The herald., 1893-02-13
Principal
Railadel6hia Cooking So
August 27th, zSec.

direction OF the municipality, permitting
or requiring 10 per cent of the principal
to be paid annually during its lifetime.
The municipality is not only burdened
with the issue of the bond, but its duty
extends to the collection of the princi-
pal and interest, and the sale of the
property securing the payment in case
OF default. 1t lends itself to the
transaction in every conceivable
way except as guarantor, while the real
security back of the bond ia first lien
(even prior to taxes and all existing en-
cumbrances) on the property fronting
on the street to be graded or paved.
The weaknesses of the proposed benef-
cent act became apparent when put into
practical execution. In the first place
the city not guaranteeing or being re-
sponsible for the bond, it has to find its
way slowly in the bond markets and,
until it becomes known and established
as a desirable security, the property
owner will have to pay for the discount,
for like the operation of the mortgage
tax law, the extra cost attaches to the
very person sought to be benefited.
In other words, no universal market
having been created for the bond the con-
tractor in bidding for the work to be
done has to allow a liberal margin in
his estimates to provide against the dis
count he will have to make in order to
sell the bond. And, besides, the act
provides that the endorsement of the
annual one-tenth payment on the bond
has to be made by the city treasurer, at
his office, which is an effectual bar
against the negotiation of the securities
in the money markets of the eastern
cities and Europe (where cheap money
abounds and seeks investments), for the
reason that the return OF the bonds here
annually for endorsement of the one
tenth payment is a nuisance, and the
cost of transmission would really more
than absorb the profit of discount and
higher rate of interest contemplated by
the investment. Hence for these
two reasons alone the city has
lent itself to an imposition upon
its own taxpayers and inhabitants.
which not only inf1icts grevious tax on
property owners and impairs the securi-
ty of existing mortgages, but in many
cases already has amounted to confis-
cation of property, whereas if it would is
sue its own bond when it's limit of in
debtedness is not reached, or in that
event guarantee the street improvement
bonds. it would save property owners
the difference between per cent and
per cent. or per cent net per annum
in interest charge, and by reason of it's
own bond being largely sought after and
marketable at premium would save
for them from 15 per cent to 40 per cent
on estimates of the contractor. / refer
to the practical operations of the
street improvement bonds as a living
demonstration of the truth of my prop
osition that municipality should
never lend itself to the creation of q
bonded debt against its own people ex-
cept that it assumes the responsibility
of diroob Psy raent- -aithar aa maker nr
guarantor, for, as in this instance, there
is danger of inaicting an injury instead
of comforting benefit.
Without going into dry figures or sta
tistics can safely assert that municipal
bonds are now among the most desirable
securities for investors and will be more
so when the following cardinal princi-
pies are observed in their issue: First,
when they are regularly and legally
authorized and made non-taxable and
incontestlble except on the grounds of
fraud or failuresof consideration and
second, when the amount OF the debt 10
limited to the size and taxable wealth
of the municipality go that there can be
no failure or inability to pay.