The herald., 1893-02-13
MUNICIPAL BOND SECURITIES,
Technical Errors Should Not
Be Basis for Evasion.
Some Defects Said to Exist in the
Street Improvement Act.
Points Suggested by a Paper Which
Will Be of Interest to Every
Glass of Citizens in
municipalities.

10 buO hubLkOA Vi bA0 iOilOWah6 PaRoA3
which advances some arguments worthy
of consideration:
Municipal bonds, to the city, town or
village, serve as the handmaidens OF
necessaries, comforts, and even luxuries
to the home of the inhabitants, whether
they be rich or poor, princes or paupers.
Without the aid of capital secured by
the combined promise to pay of COM
munity or municipality, there is no ave-
nue. open for obtaining the necessary
funds for building city halls, school
houses, water and sewer systems, ETC.,
except by excessive and burdensome
taxation, or when provided by private
corporations solely for gain and profit.
Municipal bonds were originated and
are issued for the purpose of furnishing
capital to be invested by the people and
for the people for public works to be
operated for their benefit and either in
tellectually or physically, and without
the payment or emolument or profit to
private or corporate investors, the debt
and obligation created by their issue to
be provided for by the gradual accumu-
lation OF sinking fund within long or
the requisite term of years, so that their
liquidation will not work hardship
upon the taxpayers OF the municipality.
State laws should, and, as q rule, do
limit the amount of municipal debt, 30
that no undue burden will be imposed
upon the taxpayers out of proportion to
the size or number of inhabitants of the
municipality and its corresponding abil-
ity to pay without distress or confsca-
tion of property.
With this most vital and essential re-
quirement and other safeguards, among
them freedom from machine politics
and economical administration of af-
fairs, lay down as an unbeatable
proposition that it is wisest and best for
municipalities to own and control their
water system, their gas and electric
plants, etc., rather than have their tax
payers and people submitted to the ar
bitrary and sometimes extortionate
charges Of neutrality-suspicious. for the
use of such necessities. To acquire
such ownership it is requisite to issue
bonds with the credit OF the people as
security.
Municipal bonds are generally issued
spanning one or two generations OF
time 30 that the taxpayers of today are
not wholly Durdened with the debt for
permanent and needed Improvements,
which will be equally enjoyed by their
heirs or assigns long after they have
Quilted this "vale of tears"
They are in universal favor as means
of safe investment by capitalists, saw
ings banks and investors generally, and
frequently constitute the basis of secur-
ity by way Of pledge for loans by fnan-
cial institutions, but the same can be
said of this class of securities as is true
of other classes of paper obligations,
they are not always what they seem.
L1tfgatlon 1H cOuHTsnI1y going Un, nnd
numerous cases could be cited where
the purchasers in good faith and owners
of municipal bonds, in seeking to en-
force payment of coupon or principal,
have been met with some defense, con-
stituting a hidden defect, which has
prevailed and barred recovery. This
has become 30 frequent and Losses of
large sums of money incurred from these
causes that investors are becoming more
cautious, and challenge every issue of
municipal bonds by closest legal scrutiny
before offering to purchase. Such
state of affairs should come to speedy
end by constitutional enactment to the
effect that the issuance and sale Of a
municipal bond is absolute evidence of
constitutionality and regularity and that
no technical defense can be availed of.
The money of the investor should not
be lost or even jeopardized, for it is
given as quid pro quo, and any techni-
cal defense to avoid payment is vir-
tual and real reputation of an honest
debt.
Municipal bonds should always be
authorized and issued to procure funds
for the construction of public works or
the furtherance of enterprises which
will materially rebound to the benefit,
advancement and prosperity or eleva-
ton of the people, and for this reason
they should be a direct obligation or
promise of the people to pay without
discount or evasion of payment by the
plea of irregularity of issue or the inter
position of any plea or defense looking
to reputation, and should be non-tax-
able and incontestable.
Stringent laws should be enacted and
enforced making municipal bonds, and
all public bonds for that matter, the
same as private obligations to pay not
defensible or payment evaded except on
the grounds of fraud or failure of con-
sideration. Defense or repudiation by
reason of not strict compliance or con-
formity with technical requirements OF
issue should not be tolerated or availed
of. A municipality should never lend
itself as quaei endorser or collector OF
any species OF bonds. If connected in
any way with the issue of bond in
tended for the public veal, it should be
unequivocslly, as the direct obligor, and
not assist in the creation of debt
against its own people, which from
theoretical standpoint looks to their
benefit, without incurring any financial
responsibility for its liquidation or pay
ment. Its intention may be ever go
good, proceeding on the theory that its
action will inure to the material benefit
and welfare of it's inhabitants, but the
contrary effect may be produced upon
the practical application of the scheme,
and instead of benefit serious injury
may result. The city of Los Angeles ia
confronted today with the pernicious
effects of seemingly highly advantage
GUS law, which it not only assisted to
enact but with which it is inextricably
bound up in the enforcement and which
has resulted in the actual confiscation of
property instead of beautifying and
rendering it more valuable to the owner,
as was intended.
/ refer to the streetimprovement bond
act. which, with the irrigation bond
law, is another apt illustration of the
frequent inability to put good theory
into practice. The law wes formulated
and enacted to enable the streets of Cal
ifornia towns and cities to be improved
by having Or grading without puttiuv