Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1880-05-01
THE CITY SUED.
AN ACTION BEGUN TO WHICH THE CITY
EAs LONG BEEN LIABLE.
The Facts Of the Case and What the En-
feet Will Be-A Funded Debt Gem
missioner's Opinion.

'ne Ohl1ed states circuit Co1rt tor the Ninth
Circuit District of California. 1t was sued
out by the attorneys of Max Hausmeister, of
Wurtemberg, Germany, and requires the
Officers named to withhold from ex-
penditure 80 per cent. of the revenue
of the city derivable from taxes for
the current year, and SO per cent. of GER
tain revenue from other sources, that the
same may be applied to the payment of in
terest due upon certain bonds of the city held
by petitioner This action need not create
any surprise The city has been liable to it
at any time within the past nine years, and
of this fact the city officers have been fully
aware.
THE FACTS
Are briefly as follows: By reason of the chol-
era epidemic of an early day, when Sacra.
mento became the hospital of the whole
State, she was saddled with a heavy indebted
ness beyond the power of one generation to
pay. Following this came fires and floods.
and to save herself the city had to incur still
other indebtedness. She finally made herself
secure, fixed the city upon firm basis and
set her upon the high road to prosperity. The
city grew, her business expanded, and her fu.
ture was no longer question of doubt. At
that time the people turned their attention to
the payment of the city debt, and to get it
into shape where beginning could be made
it was bonded. The details by which this ag-
gregation of the city's liabilities was effected,
1t is not now necessary to recapitulate.
THE BONDED INDEBTEDNESS
Amounted in round numbers to 81, 900. 900,
and bore interest at per cent. The city was
deemed good, and the bonds were disposed of
readily. The earliest of these bonds become
due in 1888, and from that date on in such
sums that under the system adopted by the
Commissioners of the bonded debt, the prin-
cipal and interest will be paid without distress
to the people. In 1858 law was passed re-
quiring the city government to levy and
collect tax of l per cent, to be known as
the tax for the general fund. OF this 45 per
cent. it is provided shall be used for city pur-
poses, and 50 per cent. shall go into the sink
ing and interest fund. Ii is also provided
that 80 per cent. of the fines collected by the
Police Court % per cent. of the net proceeds
of collections from water rates, 80 per cent. of
wharfage and harbor dues and tolls, and So
per cent. of the license tax collections shall
be applied in the same way.
BY subsequent enactments the water works
fund was entirely diverted from the sinking
and INTEREST," fund, permitting it to be used
wholly FOX, other purposes.
NOW IT HAPPENED
That city officials, with the full knowledge of
the people of the city, early began to violate
this law, and instead of leVying 81 for the
general fund, reduced it first to 50 cents, then
60, then 50, then 30, until at the present
time but 4l-l00ths of one per cent. is collected
for that fund, and hence but 30 per cent. of
II cents tax goes to the sinking and interest
fund. To keen the thing even the city eN-
Of special funds from which nothing has been
set apart for the sinking and interest fund.
The result has been that the sinking and in
terest fund, though entitled, has not had put
into it the sum required.
In 1872 an Ac5 was passed creating the
Board of Funded Debt Commission and au-
thorizing it to use a certain per cent. of the
annual tax levy for the purpose Of buying in
the bonds Of the city, by offering annually TO
redeem so many of them as it was able, and
to prefer those offered at the lowest figure.
By adroit management and wise inanceer-
ing the Commission has succeeded to this
date in securing. some 100000 worth of
bonds, and, holding them, draws from the
city the interest thereon, and uses the pro-
ceeds to aid its fund for the purchase of still
other bonds. This system is rapidly extin-
gushing the debt and will, if not inter
rupted, wipe it out silently and without
trouble. But the city has outstanding
NINE YEARS
Of coupons for interest which are unpaid.
She has paid into the sinking and interest
fund 50 per cent. of -her general fund, of her
Police Court fines and the WHARFAGE and
license collections. The interest amounts to
S93 GOO per annum, and of this sum the
Bonded or Funded Debt Commissioners
draw, as it will be seen, a large proportion.
When tine spring taxes come in the Board
viii have about $40 GOO on hand
with which to purchase bonds The
whole trouble arises now out of
the nine years of unpaid interest
The city can repudiate the interest due for
five years Of that period, because of the stat
ute Of limitations. But the coupons, new
and those barred by She statute, are to-day
worth 80 per cent. of their face on a general
average, ard hence it is believed holders of the
same will be unwilling to lose those of the
first five years Of the delinquency, in order to
get the face Of those of the last four years in
short, that it is economy for them not to force
the city TO shield herself behind the statute,
and which she has shown no inclination to
do But the Funded Debt Commission is
clearly of the opinion that under the law the
city can be compelled to levy for the general
fund the tax of 81, and apply 80 per cent. of
it to the sinking and interest fund. This will
produce more than enough to pay the annual
interest, and nearly one-fourth of that is
drawn back by the city through her Debt
Commissioners, who have purchased bonds
for her. If the city repudiates five years of
the interest debt arrearage, she will then have
to discharge but four years of it.
JUDGE H. o. BEATTY,
OF the Commission, whose judgment is re-
spected by all citizens, and who is thoroughly
cognizant of al the facts and the law, gives
it as his opinion that the suit now brought
will not necessitate any increased taxation.
He SAYS the Trustees can be compelled to
collect one per cent. for its general fund.- and
of this it must set aside % per cent. Tor the
sinking and interest fund, also 90 Per cent of
the water works income. But this levy Of
one per cent. cannot be made this year, as
the time has passed. The water works debt
is not fully paid, the water works income
having been used for other purposes. 1t ap-
pears that the year after the passage of the
Act requiring the one per cent. the city
levied the tax as in duty bound and paid
some $50, 000 upon the coupon interest, bat
since then has not complied with the law.
OF the past-due coupons the city owns
through her Commissioners S24. 600
worth. The Funded Debt Commission has
heretofore had u certain per cent. of the tax
rate for the purpose of buying IN bonds, This
wear 1t has "a cents of it. 1t viii not now
need any more, as the annual interest it viii
draw on bonds already secured will
enable it to so on with it work.
This then. Is "a cents off the
tax rate of this year. Judge Beatty
therefore concludes that the city can comply
with the law and levy the l per cent. for the
general fund and not increase the tax rate.
1t now collects Al cents instead of 81 If it
levied the 81 it would produce about 500, 600,
of which (55 per cent SO, 600 must 90 to the
discharge Of interest. License collections are
about $50, 600, of which 90 per cent? SO, 500
goes for interest. Net income OF water works
he estimates at536, 900, of which 10 per cent J
/ Sl9, 500 goes for interest. and of the Police
! Court fines and harbor dues about $1,000 is
! believed to be the sum that goes to the inter
1 est fund This aggregates S99, 600, which
will pay the current annual interest and more.
the surplus to be used to discharge past due
1 interest, and after that to be held for pur-
poses of redemption. The "a cents no longer
needed by the Debt Commissioners, added to
/ Aha II cents now collected. will make 65