The Portland daily press. [volume] (Portland, Me.) 1862-1921, 1885-10-05
THE DUTY OF THE CITY COUNCIL.

THE DUTY OF the CITY COUNCIL.
One of the arg uments used by the friends
of the mutual agreement plan of reorgan-
izing the Portland & 0gdensburg railroad is
that under this plan the city will be
the owner of a certain amount of bonds pay
ing per cent interest while under the fore
closure plan it will get nothing but stock
without prospect of dividend. The Portland
Globe which advocates the mutual agree
ment'' plan puts it in this way
The two plans proposed-the foreclosure, and
Mr.. Putnam's reOrganiZati0n-mayb be summed up
briefly. The foreclosure wipes out all claims be-
low the second me rtgage, and if completed leaves
the city with 81 per cent of the shares in a new
solvent corporation, but with no prospect of divi-
dends. The Putnam plan, if it can be effected,
gives the city $4,000 in bonds paying per
cent and controlling interest in the preferred
stock. II is a plain proposition Do the tax
their already large investments in this property?
What the PRESS would like to have the
Globe or any other advocate explain is how
it is if there is no prospect of dividends if
the second mortgage bonds are converted
into stock there can be a prospect of interest
on the second mortgage bonds if they re-
main as bonds. The interest on the bonds
must come out of the earnings of the road.
There is no other source from which it can
come. Now if the road earns sufficient to
pay three per cent interest on a certain
amount of bonds-say 500, OO0-how will it
affect the earning power to call these bonds
stock In other words will not the road earn
just as much if all the city's interest in it is
the shape of stock as it will if part of the
city's interest is preferred stock and part of
it is second-mortgage bonds? 1t is obvious
that it will. Yet the Globe and other friends
of the mutual agreement" plan seem to
think that the city can in some way get 8
per cent interest on bonds which it could not
get if these bonds were changed into stock.
Under the foreclosure plan the city will
get about three-ffths of all the income of the
road after the running expenses, interest on
the first mortgage bonds and receivers GER
tifcates are paid. How can it get any more
than this? If there is nothing left after
these charges are paid it gets nothing. But
under the mutual agreement plan these
charges would take precedence over the in
terest on the second mortgage bonds, and if
there was nothing left the city could get no
interest on its bonds. All the city can pos
sibly get out of the road it can get just as eff
fectually as a stakeholder as a bondholder.
The question then, under which scheme
will the city get the most revenue from the
road, might as well be eliminated. The only
question left for the city to consider is, which
plan will most effectually secure to it the
control of the road Under the foreclosure
plan the city gets aroad with only two ncum-
ORANGES upon it, the first mortgage bonds of
100000 and the receivers certificates of
$25O,0O0-a total Of $1,O5O,00O. The earnings
of the road can easily take care of the inter
est on this sum, and the city can hold its con-
troll of the road just as long as it sees fit. Of
course it can voluntarily relinquish it, 1t
can put ona second mortgage so large that the
earnings will not be sufficient to pay the in
terest, and thus eventually lose control 1t
can sell or lease it. But these will be voluu-
tary acts, and no scheme can be devised by
which the city can be prevented from squan-
dering its property if it wants to- But the
road under this plan cannot be got out of the
control OF the city by anybody else's act.
The city must itself relinguish it voluntarily.
The duty of the present city council is to
adopt the plan that puts the city most secure
ly in possession of the road. If the commit
tee appointed Saturday night succeeds in
formulating plan which secures this better
than the foreclosure plan the city council
should adopt it. If it succeeds in formulat-
ing plan that secures it just as well and has
advantages in other respects it will still be
Its duty to adopt it. But before it is adopted
1t should be made certain beyond all perad-
venture that the city is as well secured by it
as by the foreclosure plan.