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The Pamphlet Collection of Sir Robert Stout: Volume 58

Scheme for the Speedy Construction of Our Railway, and for the Obtaining by the District Settlers of All the Accruing Profits

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Scheme for the Speedy Construction of Our Railway, and for the Obtaining by the District Settlers of All the Accruing Profits.

It is a trite maxim that "money makes money." To this must be added this other maxim that "credit, or security, represents money." And to this last maxim may be added this corollary that "faithful and hearty cooperation creates credit."

The Bay of Plenty settlers wish to get a railway constructed in their district in order to give them a market for their products by the consequent influx of population and capital, and by giving the district an outlet to cosmopolitan markets. The making of this railway, is estimated to cost about £250,000. The district settlers certainly have not got that amount of money available for railway purposes. But yet, the settlers, as we propose to show, do themselves possess the means of obtaining that sum, much more easily than the London gentlemen can, and with all the profit and advantage to the district settlers themselves.

The method of accomplishing this is briefly:—(1.) The pledging by the district settlers of all adequate credit which they possess; (2.) The hearty, faithful and unanimous cooperation of the district settlers, in carrying out any scheme which may be proved to be feasible; and (3.) The obtaining from Parliament inter aha, tame additional assistance, of the nature of a Government Guarantee, for which concession there are well known precedents.

I. The Credit which the Bay of Plenty settlers can pledge for money advanced or work done, in the construction of the Tauranga Railway.

(l.) Land Concussion of £75,000 to be paid in land at 6/8 per acre—In other words, the Bay of Plenty settlers can pledge, as security for the construction of their railway, 225,000 acres of land near the proposed line, which land may be at present considered as worth, at least, £1 per acre, and which, after the construction of the railway, would be worth, at the lowest estimate, £3 per acre. Therefore the security offered amounts to £675,000 worth of land.

(2) The security of the Railway itself.—This security would come into existence when the railway construction commenced, and would continue increasing as the works progressed. As it is impossible to say whether the railway will pay, (although railways elsewhere, with fewer advantages have paid), it is difficult to put a value on the railway after construction. If, however, the construction should cost £250.000, and Government should, as in other similar cases, elect to purchase, they would do so on terms, similar to those which they have granted elsewhere in similar cases. We may, therefore, safely state the value of the railway, for security purposes after construction, as, at least, £200,000.

(3,) Its guarantee granted by Government under "The Railways Construction and Land Act 1881," as to which see appendix 2.

(4,) The security of the County and Borough rates.—We shall proceed to show that the County and Borough rates represent security for at least £125,000:— page 6
The County at present lews rates to the extent of ¾ d in the £1 which yield 900 0 0
With the sanction of the ratepayers, i. e. by the merging of Road Board, (see Appendix 3), the County may levy an additional ¾d per £1, which yields another 900 0 0
The total rates leviable by the County are therefore 1800 0 0
Government, in terms of "The Financial Arrangements Act 1876 Amendment Act 1877" section 5, (appendix 4), are bound to give £1 for £1. From this source, then falls to be added 1800 0 0
In the event of the merging of Road Boards, Government is bound, by virtue of the same enactment to give a second £1 for £1 1800 0 0
Making, a total Government subvention of 3600 0 0
This gives a possible Gross County Revenue of 5400 0 0
From this falls to be deducted for Maintenance of County Roads, say 900 0 0
Leaving available, as security for principal and interest of a loan for County Railway construction, a net balance of 4500 0 0
which amount would secure, and pay interest at 4½ per cent, on a loan of £100,000. As to special rates by county for loans see appendix 5.

Even should Government refuse to pledge themselves to the supplementary yearly allowance, assumed above, or to any allowance, the county ratepayers could, by a special assessment of from 2½d to 3d per £1 provide a yearly amount sufficient to pay interest on a loan of £75,000. We assume that Government would give their guarantee as they have done in somewhat analogous cases to which we shall refer further on.

