The herald. [microfilm reel] (Los Angeles [Calif.]) 1893-1900, 1895-03-04
THE cITY's CREDIT

In view of the interest taken in the
question of refunding portion OF the
city's bonded debt, The Herald today, in
another column, gives a detailed state
ment of the amount of city bonds out
standing March Is. 1t will be observed
that the total debt of the city as repre-
sented by the bonds cit has mother debts),
is 81, 259, 900. All the bonds issued prior to
July l. 1886, bear interest at the rate of
per cent There are outstanding OF this
class $751;, 900. The issues oil SO, ~ ana
'sS were per cents of which $245, 600 are
outstanding. All subsequent issues pay
per cent interest. 1t is the IS and rs
that the Council proposed to refund at
lower rate of interest," and the rate agreed
upon is IL per cent. 1t will be noticed
that this will effect quite neat saving to
the city. OF the per cents, $58, 900 OF
the issue of May 1, 1891, could be in
cluded in the refunding proposition, thus
effecting a further saving OF $3.50 per
year. or $4640 in the sixteen years they
have to run, but the Council for some
reason not altogether plain, did not think
it worth while to save this small sum.
There is NO question that the refunding
proposition will carry when put to vote,
as the taxpayers will be only too glad to
reduce their burden. Ii the SOS, 900 per
cents were included in the proposition
they would vote for it all the more cheer
fully, but the omission will not prevent
them from taking advantage of the oppor-
tunity to decrease the rate OF interest on
the 6's and rs to IL per cent
The question of greatest interest IN
volved in the entire transaction is the
establishment of new rating OF the city's
credit The older the municipality, and
the larger its assessed value in proportion
to its indebtedness, generally the better
its credit For this reason Eastern cities
usually pay lower rate of interest than
Western municipalities. The various cities
have their ra ings on the books OF the bond
buyers, and it is gratifying to note that
Los Angeles from being per cent city
in 1881, became 5 per cent city in 81
making no allowance for premiums PAID
for bonds issued in those years.
1t is now proposed to reduce the rating
to at least 1-2 per cent, and the question
is, Could it not be made still lower-as low,
even, as 4? If this could be done, the
credit of the city of Los Angeles would be
almost as good as that OF the United
States Government, the last bond issue OF
which, making allowance for the premium,
was sold on the basis of about 3 5-S.
At least one firm of local bond brokers
offered to pledge itself to refund the city
bonds at per cent, but because commits
sion of So 600 was asked for doing so, the
Council rejected the proposition. One OF
the reasons assigned for the rejection, was
that the public would blame the Council
for sharing the commission, and thus the
cry of Doodle would go up. The gentle
men of the Council are very sensitive,
indeed
That the bonds can be refunded at
1-2 per cent there is no doubt. 1t is
generally admitted, too, that they will
command a premium at that rate, but
that the premium will be large enough to
reduce the interest to per cent basis
is hardly probable. 1t might come very
near that, if the bond buyers did not enter
| into combine, as they usually do, and
! as they will in all pro liability do in this
! case.
With so much capital lying idle. in the
| banks, and with an assessed value of over
| SAL, 600, 900 and only 81, 259, 900 debt, there
should be no trouble in placing Los An
geles city per cent bonds at par. 1t is
to be hoped that the IL per cents will
be sold at premium that will practically
make them equivalent to As