The record-union., 1895-05-03
REFUNDING THE CIFY'S Debt.
Facts and Figures the People Should
Understand.
The History of the City Debt and TIL,
Workings of the Commission
Fully Set Forth.

As the Board of City Trustees has be.
fore it the subject of refunding the debt OF
the city, the people should endeavor to
inform themselves fully in regard to the
matter. We have been requested to pub
llsh the following communication, which
was written by a gentleman who has had
every opportunity to know the facts. lie
has been one of Sacramento's leading
men for forty years. Every citizen should
read his communication. II will be found
to be full of interest at this time:
EDS. RECORD UNION: The subject of the
old city debt is once more TO the front by
reason of a somewhat sensational speech
recently delivered by one of the mem bers
of the Board of City Trustees. The sub
stance of this speech, divested of its acrid
terms, is q general charge to the effect that
the city, through the financiering opera
tions of the Funded Debt Com mission
ers, has suffered a loss of 81 100000. Speci-
fcations are demanded of the author by a
friend of the commission in a communi-
cation In a Sunday paper. 1t is not prob
able that the Trustee is sufficiently tamll-
lar with the history Of the bonded debt OF
1858 TO be able to comply with this de-
mand. In fact, his challenger more than
intimates that the Trustee does not know
whereof he speaks: an easy charge to
make by one who displays very little
knowledge of the subject himself
Whether the Trustee or his antagonist
knows much or little of the subject is,
perhaps, not material to the searcher
after truth. The former does know, how
ever, that the impression is general in this
tax-ridden town that, in substance, his
charge is true. That much he had ab-
sorbed and voiced in his speech.
There was nothing new or starting i q
that speech, but it was of value, because
it seemed to move the Board of Trustees
to demand of the Funded Debt Commits
sioners report of their doings during
these twenty-three years OF their exist
ence. The public have, from time TO
time during the last ten years, been
amused, and perhaps to some extent sat-
istied with golden promises, purporting
cent commission, of happy days in the
near future when the great debt would
be extinguished, and city taxes would re-
turn to normal rates. But, IN all this
time the patient but hopeful taxpayers
have been left in the dark. except in one
thing. They do know that the special
tax of 90 cents on every Sl00 on property,
and 90 cents on every Sl00 of all our other
revenues, ,inaugurated in 1858, for the bene-
with unremitting annual punctuality.
They do also know, or think they know,
that, with this tax loaded on them for
thirty-seven years, that old debt ought
to have been wholly paid, and that the
taxes ought to be materially reduced.
Why, in 1895. we should be taxed as
heavily as we were in 1859 to pay this
debt, is a problem which no chicanery OF
reasoning will, IN the future, any more
than it has in the past, solve to the satis-
faction of the public intelligence. 1t is
known, nevertheless, tnat there are yet a
few left in this community who are fay-
ored with that high degree of knowledge
in finance which enables them to demon
strate the problem to their own satisfac-
ton, and, in their Imagination, to the sat-
isfaction of others.
The Funding Act of 1858 consolidated
all The debts of the city then existing into
bonds to an amount not exceeding
the sum of 81, 100000 divided into four
equal parts, payable in 1883, 1898, 1898 and
1903, with interest at per cent The Act
provided a remarkably strong interest
and sinking fund. What this fund was,
and is, has already been mentioned. 1t
is an incubus which ever has weighed
and ever will, as long as it is permitted to
exist, weigh us down. 1t would, years
ago, have been removed were it not for
that fatal institution, the Funded Debt
Commission, which, by its policy and
conduct, has kept the incubus alive, and
would endow it with immortality.
The sinking fund of the Act of 1858 was
it's redeeming feature. Indeed. as much
may be said of every well-devised fund
ing law; but in this instance, especially,
was it's virtue as debt extinguisher de-
pended upon. 1t is no part of the scheme
of any funding law that the interest only
shall be paid annually, and the principal,
in one great lump, at maturity, as in the
case of ordinary money loans on mort
cages. Through the agency of the sink
ing fund it is intended, and it is an ele-
mentary part of the scheme, that the
principal should be paid before the NOM
inal date of maturity, or, at the latest, by
that time. Hence interest coupons are
annexed to the bonds only up to the date
of the maturity of the bond, and no pro-
vision is made for interest after that date.
Such was the understanding, and, in
deed, the contract between our city and
its creditors when the bonds were issued
In every funding bill in which an in
terest and sinking fund is provided al
all, the fund is designed to be sufficient to
pay the current annual interest with &
surplus over. This surplus is the sink.
ina fund, and is employed annually in
sinking the principal by the simple
method of advertising for bids, and offer
ing Inc Suri-uS OH Uduu W LILO UOuu-
holder who is willing to accept at the
lowest rate. If the law of 1858 had beer
permitted to take its course without in
reference by this commission there is nc
reason to suppose that the first quarter o.
the debt would now be more than one
half unpaid, and more than seven years
past due, to the great discredit OF the
city, and to its great detriment in every
effort toward progress.
By the method of the law of 1858 il
viii be readily seen that, by the annual
redemption of portion of the principal
the current annual interest becomes less
and less each year; and, also. that the sur
plus going into the sinking fund become:
greater every year. The increase in The
property tax and other revenues arising
from the growth of the city also adds tt
this sinking or redemption fund. Thus
from year to year, the ability OF the sink
ing fund to accomplish the purpose lol
which it was designed is increased Ia {
rapidly progressing ratio: and it is not tt
be doubled that, if the working of tht
Act OF 1865 had not been arrested (no
only arrested but kept in durance vile
for the past twenty-three years. the City
Trustees, to whom the law conhdeo th'
duty, would have extinguished the debt
or would nearly have accomplished tina
result by this time. 1t is matter
figures. It is fact that in 1859, the hrs
year of the operation of the law, there
were about $50. 900 of the bonds redeemed
by being purchased under the law at ;
low figure with money from the sinking