The last time Napier retailers were as disrupted as the present Covid-19 crisis was the 1931 Hawke's Bay earthquake almost 90 years ago.
Napier was the worst-affected town in Hawke's Bay due to the fires in its town centre.
Commercial building owners and their tenants had obvious problems, as can be seen in the photo.
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Those in Napier's CBD relying on their fire insurance for some assistance to rebuild and/or replace stock were in for a shock. Ordinary fire policies of the day stated that fire caused by an earthquake would not be covered. Few had earthquake cover insurance then.
State Insurance (then government-owned) made an "ex-gratia payment" (payment done from a sense of moral obligation) to their policy holders (despite advice that they did not have to from the solicitor general) to the extent of the damage caused by fire, not earthquake.
Private insurance companies were furious, citing an unfair advantage and described it as "making a gift to a limited number of State Fire Office policy holders".
Those building owners faced with no insurance payment or the limited State Insurance ex gratia payment still had problems, and this is illustrated by George Ebbett, managing director of the Masonic Hotel, Napier, who had at least earthquake cover:
The earthquake and fire destroyed the whole block of buildings. There was earthquake risk (insurance) of £25,000, but a mortgage of £40,000 so we are left with a bare site and a mortgage of £15,000.
Government assistance was announced on April 8, 1931, with the first step to create the Hawke's Bay Adjustment Court. The three men appointed to run the court had extraordinary powers to settle disputes of ownership where documents had been destroyed in the earthquake and to set aside "obligations or incumbrances" such as mortgages or rent.
The Adjustment Court compared its role to clearing the rubble from a site before rebuilding could take place: "Similarly in the business field the ground must be cleared of old debts and liabilities before business can begin afresh." To qualify for help, the loss had to have been caused by the earthquake, and settlement with creditors could not be done amicably.
After the Adjustment Court, the five-member Hawke's Bay Rehabilitation Committee took over. The objective of this committee was "as the ground is cleared by one agency, the second will build". In other words, once the Adjustment Court had made a judgment on liabilities or obligations, the Rehabilitation Committee could look at providing the means to restart their business.
An earthquake relief fund was created from government funds deposited in London of £1,250 000 (2020: $139 million) and used by the Rehabilitation Committee to lend to business owners to rebuild premises and restore stock. This meant that any existing bank mortgages were set aside to rank as second or third mortgages, with the government loan secured by first mortgage over land and debentures over stock. The interest rates were between 4.5 per cent and 5 per cent.
In order to make the £1,250,000 amount go further, insurance and trading banks which had head offices outside Hawke's Bay were excluded.
Most of the labour costs for rebuilding were paid out of the Unemployment Board's building subsidy.
A criticism of the Rehabilitation Committee was that it acted mostly like a loans board, and not as rehabilitation facilitation.
While the rebuilding of Napier took place, Fletcher Construction built what was affectionately called by the locals "Tin Town" because the 54 shops in Clive and Memorial Square were constructed in corrugated iron and wood. The Government gave a non-repayable sum of £20,000 ($2.2 million) to do this, much to the annoyance of Hastings, which received no such support.
Many businesses struggled under the weight of the government loans and in 1934 both Napier mayor, C.O. Morse and Napier MP, W.E. Barnard, made representations to the Government to lower the interest rate.
Minister of Finance J.G. Coates initially refused, saying the Government broke a valuable investment in London, and the interest revenue is needed as part of the budget. He stated many of the loans were in fact interest-free for one to five years. Government loans through the Rehabilitation Committee had gone from £250,000 ($30 million) in 1932 to £850,000 ($108 million) in 1933.
In November 1934, the Government relented and the interest rate on the loans was reduced by 1 per cent.
On September 1, 1935, during the election campaign Coates announced all earthquake loans would be interest-free for three years from 1936.
However, the Labour Party, through Michael Joseph Savage, during the election campaign said that from 1936 no further interest would be payable on earthquake loans - a promise Savage made good when he formed the first Labour Government. Labour MPs were elected to the seats of Hawke's Bay (Ted Cullen) and Napier (Bill Barnard, who was re-elected).
A big fear for Hastings and Napier retailers was the increasing competition from chain stores and they believed the loan interest made them less competitive.
Michael Savage's Minister of Finance, Walter Nash, recognised Hawke's Bay's problems were national problems in announcing the loan interest relief in 1936.
In addition to business owners, the Napier Borough Council was struggling under its £101,200 ($12.2 million) government earthquake loan.
The loan was forgiven in 1937 when the Government converted it to a free grant.
This generosity did not, however, extend to the Hastings Borough Council for its £11,000 loan, despite their howls of protest of unfairness. Hawke's Bay Labour MP Ted Cullen unsuccessfully argued for its forgiveness.
Hastings felt penalised by having lower debt and its overall financial situation made better by using the proceeds of selling its electrical undertaking to the Hawke's Bay Electric Power Board before the earthquake to aid its infrastructure recovery. (Napier's Municipal Electrical Department was kept until 1991, then called Bay City Power, and sold to the Hawke's Bay Electric Power Board).
Some documentation I have seen shows many Hastings and Napier businesses did not pay their earthquake loans off fully until at least the 1950s, despite being interest-free.
Michael Fowler (firstname.lastname@example.org) is a contract researcher, commercial business writer of Hawke's Bay history and now accepting commissions for 2022.