ADVERSE COMMENT

Wairarapa Times-Age, 7 December 1938, Page 9

ADVERSE COMMENT

ACTION OF STATE ADVANCES CORPORATION

MASTERTON COUNTY BRIDGES’ LOAN.

DEPUTATION TO MINISTER.

There are eleven bridges in the Masterton County Council which are in urgent need of repair or replacement at an estimated cost of £14,500. The Local Government Loans Board recently approved of an application by the council for the full amount, but at yesterday’s meeting the State Advances Corporation wrote stating that it was prepared to advance the sum of £4,500 in respect of the loan. The action of the corporation was the subject of adverse comment by the chairman, Mr R. E. Gordon Lee, and other councillors, and it was decided to place the position before the Minister of Finance, the Hon W. Nash. The State Advances Corporation offered the loan of £4,500 on the following terms:—lnterest, 31 per cent, term, 10 years, repayable on the basis of a 20-year amortisation table with the balance outstanding at the end of the tenth year to become payable in one sum. Interest is to commence from December 1, 1938, the security for the loan to be a special rate levied over the whole of the county. “As chairman of this council I cannot help but comment on the offer made by the State Advances Corporation in respect to this loan, which is required for the purposes of renewing several bridges within the county,” stated Mr Lee. “On the one hand we have one Governement department, the Local Government Loans Board, after careful and complete investigation, sanctioning a Loan for the full amount of the council’s requirements, namely, £14,500 for a period of 25 years with interest at the rate of 3| per cent, while on the other hand still another Government Department, the State Advances Corporation, while agreeing on that rate of interest, is only prepared to advance £4500 of that sum for a term of 10 years repayable on the basis of a 20-year amortisation table with the balance outstanding at the end of the tenth year becoming payable in one sum, but has declined to make any suggestion or offer in regard to the balance required, namely £lO,OOO. “I might add that prior to making application to the State Advances Corporation for this loan, several lending institutions were communicated with, including the Public Trust Office, but none could afford the council any assistance in raising the amount required. I have no fault to find with the Government’s policy in its endeavouring to maintain interest rates at the lowest possible level. We were given to understand some time ago that in order to support the existing rate, the Minister of Finance intended to increase the funds which the State Advances Corporation had available for investing in the securities of local authorities. If additional funds have been made available by the Government to the State Advances Corporation for investment with local authorities, it is difficult to understand why the council cannot get a commitment from that Department in respect to the full amount of the loan. “It is realised that probably heavy demands have been made on the State Advances Corporation’s funds for investment and the current interest rate, no doubt, has something to do with that, and to meet this situation the Council has offered, with a view to assiting the Government, to accept the offer of £4500 if it be regarded as the first instalment of this loan, and that an undertaking is given that the balance, namely £lO,OOO, will be advanced immediately it is required after March 31. 'I would go so'far as to say that if by chance there is a rise in interest prior to the council lifting the £lO,OOO the council would accept this sum at the then current rate of interest. It has never been the policy of this council to adopt an obstructive attitude, and I do not consider anyone would reasonably suggest that it was being obstructive if it definitely decided to refuse to enter into contracts totalling some £29,541 without first having its proportion of the cost, which is £ 14,500, defintiely assured. “Referring again to the terms of the loan offered by the State Advances Corporation, disappointment must be expressed that a greater term than 10 years cannot be offered, taking into consideration the fact that the majority of the bridges included in this loan are to be reconstructed in reinforced concrete. When the council put through its Conversion Loan it so arranged the maturity dates in order to eliminate problems of refinancing and it is even more disappointing, might I say regrettable, that the terms offered by the corporation will mean that if the total sum of £14,500 is borrowed under these conditions, at the end of the 10 years over £B,OOO will be outstanding, and it will be necessary for the council to arrange a renewal loan for that sum in 1948.

“I think it is highly desirable that the Government should see to it that local body loan finance should be arranged on a proper basis, and the scheme which was initiated by the conversion loan should be continued in order that it will be unnecessary for local authorities to rearrange the repayment of loans at maturity date.” Mr Lee said he could only suggest that a deputation from the council wait on the Minister of Finance and get “a final yes or no.” Time was getting on and they could not call tenders until they received the money. Some of the bridges were in a dangerous state. Councillor W. I. Armstrong: “Some of them are down.” Councillor G. Moore: “It looks as though the money is available at a higher rate of interest.” Councillor J. W. Colquhoun: “It is funny that although the Loans Board has approved of the loan, we cannot get the money.” Councillor H. H. Mawley: “The estimated cost of the Taueru Bridge is £lO,OOO so we cannot make a start with that one.”

Mr Lee: “The question is this —if we cannot get the money, whose responsibility it is if the bridges collapse? The council’s or the Government’s?”

Councillor Armstrong: “If the Government will not make the money available it will be their responsibility.” The Clerk, Mr J. C. D. Mackley, said, the Public Works Department agreed with the council that the bridges were in urgent need of replacement.

It was decided that the chairman and the Clerk, with local members of Parliament interview the Minister of Finance on the matter.