Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1886-06-24
THE CITY BONDS.
The Question of Refunding Considered
by One of the Commissioners.

The Question of Refun5ing Considered
by One of the Commissioners.
EDS. RECORD NIoN: There is scheme
on foot to involve this city TO the extent 0
from 100000 to 100000 without any
consideration therefor whatever. AnC
what is the worst feature of the scheme,
find that some of our best citizens hav'
been draw into it in the firm belief tina
they were doing something for the benefi
of the city. The proposal is to refund th'
city debt So far as | have learned, thest
are the FIVE different schemes proposed
First-To refund the whole debt-bond!
and first-due coupons-at - cents ON tho
dollar, bearing per cent. interest
Second-To refund the whole at 50 cent;
on the dollar, bearing per cent. interest.
Third-To refund the whole at 50 cents
bearing per cent. interest.
Fourta-To refund the whole at dollal
for dollar, being 8 per cent. interest.
Fifth-To refund the whole at It's lace
bearing per cent. interest. Let US see
what this will amount to: There are out
standing bonds Exclusive of what the
Bond Commissioners hold, $l,061, 800
past-due coupons, $3.50, 100-$l, 1922 900
there is also interest since last January
say six months, to be added, 1000
making 81 ,522 600 10 be refunded. 1t Is
true there are $2S coo, in round numbers,
in the hands of the Fund Commissioners
to buy coupons. But the next installment
of coupons will be due next January, and
we cannot, if this funding is carried ont,
expect with that to take up more than the
accommodating interest between now and
the time the new bonds are issued. So the
new bonds must provide for 81 go, 600.
Let us see how many bonds Will have TO
be issued under each of these proposed
compromises.
If funded at 70 per cent, bonds to
amount of $S7 900 for twenty years must
be issued-in all $1,752, 200.
If funded at so per cent, it will be
SOC, 800 year, or 81 ,926, 900 in all.
If funded at So cents Is per cent.
bonds), it will be $99,5OO per annum, or
81, $780, 600 in all.
If funded at its face in per cent.
bonds it will require bonds to the amount
of 100000 per annum for twenty years, or
$4,000. 900 in all,
If funded at its face in 4 per cent.
bonds, it will require $10S,000 per annum
for twenty years, or 81, 100000.
The present income of the sinking and
interest fund is $4,000 in round numbers.
Last year it was $S4,9 SS. This year it viii
probably be about the same.
With an income of $4,000 from the
sinking and interest fund the Fund Com
missioners will have next year 5000,
leaving only $4,000 for the outside
creditors. Every year our fund will be
increasing, whilst the amount payable to
outsiders will be diminishing.
Now, with this accommodating fund the
Fund Commissioners will be able to pay
the whole debt in thirteen years And
this without the imposition of one single
cent Of taxes on the people, derive ourd for
fund. OF course, we would have the use
of what we could get out of the sinking
and interest fund But this would not cost
any additional taxation. What is paid
into the sinking and interest fund is paid
under the order of the Supreme Court, and
cannot be diverted until the whole debt is
paid
If the Fund Commissioners are allowed
to go on, and they can pay the debt in thir-
teen years with only what they can get
from the sinking and interest fund, the
people will have to pay only one
million one hundred and five thousand
dollars to extinguish the whole debt. This
would be $6l7 900 less than if they refund
ed at seventy-five cents in five per cent.
bonds, and that is the most favorable re-
funding proposition that has been sug-
gested. And it would be one million forty
seven thousand dollars Isl ,O47 ,000) better
than to refund at four per cent. bonds for
the whole amount. This latter proposition
is the only one, believe, which would be
entertained by any large portion of the
creditors.
These schemes We're the ones least favor
a hlp IN hnnIl O1darS- n rafu,,A IN, =
cent. bonds at 70 per cent. of the face of
the debt would give them several hundred
thousand dollars more for their old bonds
and coupons than they are worth. At first
sight one would suppose, under such cir
the bondholders would jump
at the offer to compromise. Doubtless
some of them will but most of them will
not. Some of the bondholders say: " We
have had four years litigation to establish
our right to collect interest on the old
bonds. If we take new bonds q year or
two hence the city may repudiate them
and involve US in new litigation, with a
of decision which would hold
the new bonds illegally issued and
void. Then we would lose all. We
prefer the certainty of what we have got"
Others again say: . This is a tempting offer
on the part of the city. hope half or two
I'LL uS Vi luG DOlUhOiuSIo may COIupTU-
mise. But | will not. If a half or two
thirds of the bondholders compromise, and
the Fund Commission is wiped out (of
course the destruction of our Commission
is part of the compromise scheme) then
the bonds belonging to us who have re-
fused the compromise will get the whole
of $4,000 payable to the interest and sink
ing fund until the last dollar is paid. Our
bonds will be not only at par, but above
par" A thousand-dollar bond, payable in
1903, would be worth about 81 $50 or 81 200.
For these reasons the whole scheme is i'm
practicable as a refunding of the entire debt.
But the talk about refunding- proposing to
give for the bonds and coupons more than
they are worth, and far more than the
Fund Commissioners are giving-is seri-
ously interfering with our operations If
they should refund half the debt, it would
bring absolute ruin on the city.