A CURIOSITY IN MUNICIPAL FINANCE.
ITo ems Enrroa or ewe " SPECTATOR."]
Sue—In ease a curiosity of municipal finance should be of interest, I venture to send you details of the following remark- able scheme, whereby a Council deprives its own city of cheap water.
The Norwich City Council recently announced it had arranged to buy the waterworks. Payment was to be in 5 per cent. Corporation stock, at the rate of £70 •per £100 of 31 per cent. debentures; £110 per £100 of 5 per cent. preference; and £135 per 2100 ordinary shares, limited-to a 6'per cent. yield. On this basis, as was pointed out to the Council, the less the security for equivalent yield, the more ratepayers' money they were ,giving for it—viz., £100 stock -for each £5 of interest secured on debentures; £110 for each less-securecl.25 on prefer- ence; and £112 10s. for each least-secured 25 on ordinary,.whese full interest has not always been forthcoming.
:Yet this is •but the initial absurdity. To' ensure and safe- guard citizens' rights to -.heap water, the waterworks company's profits are -limited to & per .cent. on the preference and 6 per sent. on the ordinary shares; increased net receipts thus returning to the oitizens' pockets in diminishing-charges for water. Of this privilege. the Council not, merely deprive their city; they - award the preference and ordinary share- holders respectively an additional per cent. and per cent. interest from our pockets, which their shares debar as unjust
to us. 1
-Yet even that ineptitude is surpassed. The Council actually commend the scheme to us as enabling them to make 'profits for citizens. How this is to be done, save by -taking yet more than the additional per cent. and per cent. from our pockets beyond that which the waterworks would have taken,
-and -then returning with-,a label of " profit " -what survives the salaries of the staff -engaged to do it, the Council do not explain. Yet to -make citizens 'pay more for a -second and third charge on an-asset than the Council admit the-first charge to be worth,--seems to demand explanation. Possibly:Parliament will he. curious to- know why, if £5 of interest secured on:deben- tures is worth £100- stock, £110 must be ;paid for.eade 25:of interest on, preference as the security is less, while the price must be raised- to £112 10s. for each £5 on-ordinary, since: in this case full interest is -not-always forthcoming at all. Can such a fatuity, one wonders, be -paralleled in the whole history of municipal finance ?
To outsiders, I suppose, the thing reads like a comedy. or farce; ,to ratepeyers in, general- it -appears nothing short Of ,it -scandal. The transaction -is on a =scale involving' the. issue- IA .2362,444-stock for £2715070 shares alone and our- rates: are: but 9d. short -of -20s. in the -pound. • As instancing the.dreed. for .ratepayers' -scrutiny of the large schemes on- which munici- palities are now embarking and borrowing, the:case seems to me -to-deserve -both, publicity and comment. —I am,- Sir, Sze., Southwell Lodge, -Ipswiehlload,-Norwich. Joint IL-W=1s.
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