The record-union., 1895-08-20
ARGUMENT AGAINST REFUNDING.
Why Lawyer White Would Not Touch
the City Debt.
His Views Presented to the City Trus-
tees, But No Action Taken
Thereon.

Clinton L. White, the lawyer, is one OF
those who thinks it would be unwlse at
this time to refund the city debt. He has
submitted the following communication
on the subject, in which he gave his res-
sons therefor. The matter was not taken
up at last nights meeting:
To the Honorable Board Of Trustees Of
Sacramento City-GENTLEMEN: Finding
that it will be incOnvenlentf tor me TO orally
present my views, relative to the pro-
posed refunding OF the city debt of Sacra-
mente City, take the liberty of present
ing herewith some OF the reasons why,
in my Judgment, it would be both illegal
and unwise for the city TO take such
action as has been proposed.
The Act under which it is proposed to
take this action attempts to give to the
present bondholders monopoly in the
way of purchase of the new bonds pro-
posed to be issued. and is exceedingly
vicious in that respect, in fact sufficiently
30 to lead to the suspicion that there
was some obbery in the passage of such
an Act. The original ACT gave no mo-
nopoly to the bondholders, and gave the
people q vote on the question OF refund
ing.
Since, however, it requires more than
the passage OF a bill by the Legislature in
order to make a law, and the Act in cues
tion appears plainly obnoxious to the
Constitution, it Will be sufficient here
after, should it become necessary, TO
point out that the Act, though it appears
on the statute books. is not in fact law.
The Act provides that mo Indebtedness
shall be refunded at higher rate OF
interest than the original Indebtedness
bore" The original Indebtedness OF
Sacramento City at one time bore SIX per
f,.-
now $4,000, has not borne aay interest
whatever.
The true construction of this provision
of the Act would appear to be that the
issue of new bonds is not to increase the
rate of interest which is to be paid, and
that the city, in proposing to issue new
bonds, is not to be placed IN worse posi-
ton, as to the rate of interest to be paid,
than she occupies at the time such action
is taken.
In other words, if there are $40. 900 of
old bonds, which do not at this time bear
interest, they cannot, under this Act. be
replaced with bonds which do bear
interest.
1t is proposed by your resolution to
appoint bank in New York as agent of
this city, to make payment there of the
interest and principal OF these new bonds.
If the compensation of such bank Will
exceed Sl00 you are governed IN the
making OF SUCH appointment by Sections
23 and % of the City Charter, and should
advertise for bids, let the contract to the
lowest responsible bidder. and send the
contract to the Mayor for his approval.
What effect the recent investment in
Sacramento County bonds of SI00,OOO.
made by the Funded Debt Commission,
will have on your plan OF refunding is
question as TO which | am not fully in
formed, but | have had the impression
that you expected this money in the
hands of the commission would be used
to buy up city bonds, to reduce the num-
ber outstanding to the extent that S6fO, 900
of new bonds would be sufficient to dis
pose of the old debt.
Accepting, however, as correct the
figures furnished by members of your
board, as to the amount of Indebtedness
to be provided for, we find 1t TO De
S640, 200, of which $4,000 is overdue and
bears no interest, while S230,O00 is in
bonds which fall due in 1895 and 1903,
bearing interest at per cent. per annum.
AS to the interest bearing portion OF the
debt, 1t appears reasonably certain your
plan of retunding must prove failure,
tor man who holds perfectly secured
investment, bearing per cent. interest,
and having eight years to run, who
would exchange it for one bearing but t
fool,' and the city's bondhOlders have
not thus far shown themselves entitled to
that designation.
AS to the $4,000 Of overdue and nom
interest bearing bonds, beyond question
the holders of these old bonds ought
to be glad to exchange them for
valid obligations OF the city bear
ing 4 per cent. interest, but since
by thus changing this non-interest
bearing debt into an interest bearing
one the city would eventually pay S73S, 900
instead of S4l0,000; the wisdom of making
such exchange is not fully apparent.
Sacramento City has not S32S, 600 which
she can afford to give away, even in the
shape of interest to the bondholders.
II any member of your board owed an
Indebtedness of say 81, 100. upon which
he did not have to pay interest, and his
contract was such that MS creditor could
not vex him, and he could pay the debt
at his convenience end as his income
came in for the purpose, would he be ex-
pected to voluntarily burden himself
with payment OF interest also? You are
obligated to our citizens, who have in
trusted to you the high offices you hold,
to exercise az good financial ability on
behalf of the city as you would make use
of in your own personal affairs.
Beyond doubt, members of your board
have been induced to favor the issuance
of new bonds, in place of the old, in the
hope Of making thereby substantial re-
duction in the rate of taxation. AS you
have made but little progress thus far in
the direction of refunding, and cannot be
certain at this time that the plan will be