Gallipolis journal. [volume] (Gallipolis, Ohio) 1837-1919, 1874-06-04
AT THE BLACKBOARD.
Those Ten Per Cent. City Bonds.

lnasmuch as our City Council has
been discussing the financial proprie-
ty of redeeming those city bonds
which are drawing ten per cent. IN
terest, by issuing other bonds at a
less rate of interest, we have thought
it best to figure a little thereon for
the benefit of the general reader as
well as the Council. Sometime in
the mysterious past $4,000 in city
bonds were issued to certain gentle
man in order to raise money for city
purposes. These bonds were to
draw the average rate of interest,
and did so until the owner demanded
his pay. The demand came when
city credit was lamentably low and
ready cash wonderfully scarce. By
some private understanding, in order
to obtain an extension, an agreement
was made to pay ten per cent. inter
est and the same has since been done.
So much as to how. the bonds came
out, and how the city comes to pay
ten per cent. interest thereon. Now
for the policy of redemption by other
bonds.
OF late city bonds have been sell
ing at eighty-five cents on the dollar.
Then in order to take up these bonds,
$500, it will be necessary to issue
$4,O25 in bonds, or $525 more than
the face of the original bonds. Sup
pose the bonds issued for the re-
demption of the ten per cent. bonds
draw eight per cent. interest, and run
five years, then the amount paid for
the new bonds at the end of that
time, together with interest, will be
$5,635. The amount which will have
been paid for the So, 500 at the end of
the five years, interest included,w will be
SIS, ,25O, or loss to the city of $685..
Suppose the new bonds are issued
payable in ten years, then the inter
est and face of the bonds, at the same
rate of interest will foot up $7,245.
In the same length of time the bonds
at ten per cent. will double them
selves and amount to $1,000, loss to
the city by the new issue of $245.
Suppose again that we issue the new
bonds at Z per cent. land by the way
not much money is loaned at seven
per cent. now and they are made
payable in five years, the total
amount paid out for them at the end
of that time will have been $5, ,433.75.
The original bonds running until
that time, with their redemption in
cluded would amount to only S., $50,
a loss by the new issue to the city of
$1S3.75. If the bonds were drawn
at seven per cent. payable in ten
years, then the difference in favor of
the city would be $157.50. These
are based wholly upon
the theory that we have to discount
our bonds fifteen per cent. on the
lollar. If we could sell them for the
face then there would be no question
Dut that it would be policy to take in
5en per cent. bonds with seven or
eight per cent. bonds, time making
no difference.
We would recommend to the Coun-
ell the consideration of this question.
For some time the city has been re-
deeming about $4,000 of her bonds
yearly, but has issued in the same
length of time an amount equal to
or greater than that sum. 1t is po-
litic to retrench, and with our in
creased duplicate and high levy, nine
mills for debt, we can certainly re-
deem these ten per cent. bonds with
cash this year. By issuing new
bonds in this instance we increase the
debt $525, pay, if ten year bonds,
nearly the face of the original bonds
in interest, weaken our credit, and at
the end of a decade stand just where
we do now, only we have debt on us
1925 greater than it now is.
We have no direct interest further
than another, and only calculate the
several propositions for the benefit of
taxpayers. Let the Council figure
upon these questions and in their
own good judgment decide for the
best interest of our city, which now
groans under a debt that would sink
a navy.