The New Loan Scheme.

Manawatu Times, Volume X, Issue 1153, 18 January 1884, Page 2

The New Loan Scheme.

A special meeting of the Palmerston Borough Council was held yesterday afternoon. Present — His Worship the Mayor (G. M. Snelson, Esq.), and Crs Walker, M'Neil, Ferguson and West. The Mayor stated that he had convened the meeting to consider the position of the Council, as it was necessary that something should be done to improve the financial position. It was necessary to provide for engagements falling due, and ! also for the necessities of the town, which must progress. Progression had been their watchword in the past, and it must be so in the future. The Wellingtou-Manawatu Bailway would shortly be completed to Longburn, and now that monied people were arrivingi n the colony by the direct steamers from the old country it was advisable to offer every in- j ducement to them to settle in our midst. It was much to be regretted that the recent loan proposals had been rejected by the ratepayers, and he felt sure that many had not considered the matter before they voted. That, however, had now passed by, and it was now necessary to devise some means to ensure progression. He had a plan to propose to the Council which he thought they would accept. The waterwo k3 and. sewerage scheme in the late loan proposals did not appear to meet the views of the ratepayers, and if these were left out the amount for street improvements was all that remained. According to the schedule in connection with the £30,000 loan, it was proposed to expend about £5000 on streets, and he suggested that this portion of the scheme should begone on with, and a loan of £5000 raised to enable it to be carried out. They would have to pay a little more interest for this smaller sum than it was proposed to pay for the £80,000, and he had set down the sum for this at 7 per cent, or much the same rate as the present loan. He had committed his proposal to writing in order that there might be no misun- j derstanding. He then read the following : — Proposal to raise a loan of LSOOO, for improvements to streets as per schedule, secured bv a special rate of Is in the £, and grant from or« dinary revenue of LSO, as follows:— Special rate equal to LIOOO Grant from ordinary revenue... 50 , LIOSO This provides an annual charge for — j fnterest at 7 per cent L350 Sinking Fund 700 LIOSO The above sinking fund invested at 5 per cent would repay the loan in six years,making the two loans which would be then existing, mature at the same time. The tffect upon the ordinary revenue might be anticipated to be as follow* ••— Present ordinary revenue ... LI 4OO Deduct amount required for interest on present loan ... 800 Available tor ordinary expenditure L6od Presuming the loan tobeexpen* ded in th r ee years— first two years 12000 each; third year, L1000:— — Incro»eo at on.do£ lit^ear, on Ll4oo— From ordinary causes, at 4 per cent L56 From loan expenditure at 6 per cent LB4 Ll4O Available for ordinary expendi* tare ... ... .«. L740 Increase at end of 2nd year on L1540— From ordinary cause? ...L6l 12s From loan expenditure ... 92 8s L154 Available for ordinary expenditure L894 Increase at end of 3rd year on L1694Prom ordiuay causes ... L6B From loan expenditure ... 102 170 Available for ordinary expenditure ... ... ... 1064 During tbe following years, previous to n payment of loan, an average in crease might; be expected of 1,100, making; the sum available fur ordinary ex pendtture about LllsO. At this lime the revenue and disbursements would be as follows : From special rate ... LIOOO From ordinary revenue... 1950 12950 Providing for— Interest and sinking fond... L1850 , . ; Available for current expenses 1100 L2950 The Mayor said the foregoing were the figures of the scheme. The first year £700 would be put aside as a sinking fund out of the special jate, and at the end of the second year the same sum would be set aside, which with the interest on the first £700 at 5 per cent, would make the total sining fund at the end of second year £1435. The third year another L7OO would be added with interest on L1 485, bringing the total up to L2207. The fourth year by the same process the total would be increased to L8017 ; at the end of the fifth to L8867 ; and at the end of the sixth, to L4767, or L238 short of the loan of LSOOO to be then repaid. The Mayor said that before going any further he would like to show what would be the effect of the proposal to raise no loan at present but strike a special rate of 9d in the £ to find interest on the present loan of LIO.OOO, — calculated on an increase, as in the past, of 4 per cent, each year on the revenue used for ordinary purposes, and 2 per cent, on the revenue used for new works. Shortly 3tated, it would be as follows : — The present ordinary revenue was £i4OO and a 9d rate would leave for new works, £800. The increase would be — First yea*-, £1403 ; increase of rates £40 ; ordin.irj expenditure £600. Second year, L1 440 ; increase L42 ; ! ordinary expenditure. L640. Third year, L1482; incieue L43; ordinary expenditure, L682. Fourth year, L1525 ; increase, L45 ; ordinary expenditure, 1*725. Fifth year, L1570; increase, L47; ordinary expenditure L770. Sixth ysar, L1617 ; ordinary expenditure LBl7, (The araounc available each year for new works being L80O.) Alluding to the impression that some assistance might be gained by obtaining special legislation to enable the Council to appropriate the rents of reserves to Borough purposes, the Mayor said he found that these