It requires no figures to prove that the Borough can offer security for a loan of, at least, £25,000, for there has already been gazetted at their instance, a loan of that amount, which has not yet been operated upon. This amount, therefore, with Parliamentary sanction, is also available for railway purposes.

In other words, this district can offer pre-railway-constmction security to the extent of about one third of a million sterling, made up as follows:—
(1.) Present value of Railway Land 225,000 0 0
(2.) Value of County Security 100,000 0 0
(3.) Value of Borough Security 25,000 0 0
Making a total pre-railway-construction district security of 350,000 0 0
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And the post-railway-construction security of the district is:—
(1.) County and Borough securities aforesaid 125,000 0 0
(2.) Prospective value of railway land 675,000 0 0
(3.) Probable assessed value of railway line 200,000 0 0
Which give the total post-railway-construction district security of 1,000,000 0 0

There should be no difficulty, therefore, in obtaining a loan to the extent required. In any event the local authorities could easily raise £50,000, which would give the undertaking a start and enable the promoters to finance by means of the 225,000 acres of railway land. Interest on this might be taken in Scrip; and, if so, the ratepayers would not be called on for special rates. But, if they were, they would receive equivalent value in Railway Scrip, as Ave shall explain more fully below. This would deprive of all cause for complaint, any district which might consider that it would not receive sufficient immediate benefit from the construction of the railway.

II. Government Guarantee.

The above security would, we consider, be alone ample for raising a loan of £125,000; but, "to make assurance doubly sure," and, in order to obtain the loan at the lowest rate of interest, Parlia-ment should be asked to sanction a Government Guarantee of the moneys borrowed by the Local Authorities. For such Government guarantee there are the following well-known precedents:—

(1.) By section 9 of "The Westport Harbour Board Act, 1884," it is provided:—"Prior W the issue of a loan the Governor in Council, if satisfied at anytime that the revenues accruing to the Board under thin Act are sufficient to meet the interest on any loan proposed to he raised under the authority of this Act, and to provide a sinking fund for repayment thereof, may declare such loan and interest to be guaranteed under this Act; and from the date of the Order in Council declaring the guarantee, the interest on such loan shall he paid out of the Consolidated Fund.

But no greater sum than one hundred and fifty thousand pounds in the whole shall he guaranteed under this Act except such extended guarantee be sanctioned by a resolution passed in that behalf by each House of the General Assembly."

(2.) By section 9 of "The Greymouth Harbour Act, 1884," there is, mutatis mutandis, a precisely similar enactment.

III. Railway Scrip.—

We have occasionally referred to Railway Scrip, and we shall now endeavour to explain to our readers what we mean by that expression Railway Scrip. Railway scrip would consist of coupons, each representing an equivalent value in railway and land, and entitling, the holder, at stated times, to select railway land by ballot, and to pay for the same with such railway scrip. This scrip would be used in paying for the construction of the railway. To induce contractors and workmen to agree to take scrip instead of cash it might be arranged that they should receive a premium equivalent in scrip. As however, workmen could not live on scrip, it would be necessary to pay them part cash and part scrip. Suppose, for example, forty shillings' worth of work done; for this the contractor or workman would receive 20/-in cash, and 21/-in railway scrip.

Scrip would bear interest at 5 per cent, from the date of issue till redemption. The part cash, referred to, would be obtained from the Loan to be operated by the Local Authorities, as above explained, for which accommodation the Local Authorities, and ratepayers for rates, would receive railway scrip. This railway scrip would, pro- page 8 bably, be eagerly accepted by the debenture-holders in satisfaction of the loan to the Local Authorities. Thus, the ratepayers might not be required to pay a single penny.

Consolidated, Railway Stock Certificate.—There is another benefit to the possessor of railway scrip: a scrip certificate, besides being a Land-Order, would also imply that the holder is entitled to receive, in exchange, a Consolidated Railway Stock Certificate, whereby he becomes a proprietor of the Railway, to the extent of the scrip lately held by him.

