The Montgomery advertiser., 1901-06-26
COUNTY AND MUNICIPAL DEBTS
Some Thoughtful Observations on
 the Subject.
Editor The Advertiser:

Some Thoughtful Observations on the Subject.
 | Editor The Advertiser:
 The Committee on Taxation, to say the least. fell far short of it's oppor- | tunity to make a report showing a grasp of the principles of sound public | finance.
 The Constitution of 1875 contains an article on taxation which was prob ably adapted to that time of practical public bankruptcy and reckless expen- allure known as the "carpet-bag' pe- riod, but which is unsound in theory and has been so fatally defective in practice that municipal credit in Ala | bama is placed upon a par only with that of Kansas.
 In the first place, the Constitution makes no distinction between taxation for current expenses and taxation for | fixed expenses for bonds and interest. In the second place, DO limit was placed upon the amount of indebted ness which counties and municipalities might incur. The result has been that a deplor- ably large number of counties, cities l and towns have defaulted in the pay ment of interest on bonds which were I issued far in excess of the ability to pay the same
 To say nothing of the fact that mu- | nicipal securities in Alabama bear much higher rates of interest than they would otherwise bear, there is no doubt 1 that thousands upon thousands of dol- lars have been lost in premiums which would have been realized upon bonds under different constitutional proVls- | ions. Quite recently a County in Mon l tana which had issued per cent bonds
 ten years ago. sold 1-2 bonds. Its | ability to do so is due to the fact that no municipality in the State has ever
 defaulted in it's interest payments. The laws governing the investments of saV-
 ings banks which are the largest pur-
 chasers of municipal bonds forbid their l investing in bonds of any municipality
 which has ever defaulted. It goes with
 out saying that the market for Ala
 bama municipal securities is rapidly
 growing smaller and is limited now to
 the people who are unacquainted with
 existing conditions.
 Of course taxes cannot be increased,
 but certainly they can be intelligently levied and the proceeds thereof prop
 erly distributed.
 The legislature should be given the
 power to determine what proportion of
 the 50 cent tax shall be applied to cur
 rent expense and what reserved for in-
 terest and principal of bonds issued. Under the rulings of the Supreme
 Court the legislature has not this pow
 CT and there is nothing to prevent ex-
 travagant officials from spending all
 the revenues for salaries and current
 expenses thus forcing a default in the
 payment of interest and piling up
 of the indebtedness of the County, city
 or town.
 The Committee has sought to pro- : vide in Sections g and 10 of Article Xl
 for debt limit but there is no question
 that that proposed i. e., 5 per cent for
 counties and per cent for munlcipal- ities Is altogether too large. !, To take a simple example. 8 county
 with an assessed valuation of $l l,OOOOOl
 under the present tax limit can raise $5, 900 a year for all purposes. Under a per cent debt limit the same county , could issue $50,000 bonds. If these
 bonds bore per cent the interes
 charge would be $2,OOO per year and II
 provision were made as there shoulC ? be for retiring the principal in twenty years, 1t would be necessary to lay , aside $2.5 more each year for sink
 ing fund, making the annual amour required for bonds and interest $4,5OC per year, when the total income of thu county would be only $S,OOO, In Indiana where the assessed Valua ton bears about the same proportion
 
 bama the Constitution reads: D '.Article XIII, Sec. 1. No political O.
 municipal corp1Eation in this State shal
 ever become indebted in any manner
 or for any purpose. to an amount On
 cluding existing indebtedness) exceed 9 ing two per centum on the value of tn e taxable property within such corpora Q tion to be ascertained by the last as
 sessment for State and County taxes l fha n n debtedness and all bonds or obligation e in excess of such amount given b, s such corporations shall be void" s In States where the debt limit i higher the assessed valuation Is less il f comparison with the actual value. F There is a decided need for provis o ion in the new Constitution allowing Q counties, cities or towns Tn detauit | n levy an increased tax for bonds an r interest and provided the tax is vote ' by the people of such County, city o
 town.
 In many instances the holders of de . faulted bonds would accept new re
 funding bonds bearing lower rate Q = interest could they be assured that tn e tax limit would be large enough to pa e the same.
 s have no object in surrendering thei a old bonds for other bonds issued unde e the same conditions which caused a de m fault in the payment of the origins
 obligations. By making the special in Il creased tax optional with those wh lr would have it to pay, the Conventio II would not be violating any pledg o made
 70 It is to be hoped that the Conventio L. will live up to it's opportunities an al give default;ng municipalities chanC ia, to redeem their credit and get out ( v debt.
 Freedom in local affairs is the four l. dation principal of Democracy.