rentp had been forestalled! nV order to set tlie racecourse in order, The Coimtilkad pledged therents accruing from the reserves to reduce an overdraft of the Eacing Club up to 1887. In 1884 the Council would have to pay off £64 of this ; in the two following years the whole of the rents would have to be devoted to this purpose, and in 1887, half the rents. In 1889 some of the debentures for the £10,000 loan would fall due, but at that time doubtless some arrangements may be made, and the Bank I may allow an overdraft of £700 in ( anticipation of a new loan to be raised. He was strongly of opinion that the Council should not forestall the rents after 1887. ; Cr M'F'eil pointed out that even if the rents were not mortgaged, all money received from the reserves must be spent upon them, to whicb the Mayor replied tbat he had alluded to the fact of special legislation being necessary to enable the Council to deal with them as had been suggested. At this stage in the proceedings Crs Linton and Mowlem took their seats. Cr Walker asked how it was proposed to borrow money, to which the Mayor replied that enquiries had been made of the Wellington agent for the Mutual Provident Society who had informed the Cbun« o.il that the Society could not lend itafunJsto municipalities. Cr Walker thought the statement j that the first debentures of the existing loan fell due in 1889 wan in error, as he held some which cam ■ due in July, 1878. On referring to the books the Mayor found that the first debentures were issued in November 1878, for a term of ten years, aud that a number of others would be due in January. 1889. Cr Linton theughfc the Council should not introduce a sinking fund into its proposal. It had been called bad finance in connection with . the last loan. The Mayor thought the Council must show investors how it was proposed to repay the principal. There was no sinking fund provided for in connection with the last loan. It was only when the last; L3OOO was raised that LBOO was put aside at the suggestion of the Bank, and this had been taken because it did not leave enough in the ordinary revenue. Cr Linton thought it would be found that a sinking fund was arranged for in connection with the first loan. As one who had been among the first to take tip debenw tures he could say that he had done so with the distinct understanding that a sinking fund was a feature in the scheme. But the Council had always been short of funds and ..othing had been done in this direction till the Bank of New Zealand took over the balance of the loan, when LBoo' was set aside as a lump sum to represent the amount of sinking fnnd which would have accrued up to that date. The mistake the Council had made was that it should tare struck a special rate to provide a sinking fund, but at that time they thought it best to pay the sinking fund out of thegeneralissrerme. TheLßoohad been taken recently in t'he expectation that the L3OJOOO loan scheme would be carried and LIO,OOO set aside to provide security for the debenture holders of the first loan; but the loan had not been floated and their security had been lessened by LBOO. He would like to know how the Council were going to repay the former loan now. The scheme just read provided for the redemption of the proposed loan in six years, but nothing was said about the repayment of the former loan, and he thought it was due to tbe debenture holders that the Council should show them how they proposed to repay them their money. Those of wh mit was now proposed to borrow might say that the Council provided for a sinking fund in a former loan, bo> took it to pay general expenses, and aright do the same again. He thought they should try to ai range a sinking fund for £i5,000, as it would be wise to lay a good foundation t«r tbe present proposals. The way the Act was constructed now it would be almost a miracle if a loan proposal was carried. Under the old Act a majority of one fifth of those who voted was sufficient, but now they must be almost unanimous. Tbe Council must have thing very straight and the scheme must bo one that no one could pick a hole in. It seemed a strange state of affairs when a majority of two-thirds of the property-holders in the place could not carry a loan proposal. If the scheme was not carried it seamed to him that it was litile use for the Councillors to come there. The Mayor said that under the Act of 1880 a special rate raised as security for a loan could not be applied to any other purpose whatever and therefore if the scheme he had submitted were carried it would leave the burgseses in exactly the same position as now in respect to the £10,000 loan, except that their general revenue would be increased at the end of the term to £1900. The new loan was tu be raised for a special purpose and the Council could not now enter into the question of providing a sinking fund for the £10,000. He then read the printed debenture issued in con neewith the exiflting loan, in which nothing was stated in respect to a sinking fund. The Mayor again compared the scheme to raise £5000 with the pro* posal to strike a rate to secure interest on existing loan only and to use the ordinary revenue of £1400 for general purposes. He stated that by the loan proposal the rateable value of the Borough would be increased by £450 at the end of six years. Cr Ferguson drew attention to the fact that the rate in the one case waa calculated at Is and in the other at 9d. | The Mayor replied that the ins creased rateable value would in a'l probability have the effect of lessen* ing the special rate from Is to 9d. Cr Liuton thought the proposal meant in the t case, tbat where rato* pavers were at present payiog Is in the £, they would at the and of the time be called upon to pay 2s 6d.