Railway Scrip would be negotiable, and would circulate like Rank Notes. The issue of railway scrip would, in fact, introduce into this district a much needed circulating medium, and, in consequence, revival of trade.

Railway Land Orders.—As railway scrip will represent an equivalent in railway land along the proposed line, and also consolidated railway stock, the consequence would be that the Railway Company's accredited British agents could readily induce settlers to purchase railway scrip in order to flock to this district; for the scrip certificates would be, not only, Land Orders for land of good quality, at a moderate price, close to the railway, and with first class access to all markets; they would also be warrants for obtaining consolidated stock certificates, making the holders fully paid up shareholders of a railway through their land, and, probably, entitling them to a very handsome bonus, in the very probable event of the railway being acquired by Government. In other words, intending settlers could thus, by paying a moderate price, become owners of good land, along a railway, and get in addition, and as a present, the railway itself running through their land.

Disposal of Railway Land.—The Railway Land would be laid off in suitable and alternate Blocks and Townships, so mapped out as to afford the most efficient communication of all the allotments with railway stations and highways. These blocks and railway townships would, in detail, be open to scrip-holders for selection. Choice lots might be exposed to sale by auction. For all railway land so acquired the Railway Company would be bound to take payment in scrip, if offered. In plotting out the blocks and townships, care should be taken that sufficient land is reserved for roads, schools, railway and public works and buildings, and for educational, recreational and other necessary purposes.

The Railway Board of Management.—It would be necessary, in the Joint Act, to make provision for a Board of Managers, which would be a guarantee to the railway creditors that their interests would be protected. The best method of accomplishing this would be, we think, for the creditors themselves to be their own protectors, by themselves appointing the Board. As all scrip-holders will be creditors, and as it is proposed that all interested in the railway should, in the first instance at least, be scrip-holders, the board would, if appointed by the scrip-holders, be sufficiently representative. Consolidated stock holders would, of course, be tantamount to, and ultimately replace, scrip-holders. It might be provided, that the scrip-holders, including the stock-holders, and the Local Authorities, should be entitled to appoint to the Railway Board one Director for every £20,000 of scrip, or consolidated stock, hold by them; and that, in any event, the County Council are to be entitled to appoint three Railway Directors, the Borough Council two, the other scrip and consolidated stock holders two; and page 9 Government, in consideration of their guarantee of Local Authorities' debentures, might be empowered to appoint one Director.

Reconciliation of Conflicting Interests.—

(1.) The Borough.—The County would, for its loan or accommodation of £100,000 to the Railway, receive a sufficient consideration in having the land of the County opened up, and by getting equivalent value in railway scrip. The same, however, cannot be said in respect of the Borough's loan of £25,000. So far as has appeared, the only consideration which the Borough would get for that accommodation would be an equivalent in railway scrip. The Borough would, therefore, require some additional consideration. This additional consideration might take the form of a proviso in the Joint Act to the effect that the Railway Company is to obtain all the reclamations around Tauranga Harbour, and that the Borough Council should have the preemptory right, within a limited time, of exchanging any railway scrip, which they may hold, for reclamation of equivalent value, not essential for the railway, as settled by arbitration, or as otherwise reasonably provided by the Joint Act.

(2.) The Victoria Wharf Question.—The Railway Company should purchase this, if the proprietors are willing to sell, for a price to be fixed by arbitration, and provided that the proprietors take payment in railway scrip. The wharf to be, of course, handed over to the Borough Council, in manner described in the preceding paragraph.

(3.) The Katikati Ratepayers,—As Katikati would not obtain, by the construction of the Railway, immediate benefit to the same extent as the rest of the County, it might be provided that, for any rates obtained from Katikati for railway purposes, the ratepayers are to receive Premium Railway Scrip:—e. g. for twenty shillings of rates, so paid by them, let them receive say twenty one shillings' worth of railway scrip. We do not believe that the Katikati ratepayers would refuse to cooperate on such very reasonable terms; hut, if they did, that difficulty might be obviated by the creation of a New County, whose rates were to be devoted to railway construction purposes. In this connection we may state that, is our view, the spending of the rates in the making of district railways is as legitimate an application of them as the spending of them in the making of roads, bridges and other public works.

