UNDERSUBSCRIPTION OF RECENT OFFERINGS

However, it seems that England is not absorbing Australian issue as readily as formerly. During 1926 and 1927 half a dozen Australian loans issued in London are known to have been left largely in the hands of underwriters-the New South Wales 5 per cent loan for £4,000,000 issued in London during March, 1926, and the 54 per cent loan for £7,000,000 issued during November, 1927; the 5 per cent Queensland loan of £2,500,000 floated early in 1926; the 5 per cent South Australian loan for £1,800,000; the Commonwealth loan of £7,000,000 issued in November, 1927; and the City of Sydney 54 per cent debenture loan of £2,000,000 issued in December, 1927. The proportions taken by the underwriters were reported as 70, 62, 68, 63, 75, and 74 per cent, respectively. The Australian conversion loan of £36,000,000 issued in Australia in October, 1927, was reported to be similarly undersubscribed.

Australia appears to be taking action to meet the criticism. The agreement relative to the taking over of the State debts by the Commonwealth, the provisions made for the establishment of a sound sinking-fund system, and the organization of the loan council on a permanent basis are received favorably both in Australia and in London. A further consequence of the criticism is the retrenchment policy in loan expenditures recently announced by several Australian States.

MUNICIPAL FINANCES

SOURCES OF INCOME

The revenues of Australian municipalities come from direct taxation in the form of "rates"; from license fees, market dues, rents of municipal properties, tolls, and sanitary charges; and from the operation of various business enterprises and public utilities owned by the municipality. The "rates" are levied upon property owners and tenants; assessments are made for sanitation and street lighting; and license fees are charged the owners of vehicles, dogs, etc. Municipal business enterprises, such as meat shops, bakeries and markets, and public utilities, which are particularly numerous in Australia, may yield revenues, but often enough they are operated at a loss. In addition to these ordinary revenues, municipalities frequently receive grants or subsidies from the government for special purposes. Australian municipalities, with the exception of the metropolitan cities of five States (Tasmania not included), derive income from their water-supply systems. In the metropolitan cities the water supply is either under the control of specially constituted boards not subject to municipal control or under that of the State government. The financial transactions of the system are thus excluded from the municipal budgets of the metropolitan cities with the exception of Hobart.

The borrowing powers of the municipalities are set forth in the local government acts of each State. (In general they are similar to the borrowing powers accorded American municipalities.) Limitations are imposed upon municipal borrowing and, while these differ in each State, the following features are common to all: (1) The objects for which borrowings may be made are specified, and in all cases these include permanent works and improvements, liquidation of previous loans, and other lawful objects; (2) the amount of the debt may not exceed either a certain percentage of the value of the ratable land within the district or a specified multiple of the amount of the revenues of the municipality during a certain period; (3) the time within which loans are to be redeemed is prescribed; and (4) the flotation of a loan must receive the consent of the ratepayers as expressed at the polls.27

MOVE TOWARD MUNICIPAL CONSOLIDATION

Of the several hundred Australian municipalities, the most important from a financial standpoint are the six metropolitan cities, whose budgets run into the hundreds of thousands sterling. It should be noted, however, that these cities, especially Sydney and Melbourne, do not constitute single entities, but are rather an aggre

A detailed treatment of the subject of Australian municipalities with regard to their history, organization, powers, finances, etc., is given in "Local Government in Australia," by G. H. Knibbs, Commonwealth statistician, Melbourne, 1919.

gation of municipalities of which the "city" forms the core. Each of the constituent municipalities has a council, a mayor, and other officials, although in passing from one municipality to another it is difficult to determine where one begins and the other ends. Neither do the outlying municipalities possess complete independence in their affairs; control over them is generally exercised by the principal municipality, "the heart of the metropolis." The situation is the result of suburbs growing into the city without losing their political entity.

Dissatisfaction has long been expressed against this system, and there has been agitation for political consolidation. Brisbane took the first step in this direction in the so-called Greater Brisbane City act of 1924, which consolidated into one municipality Brisbane proper and the suburbs surrounding it. It is reported that at a recent session of the Legislature of the State of Victoria a like bill was introduced for Melbourne and its suburbs. The other metropolitan centers may soon adopt similar measures.

Whereas in most European countries and in the United States the capital is not always the most populous city, in Australia it invariably is and in some States constitutes the only large center. Furthermore, 46 per cent of the Australian population resides in the six metropolitan centers. The discussion which follows will be limited to these six "cities."

SYDNEY

Sydney, the capital of New South Wales, is the oldest and largest city of Australia besides being the chief commercial metropolis and center of import and export trade of the Commonwealth. It has an excellent harbor and is the terminus of all steamship passenger lines and of most of the freight lines plying between the United States and Australia. In addition, it is a most important port in relation to the trade with the Far East, the Philippine Islands, and New Zealand. Its prosperity is no less due to the adjacent Newcastle coal fields, which provided the incentive for the city's industrialization. The population of Sydney, including suburbs, was about 1,170,000 on December 31, 1926; that of the city itself, 110,000.

