New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1884-11-30
THE DEBTS OF CITIES.
EFFECTS OF THE NEW AMENDMENT
THE CORPORATION couSsgIs ANSWER TO THE
MAYORS QUESTIONS.


MAYORS QUESTIONS.
Soon after the election returns had deter
mined beyond question that the new amendment to tho
constitution hs State had been adopted, Mayor Ed
son sent communication to Corporation Counsel La
combc requesting to two questions arising I'M
der the amendment This amendment which goes into
effect January J. 1885, prohibits any city OF the State
having than 100 900 inhabitants from mourning an
indebtedness exceed 10 per cent of the assessed vau
alton of its real estate II its present debt
exceeds that proportion IL IL prohibited from
mourning any additional debt until IL has reduced It's
obligations below the 10 per cent. Tho amendment al
exceptions in the OF bonds for the supply
of water and other purposes The Corporation Counsel
yesterday sent reply the Mayors questions, the frat
one of which was VIII the city authorities bo pre-
cuded by the Constitutional Amendment from ssu-
ing any than for tho suppyof water after
January |, 1855 g.
MR. LAcOMBE's ANSWER.
The substance of Mr. Lacombe's opinion "a follows:
The total assessed valuation Of the real estate OF TINS
city subject to taxation Is $,ilo76l597 10 per cent
Thereof Is y a y 7o oI pnS o ss avn % be-
$l25SIo579 80. of which S35A70,5.0 SO are held
by he Commissioners OF me linking fnnd. % thu CITY a.
therefore Si25 80, and the first question to be
considered IA neither anything Ia to be deducted from
l. The statement has been made that so much Of this
represented by bonds heretofore Issued Ia pro-
vide for the supply of water should not be rs
"exsting Indebtedness by what process OF reasoning
preed as To sustain such conclusion 1t IA hard To
The language used Is: Nor shall this elton e con
suppIy OF water etc" The aiming Of this clause IN APP
parent aud not obscure II simply provides that the ten
per cent rule shall apply o prevent the future issue
OF bonds OF his kind IN no way provides that III cal
cuaiing existing indebtedness bonds Issued for water
r. 1re The assets Of the city to deducted from this
APPARENT gross total'
In my opinion they are not. 49, ,
In the language OF everyday life, the word indebted
ness implies obi CATION 10 pay irrespective entirely
of 4 hp airy
II the assets of he city arc TO be deducted ~ ss-
gecd then power to contract debts is not limited 10
10 per upon the assessed valuation of taxable real
estate but extends to The whole value OF all the assets oil
the city and 10 per cent such assessed valuations
III Are the stocks and bonds held by the Commission
crs the sinking Fund TO be deducted from the gross
apparent iudcbtcdncssI . .,- -. m,
cssed correct these securities are not To- De deducted
on the theory that they assets Of the city that they
merely represent Rast @ I s n u To- pro
duce part the needed to pay existing indeDt
states bonds the financial condition OF the city would no
doubt be as sound az It is to-day. but Its existing in
ness unre,tuced by the amount OF the Investment.
