was decided that the resolution passed regarding the taking of a poll on the question of paying 6 per cent, interest be rescinded.

A further resolution was carried in favor of taking a poll on April 27 asking the sanction of the ratepayers to increase the rate of interest on the hydro-electric loan of £60,000 to such an amount as the council may find It necessary, but which the council confidently believed will not exceed 7 per cent. The ratepayers will also be asked to sanction the payment of 6 per cent, on any money which can be raised in New Zealand (to make up the balance of the £72,000 loan). • In the event of the poll being successful and the Government guarantee beiing forthcoming, the council’s bankers will be immediately instructed to proceed with the raising of the loan.