Sacramento daily record-union., 1881-02-14
THE FUNDED DEBT OF TIE CITY
A Clear Historical statement-The Facts
and Figures

Public attention having been recently at
tracted to the subject OF the funded debt of
the city, it is well that the city taxpayers be
correctly advised as to the facts and as to the
condition of the debt, and the obligations of
the city and the duty of the Trustees. By
passed April "a, 1858, the government of
the city and county was united in one munic-
| ipal corporation, and so continued until the
25th day of April 1868, when the Consolida-
ton Act was repealed, and the two govern
ments again separately established.
The funded debt was created by the Act of
| April IA, 1S5S-that is to say, the debt had
been created before that time for all city pur-
poses, including the special debt for estab-
| fishing the City Water Works, and was then
! funded under the authority of that Act. The
aggregate amount thus funded was, in round
numbers 81, 900, 600 in bonds, with six per
cent. per annum coupons attached-S400, 600
to mature in 1888, S400, coo in 1898 S400, 600
| In 1898, and S400, 600 in 1908. At about the
time these bonds were Issued. or soon after,
by some arrangement between the city and
the holders S59, 100 of these bonds were re-
deemed and cancelled, as follows So, 600 of
the bonds maturing in 1888, S4, 400 Of those
maturing in 1898, so, 900 of those maturing
in 1898, and S4l, 700 of those maturing in
1908 1t may therefore be stated that the
funded debt started at some date prior to
1860 with principal of 81, $40, 700.
The Act of 1858, by which the debt was
funded, was contract between the city and
the creditors, in which was provided the pre-
else manner in which and the exact means by
~. - h. IL i into
were to be paid In brief, the Act provided
that 55 cents in each 100 cents of an annual
tax upon city property, together with 30 per
cent. of the income from water rates. licenses,
harbor dues and fines in the Police Court,
should be set apart in sinking fund for the
payment of the annual interest, and redemp-
tiOn of the principal Of the bonds. In pass.
ing it may be stated as fact, which is well
known, that the city has only partially full
filed this obligation.
The Act of April %. 1868, by which the
city was rechartered, re-enacted all the pro
visions of the Act of 1858 relating to the
funded debt. 1t may be fact worthy of note
here, that in 1855, when the city entered into
the above contract, the total assessed value OF
its taxable property was $40, 251. .579 within
a small amount as much as it was in 1850,
when it was so, 504 225; and that in 1863,
when it affirmed the contract, its total as
sessed value of taxable property was only
s.. 533, 10 and did not reach So 900, 900 until
after the year 1868 Another fact The city
has never since 1862 put into the sinking
fund provided for the payment of the funded
debt the 80 per cent. of l per cent. provided 1
by the Acts of 1858 and 1868, except twice
once in 1868 and once in 1S67-though it has
never failed to put in the fund less amount,
running generally at about two-tifths of the
amount required.
In 1872 an Act was passed creating Board
of Fund Commissioners and authorizing the
city to raise special annual tax not exceed |
ing 80 cents, the proceeds of which should be
devoted to the purchase of bonds of the |
funded debt at price not exceeding 80 per
cent. of the par value, and of coupons at any |
price not exceeding par value. Under this
Act the city has succeeded in redeeming the |
following amounts of bonds OF those matur-
ing in 1888, S75, 100; in 1898 S106, 400; in
1898, S132 900; in 1903, Sl62, 500 total,
SAG, ,900-thus reducing the amount of the
principal of the outstanding debt to 81 063,-
800. It will be seen by consulting the figures
that there remains outstanding of the bonds
of 1888. 1921, 900; of the bonds of 1898,
$3.50, 200: of the bonds of 1898 S257, 100; and
OF the bonds of 1908, S195, 600. 1t appears
that the proceeds of this special tax collected
during the past eight years has been mainly
devoted to buying in bonds maturing in 1893
and 1908, instead of those maturing in 1888
and 1898. The policy of this Is perhaps ques
tionable, in view of the probability that the
generation which will control the destinies of
Sacramento in the next century will be more
able to handle the portion of the debt |
Justly assigned to them than we. |
There have also been redeemed under the |
Act of 1872 interest coupons to the amount |
of S264, ,022. There were prior to the lst of
January, 1881, S62l. S26 of past-due unpaid |
interest coupons. OF these $500, 600 became |
due prior to the lst of January, 1877, and |
being more than four years past due it is |
supposed that amount is outlawed in case the |
city should plead the statute of limitation, |
though this is a disputed question. Leaving |
out of tie account this $500, 900 of supposed |
outlawed coupons, there remains due of |
coupons not claimed to be outlawed, the |
sum of 1921. .926, which, added to the out |
standing principal of Sl063, 500, makes the |
total amount 81 3S5, GIG. This large ac- |
cumulation of interest has resulted from the |
failure of the city in years past to place the |
agreed amount of taxes in the sinking fund. |
The Act of 1872 was devised to obviste this |
delinquency, and has been partial success.
But that Act is of no further use for the pur-
pose of buying in bonds, as no more bonds |
can be purchased at the rate of 80 cents, |
therein limited.
To meet the current annual interest now
falling due requires only the annual sum OF
S63, ,828 But the matter which causes the
embarrassment of the city at the present time
is the large amount of back interest, payment
of which is asked by the creditors-not all at
once, but in annual installments-as fast as
it can be met by an honest compliance with
the law under which the bonds were issued
and accepted This is all the creditors have
a right to ask And if legal precedents be
I'LL ha J. 1sfs1,,l+ 70 lary tbaf tho
creditors have it in their power, whenever
they choose to exercise it, to compel the city
authorities to levy and collect the tax of 30
cents, and to appropriate the proceeds, to-
gether with 80 per cent. of the income from
the water works, licenses, harbor dues and
fines in the Police Court, to the payment of
the back interest and the current annual
interest. For more than year past
suits to this end have been contemplated and |
threatened. One moving cause was the fear |
that the city intended to plead the statute of |
Limitations against all coupons more than four |
years past due. The coupons falling due on |
lst of January, 1877, would OH the lst of JAN
uary. 1881, cross the dead line of the four |
years statute and encounter the risk, or the |
supposed risk. of being transformed into |
waste paper unless suits were commenced to |
save them, or some satisfactory assurances
were received from the city in regard to them |
as well as TO those coupons that mad more |
time to live.
1t was at this point and in this emergency
that, under the advice of prominent citizens, |
through the medium Of committee of such |
citizens. the Trustees promised the creditors
in December last, that in future the law would |
be complied with. For the violation of this
lawin years past perhaps the creditors have no
adequate remedy. But they may resort to
the Federal Courts to compel the execution
of the law, and the application of the funds
arising from the execution of it to the pay
ment of the debt. Such a controversy it
would be impolitic to invite. The evil con.
sequences TO the city, in case of the adverse
decision, it would be difficult to estimate in
advance.
In considering the question whether the |
city will or will not stand to its engagements |
in this regard, the revenues which it is able |
to produce in connection with all its necessi- ,
ties is controlling factor. 1t is one for the |
consideration of the CT ditors as much as for |
the city. That some extra taxation will be |
required to strengthen our levee defenses and |