The municipal organization of Sydney which had for years been of the mayor-council type ordinarily found in American cities, was temporarily changed to the "commission" form by action of the New South Wales Parliament in December, 1927. The commission consists of three members appointed by the governor, who are to hold office until December 31, 1929. Meanwhile the council will be in abeyance, and no election of aldermen will take place. Besides being vested with the power of instituting investigation into the city's finances, the commission has been authorized to make, levy, and collect "rates," tolls, charges, and imposts and to issue ordinances for the government of the municipality. Under the previous organization the executive powers were conferred upon a lord mayor chosen by the aldermen from among their own number; the legislative duties were performed by a council of 26 aldermen elected every third year by the qualified residents of the wards.

Although governed under special acts and not subject to the general local-government acts, the accounts of the city have in recent years been kept in the same manner as those of other local bodies. All

the "rates" and other ordinary revenues of the city are paid into the city fund, out of which are defrayed the general expenses of the municipality. Separate accounts are maintained, however, for transactions dealing with the municipal markets, electric plants, land and property resumption, street improvements, and insurance.

MUNICIPAL FINANCES

During the year ended December 31, 1926, all funds of the municipality of Sydney recorded total receipts of £3,321,524 against total expenditures of £3,447,680-a deficit on the year's transactions of £126,156, which besides being the second consecutive deficit was also the largest on record in Sydney. The receipts and expenditures of each of the municipal accounts during 1926 (the latest year for which figures have been published) were as follows:

TABLE 49.-SYDNEY INCOME AND EXPENDITURE, 1926

The only transactions which created surpluses during 1926 were those dealing with public markets and the insurance fund. Deficits were recorded in the city fund, land-resumption account, electriclight account, and the Moore Street improvement account.

The city fund, as already stated, deals with the general revenues and expenditures of the municipality. "Rates" on the capital value of unimproved land constitute the principal item of the city's income. In 1926 they produced £651,221. Among the expenditures the principal items are the maintenance and upkeep of streets, care of the general municipal properties, and cost of administrative departments.

A DECADE'S FISCAL RESULTS

Reviewing the municipal finances of Sydney for a decade one finds that between 1915 and 1924 the results were quite satisfactory. During that period there were only two years marked by deficits, totaling £89,895; the rest of the period showed surpluses aggregating £816,898, which left a net total surplus for the period of £727,003. During the three years prior to 1925, the financial results of the municipal council's transactions were particularly favorable, as the average annual surplus during those years was £182,378 (over $886,000). Since 1925, however, the city's finances have taken an unsatisfactory course; deficits totaling £236,729 ($1,152,042) were recorded in 1925 and 1926, and a deficit was anticipated for 1927 also. During the period 1915-1926 both revenues and expenditures more than trebled. The increase in revenues is accounted for by larger receipts from the sale of electric current and by increased receipts from "rates" due to the rise in land values within the city area.

According to recent records of the city council, the value of all unimproved land in Sydney has risen from £27,356,000 in 1914 to about £55,000,000 in 1927. The belief is expressed that land values will continue to rise in view of the great demand for land and its limited supply. The value of unimproved land upon which assessments were made in 1927 exceeded the value for 1926 by some £10,000,000.28 The assessment rate during 1926 was 31⁄2 pence in the pound sterling. The heavier outlays were due to the expansion of municipal functions necessitated by the growth of population and by the city's commercial and industrial development.

BONDED INDEBTEDNESS, TREND SINCE 1915

The trend in revenues, expenditures, and indebtedness of the city of Sydney since 1915 is shown in the following table:

TABLE 50.-SYDNEY REVENUES AND EXPENDItures, Debt, aND SINKING FUND, 1915 TO 1926

Sources: Statistical Register of New South Wales (annual editions); annual reports of the city treasurer.

On

Rapid growth is shown in the bonded indebtedness of the municipality; it more than doubled between 1915 and the end of 1926. December 31, 1926, it stood at £14,288,089 ($69,533,095). As the sinking fund on that date amounted to £1,883,210, the loan indebtedness is reduced to a net amount of £12,404,879, which makes a net per capita debt of £103 15s., or $504.90. More than 80 per cent of this amount was obtained within the State of New South Wales; the remainder came from London. The money was borrowed primarily for the municipal electric plant, public markets, and land resumption. Although the proceeds of the loans have been spent on productive works which should provide annual interest charges and sinking-fund contributions, all the undertakings did not prove selfsupporting.

During 1927 the city council of Sydney was committed to a heavy program of construction. Accordingly authorization was made for the issue of debentures totaling over £5,000,000. A loan for £2,000,000 was placed with a London brokerage house in September, 1927, after an offer from an American bank was declined on the ground that the council was not authorized to borrow dollars. The loan in London was not favorably received, however; it is reported that

* Based on report of American Trade Commissioner E. G. Babbitt, Sydney, Australia, Jan. 13, 1927.