■-■'■■■■.■ ;;vjy wt^- J^*' v; v ;i>y '-^,'r?ysai The Mayor said this would bn t}& caseif matters remained stationary but it was in this oase as with a basi* ness in which ten years ago much less might be done than now though the expenses had been increased since. Cr Linton said the reason he alluded to this aspect of the matter was that the last proposal to raise a loan had not been carefully considered or proporly put before the public. It was as well for the Council ito be able to answer such questions if they were raised at a meeting of the ratepayers. He attributed the failure of the proposal to the way in which it had been placed before the ratepayers^ It should be thoroughly understood that if the valuation increased, the special rate would be decreased. Cr Ferguson thought the Council might safely reckon on an increase from other causes. Population would no doubt iucrease, and many sections now occupied would be built upon, so that their valuation would be increased. This point should not be lost sight of. Cr West understood that by the scheme just laid before them there would be a deficit of £240 at the end of the term, and he thought that should be made up by retaining the Is special rate.. The. Mayor thought it would make up more than the required sum. It was only a question of interest and he had no doubt the Council, would have to decrease the special rate. Cr Walker said that as money, could be obtained at 4 per cent, at home, it seemed rather lowering the credit of Palmerston for it to enter the money market with a loan at 7 percent. The Mayor thought that probably it could be raised at less interest but he had calculated at 7 per cent, in order to be perfectly sure. Cr Ferguson thought that the point recently brought forward by the Times that the rateable value had been doubled since the last loan was raised should not be lost sight of. The Mayor said he proposed on this occasion to convene a publio meeting to discuss the proposal and ascertain the views of the ratepayers and then if they were favorable to it to advertise the proposal, hold th« meeting prescribed by the Act, and then put the question to the poll. Cr McNeil proposed that a special rate of Is in the £ be struck to pay for the proposal loan of LSOOO. The Mayor referred to the lot, and stated that this proposition could not be dealt with except at a special meeting convened for the purpose, and the matter therefore dropped. The Mayor stated that the schedule of streets in connection with the proposed scheme was ex* actly the same as in the former pro* posal. In that L5900 was set down for streets, which sum included LSOO for contingencies, and he thought the works might be carried out for less. • Cr Walker asked what would be the effect if the money was not borrowed to which the Mayor replied that in that case the ratepayers would have to pay a 9d rate for -6 years which would 7 realise £800 per annum. If the loan was raised they would; have to pay Is rate and' would spend £5000 in three years. Cr Linton- proposed that the Mayor be requested to convener a/ public meeting to consider the proposal. He regretted the loan was not to be a larger one. As for the estimated increase the Council could not say what that would be, and if they applied it to themselves he was sure there was not a man in the room who was in a better position than, he was six years ago. He could safely allege that, if the last scheme had been carried, unless they had a very large influx of population, it would have beggared everyone. On the made streets property was now rated to the utmost limit, and- if it stretched any higher the Assessment Court would be beseiged. The proposition waa_ seconded by Cr M'Neil and carried, when the Mayor announced that the business of the special meeting was at an end.

Since tbe above wu in type it hta been discovered tbat an error was mad* iu the calculation of the results of the proposal to strike a 9d rate without raising a loan. The figures, as corrected by Mr Keeling, stand ss follows :— First year, revenue LI4OO, increase L56 Second year.revenue Ll4s6,increase L6B Third year, revenue L1514, increase L6O Fourth year.revenue Ll674,increase L6B Fifth year, revenue L1637, increase L6f Sixth year, revenue L1702.