The grounA however. on which 1t Is urged that the
city hois or stocks held by the Commissioners OF the
Sinking Fund not 10 be considered ~ part ot me
exisng Indebtedness Is that the city owns these onnas
OF the sinking Fund practically purchase ny inc ely
TO AN Intelligent dsc usson OF this question, clear
conception of the character and functions OF the Sinking
The theory advanced ~ stated is that the city owns
these bonds.that it, purchase of debt due from itself
extingushes debt The allacy Of this claim Hos IN
the assumption that the city ami the sinking Fund Com
are the SANE he eI he as g That '''
1t is not to be disputed that one cannot owe M OF
that when debtor buys an obligation on when ne Is ,n
debted thereby ceases To he part OF MS exsns IN
debedness But IL is not true that the city owns or mas
ceased TO he liable to pay bonds wniee the COMMISSIONER
| of the Sinking Fund have bought and noid, Co.,,
sioners and the sinking Fund tho other are distinct
and different The City OF New York does not own the
that fund In The that 1t owns Its general fund or IN
the that owns other property me cy Is ,er
the general and ordinary sense OF that RI ~ csnot
exercise acts Of ownership over it. The Commits
of that fund and hold IL in trust subject To ecIt tam
specified and defined duties The creditors whose debts
ia g hpSs those trusts and duties strictly and fully
formed and enforce the performance thereoI lney
nnce Of the trust duties relating thereto which neither
the city nor the Commissioners can la"iuiy mpar Ut
IL seems that the intent of the contract OF pledge
made by the laws and ordinances relating 10 ths ala
| sinking Fund until their maturity. This system and
agreement has GOOD purpose, w 70 secure 'ns
the order of their prortes or all Dohds pa. aDie
ing Fund and which are payabe thereout in preference
to any other outstanding bonds which arc III prncpie
10 be- deemed paid when held by the Sinking fund Co-
mssiOners. If they then have FUNDS sueeht ior
| the pas ment thereof - -,
or cxtingnished cancelled, until their maturity nor
then until all prior aud equal claims Oh the fund are ex
iii TO steadily kept in mind that assets beng In the
debtors possession or IN trust unu cr.aeH oy o
The ct of 1878 clearly requires all accumula Ions Of
tbc sinking Fund to be retained until all OF the debt
thereon charged full, redeemed and paid No security
afforded by the sinking Fund be Impaired until every
hond payable therefro paid In full and the scope OF
principles herein before set iorth IS engu oy INC
act of 1873 just 10 the extent that said act mad. me
claims op the Sinking Fund more numerous lhah 'ney
VIII the sinking Fund Commissioners hold an invest
ment bonds falling due later than bonds presently uao
,he l,2nr Fund Including the 81 OO00 900 to S2u0O00
called for from taxation under section Oh INC hct VI
ls7s is insufficient to pay the bonds 80 due ana paya
know of nothng 10 prevent the commissioners selling
ON the market enough Of the bonds not due to raise we
| funds TO make such payment How then can the bonus
which may transferred to holders De eohsaeieo
~ ia true that by reason of the fact that
there IA large accumulation in tho sinking iuno. me
city will have to raise less money to pay ITS debts t y,
this state may interpret the words present nuep'e
as meaning only ye sSysnsed WHEELER
they shall held sound or unsounf, seem snlhv,en'
% vii The city authorities be- precdcd from issl,-
ing bondsi" II the answer L. at all doubtful ~ maSS "
| assumed that bonds Will be ISSUED hiter Jhhuni) II
| 1888 TIL the court resolves the doubt
THE SECOND QUESTION.
hmm this assumption your second question may next
/ lie considered. O..
second-If they will be thus precuded what steps II
any may be taken lawfuy.by the city authorities pe'oe
that date TO provide for avoiding any consequent
| embarrassment in the administration of tue eiy
| affairs ,..,.. =. ,.,o os.,,,,tes which
tho rontruer IA preparing this question canho, I'VE tu
| onsvered Certain general considerations, hoWeNl,
NAV he gested guide FOR future action wheh 'hose
| estimates laid before you, ,, 4. ,,. Ja,s,, =, I,
l. The problem now to he consdeieu Is ,ne h.
plan merely temporary relief ,np', n nsnsss,ry
HE administrative system are no DOUBT ihie heo, 80,
e ,h ~ the amendment The determination o.
MAI th"ae ehaua,s shall be Ia OF Craze nnpof vance sn
Ieneni ia the heat Thought and most careful lnsmem w
The cers a, the city, whose operation WIZ he neee'
az, tn the Legislature IA 10 what neat !" w
done lut IA change can be made wv the s w.
unats that pohlcn may fatty lie seserNed ioi sne w
Termination ~ thpse who are W eo-ope'"" |" e"e''s
| such chance ..... ,.....,. aha ahigatiun al