(4.) The Interests of the Local Railway Shareholders.—These interests might also be protected by a proviso in the Joint Act to the effect that all persons who had paid money, or done work on account of the railway, should be reimboursed with railway scrip.

(5.) Saving the Rights and Interests of the London Syndicate.— The Joint Act would also contain a saving clause, providing that, in the event of the London Syndicate impounding the £25,000 within the time limited, and otherwise, carrying out their obligations, the Joint Act be null and void.

Preliminary Railway Expenses.—The Joint Act would provide that any person doing work for the undertaking, previous to the obtaining of statutory powers, would be required to take [unclear: payment] way scrip. Such preliminary expenses might include cost [unclear: of] preparation of Plans, Sections, and Book of Reference, Law [unclear: e] connected with the framing of the Joint Bill, Printing, etc. So [unclear: we] ourselves are concerned we may say that we are prepared to page 10 take payment in scrip for any preliminary railway work which we may be employed to do. As, however, some cash for preliminary outlay would be required, we would suggest that, in order to meet this difficulty, the Bay of. Plenty Settlers should form themselves into an Association, to be called "The Bay of Plenty Railway Association", and that each member of this Association should contribute a small sum, in proportion to the amount of land, or other interest, held by him in this District:—say one penny for every acre of land, or for every ton pounds sterling of other interest. Such contributions would, of course, be subsequently repaid in railway scrip.

Subsequent Expenditure.—With regard to the expenditure to be incurred, after the passing of the Joint Act, in the actual construe of the railway; the Joint Act, (which would authorise the issue of railway scrip, representing a proportionate share of railway land and railway line, as already explained), would authorize the Railway Company to pay in railway scrip, or, if necessary, in premium railway scrip, all its creditors who should agree to do work for, or lend money to, the undertaking, in consideration of receiving payment in such railway scrip.

Specifications for Railway-construction Contracts to stipulate that Contractors take payment wholly or partly in Railway Scrip.—After the obtaining of the Joint Act, and when matters were so far advanced as to require the letting of contracts for the construction of the railway line, the specifications for contracts might contain a condition that the contractors are to take one half, or as much more as they choose, of the contract prices, in railway scrip. The loan, guaranteed by the Local Authorities and Government, would provide the requisite ready cash. The Local Authorities might pay over that money to the Railway Company on the Joint Certificate of their own and the Company's engineers. For every cheque so paid by them they would receive an equivalent in railway scrip. The debenture holders, the creditors of the Local Authorities, might, in their turn, be willing to take, railway scrip in satisfaction of their claims. Thus these loans might be at once redeemed, and the question of the ratepayers liability might not be of long duration.

Why not pay for the whole Railway construction in Railway Scrip, and thus obviate the necessity for the Loans by the Local Authorities?—It is possible that our Railway Scrip may be at such a premium that our Railway Company may not require to borrow at all. This, however, is a mere possibility, and cannot be reckoned on, for the reason already referred to, that the workmen would require cash sufficient for their food, clothing and lodging.

Allocation of Railway Land.—The mode of allocating railway land might be as follows;—
Acres.
Assuming the total amount of railway land to be 225,000
Required to be set aside for Surveys, Roads, Rolling Stock, Township Allotments, Endowments, &c. say 60,000
Which leaves for selection by the holders of railway scrip 165,000
The Amount of Railway Scrip may be assumed to be as follows:—
£ s d
Amount to be paid for Railway Construction, excluding Interest 250,000 0 0
Add Interest on the above, say average of 2½ years from date of payments till 6 months after date of railway land being open for special selection, or till date of selection, say 31,250 0 0
Giving a total of 281,150 0 0

Which is adequate to the purchase of 165,000 acres of land at £1.12/10 per acre.

