The record-union. [volume] (Sacramento, Calif.) 1891-1903, 1892-02-27
TIE BOND COMMISSION.
c. {. Grunsky inquiries Into the iiatter
of Its Utility.
How the Commission May be of Service
to the City, and How 1t
May Not Be.

THE Funded Debt Commission can henceforh
DC of service 10 the city only by Tetardillg the
payment Of 1adtured bonds and interest coupons,
and 6y the purchase Of other bonds and coupons
ABOLISHED u the money StreceiUeS be returned
% me cltg an some legitimate 1cay."
Such is the conclusion to which G. E.
Grunsky has arrived after an inquiry into
the matter ofthe operations of the Funded
Debt Commissioners, which inquiry was
made at the request of DR.. @. l.. Sim
mons of this city. 1t will be seen by Mr..
Grunsky's letter on the subject that he
believes the commission can be Of future
service to the city only under certain cir
cumstances. The letter in full is as fol-
lows:
SAN Francisco, Feb. 8, 1892.
DR.. O.. L. Simmons, ,SacfdDeett0-DEAR
SIR: Your letter, inviting me to COM
ment upon and to crlticise the report re-
Gently made by ID. a. Lindley upon the
value of the Funded Debt Commission To
the city of Sacramento, has been received.
Accepting per cent. as a proper rate of
discount and basing my statements upon
amounts Of bonds and coupons and rev.
enues, as contained in the tables of Mr..
Lindley's report, have the following to
contribute:
present values of the debt is the most de-
sirable way of making comparative eX-
hibits, and no difficulty need be encoun-
tered in constructing tables, showing
with reasonable accuracy the present
value Of the debt under the several sys-
TENS OF payment. Care must, however,
be exercised in determining the time at
which the several bonds and coupons will
be paid under each system and the present
value of bonds and coupons must be de-
termined separately for each system.
Mr.. Lindley's deductions with reference
to the operations of the commission are
correct il the commission can be relied on
TO establish an infiexible rule not to pur
chase any bonds or coupons at greater
values than those indicated in his table
No. /. 1t should not, however, be as
Sumed that bonds and coupons will be
surrendered at such rates unless it be-
comes known that the commissions
money Will be returned to the city if
higher rates are demanded. If the bond
holders prefer to discount at per cent.
rather than hold their coupons and bonds
to maturity, then the debt will be fully
paid in lS97-or, as Mr.. Lindley says, the
commission might in 1895 become the
only bondholder.
His tables Nos. l and ., in so far as
they snow present values, are correct if
Lhe commission ceases to buy bonds and
coupons and returns all its money from
lime to time to the city, but they are not
correct for any other system of paying
the debt.
A table similar to his table No. ought
TO be prepared with table No. 3 as basis
1t win be found if this is done that, if the
commission ceases to operate at the close
Of 1892, the present value of the debt will
DC 1864, l07, and this is more nearly in ac-
cord with the payments at present aEtici-
pated by the bondholders, based on
which they figure the value OF their
holdings.
1t is desirable to know the present
value of the debt if the commission
operates with view to the most rapid
payment possible. This will show a pres
ent value somewhat less than 1854, JOY, but
not within about 100000 as low as figured
by Mr.. Lindley in the latter portion of
ais table No. ,. Data necessary to make
this calculation is not available, because
it cannot be determined in advance what
bonds and coupons Will be offered to the
commission. But the commission can
compel some bonds and coupons to be
neld for longer time after maturity than
they would have to be held under the di-
rect system OF payment. Based on inn
perfect data, and as merely illustrative
This present value may be noted at $780,
900. AS the present value which Mr.
Lindley has made the basis of his figures
IN the second part of table No. 2 is less
than this sum by S97 900, more revenue
than that table indicates will be required
The future payments Will aggregate ST.
600, which sum is not greatly at vari-
ance with the aggregate revenue required
without the commission Figured at 81 :
106,284 by Mr.. Lindley).
The present values assigned by Mr.
Lindley in his table No. to the several
bonds and coupons should not be applied
under all systems of debt payment, be-
cause ii bond of 1SSS-95 with or without
The operation of the commission is re-
deemed at full face value in 1894 see
Lindley table No. 81, then its present
value is not SO cents as figured in table
No. =, but it is so cents. Estimated in this
way it will be found that the present
value of the city's debt is greatest by that
system of payment that Will soonest
make interest coupons and bonds payable
as they become due, it is least and bears
most lightly upon the city under that
system of payment which will most re-
lard the payment of matured bonds and
interest coupons.
The Funded Debt Commission can
henceforth be of service to the city only
by retarding the payment of matured
bonds and interest coupons, and by the
purchase of other bonds and coupons at
or below their present value.
1t should not be abolished, if the money
it receives can be returned to the city in
some legitimate way and kept out OF the
hands of the bondholders.
These conclusions are predicated upon
The assumption that the bonds and inter
est coupons bear no interest after ma
turity.
Should it be found that they do bear in
terest, then the city should aim to pay
the debt as speedily as possible, and the
commission will be useful in accomplish
ing this.
Summary-With the commission in
operation and transferring all its money
10 the city through the medium of other
bonds, or otherwise, the present value of
the debt will be about $3.50, 430, and the
debt viii not be entirely paid till about
1906.
With the commission in operation and
using all its money for the purchase of
additional bonds and coupons, the pres
Ont value of the debt may be noted at
about $3.50, 000 and there is a possibility
That it will be fully paid in 1898.
With the commission abolished at the