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Worn all the railway laud allotments of equal value, taking into account quality of soil, proximity to railway and roads, &c., the allocation would be simplicity itself. But, manifestly, the differentiating conditions, in these expects would require to be considered, and, as far as possible, given effect to. It may be assumed that, at least, four different valuta for Railway Land would require to be stated as follows:—
Acres at £ s d
First Class Railway Land Allotments would consist of land of first-class quality, and proximate to the railway. This might be put down at 20,000 3 10 0 70.000 0 0
Second-Class Railway Land Allotments would consist of good or fair land, comparatively, proximate to the railway, say 20,000 2 0 0 40,000 0 0
Third Clans Railway Land Allotments, consisting of first-class land, comparatively remote from railway 62,5,00 2 0 0 125,000 0 0
Fourth Class Railway Land Allotments, consisting of good or fair land, comparatively remote from railway 62,500 0 15 0 46,375 0 0
Total 165,000 281,375 0 0

The above figures are merely indicative of the proportions and classification, and might be differently stated. In any case, however, the classification and apportionment of the railway land would have to be so effected as to cover the amount of railway scrip, and leave over as small a balance as possible.

Any Balance left over.—This would, of course, form part of the Railway Company's property in railway, plant, Ac., of which the scrip-holders would be also entitled to their proportionate share.

Railway Station Townships.—The railway land to be set apart for Railway Townships might consist of about 10,000 acres, of which the allotments should be disposed of by public auction, and for which payment would be received in railway scrip, as far as, and to the extent of, the nominal value of the railway scrip held by the successful bidders.

Mapping out of the Railway Land.—The railway land sections should be carefully mapped out in suitable sizes for farms &c, having due regard to roads and natural boundaries, and so as to minimise fencing, and admitting of both small and large farms, but of not less than fifty, nor more than six hundred acres or thereabout.

Reservations.—The Reservations, as above referred to, should be taken throughont the whole of the railway land on the alternate block principle, so that a fair division for all interested may be secured.

The Scrip-Holders Property.—All the railway property would thus belong to the scrip-holders. This property would be in two portions viz.:—(1.) Land Allotments, and (2) The Railway itself, and its Equipments, being the whole of the railway property, minus the laud allocated as above illustrated.

Priority of Selection.—The priority of selection might be according to priority of application for selection, and of making the required deposit, and by ballot. If scrip-holders did not exercise their right within six months after the railway laud had been duly advertised as open for selection, the Company should have the right of redeeming the scrip at its nominal value.

Cooperation.—In order to provide a small sum for preliminary outlay, and to bring pressure to bear on Government and Local Authorities by petitions or otherwise, and otherwise promote the scheme, all the Bay of Plenty settlers should unite informing themselves page 12 [unclear: t]"Bay of Plenty Railway Association" and subscribe towards the Association's funds in proportion to the amount of their land, or other interest, in the district—say 1d per acre of land, or per £10 of other interest. Each member should pay one shilling of entry-money. They should also undertake to petition in favour of the Joint Bill, if approved of by them.. And, finally, they should undertake that, in the event of taking contracts from the Railway Company, (and as many as possible should agree to do so), they shall take payment in railway scrip to the extent of, at least, one half. The Association would also require to form a Committee for taking the necessary legislative and other steps at once.

With the view of the immediate formation of "The Bay of Plenty Railway Association," we append a coupon, which should be at once filled up, signed, and transmitted to the under signed.

We do not absolutely guarantee the accuracy of the above figures as to the amount of the land concession and its value, as we have not had access to official documents; but, from information of a reliable kind received by us, we believe that we have not made an overstatement.

In the event of twenty or more ratepayers subscribing the appended coupon, a meeting of the Association will be immediately convened, at which an Acting Committee may be appointed, and other necessary arrangements made. In any other event all payments, less cost, of remittance, will be returned.

James Galbraith;

Hamilton Street. Tauranga.