The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1903-03-11
MEANS MUCH TO BUYERS
NEW LAW ExEMPTING MUNICIPAL
BONDS FROM TAXATION.
Creates q Home Market and Causes
Large Reduction I'm Interest
Charges-Law Signed.

Indiana and Indianapolis financiers were
happy yesterday because of the approval
by Governor Durbin of House bill No. 4O7,
known in financial circles as the "home
market bond bill For many years there
has been agitation of the removal of taxa
ton from state and municipal bonds, and
this has been successfully accomplished in
the bill signed by Governor Durbin. The
Law as passed follows:
BE II enacted by the General Assembly
of the State of Indiana that all bonds,
notes and other evidences of indebtedness
hereafter issued by the State of Indiana
State upon which the said State or the said
municipal corporation pay interest shall be
exempt from taxation"
The law contained no emergency clause
and will not be effective until the formal
notice of publication is made. Because of
the pending issues of the city of Indianap-
oils and the School Board ii is hoped the
publication of the laws will be announced
before April Is. as the city's issue OF 800 900
boulevard bonds is TO be sold on that date.
although the bonds will bear issue date of
May L The School Board will sell $500 900
Of bonds May 1, and it also hopes the law
will be effective by that time.
The effect of this law according to Eu-
dorus NJ. Johnson, of the banking firm OF
John +. Wild & Co., will be salutary
throughout the whole State. "Low-rate in
terest bonds of the State and municipali-
Ties said Mr.. Johnson, ''have not been
sought by Indiana investors because of the
charge of taxation on their earning capac-
ity. Foreign bidders have bought Them so
that the State and municipalities got little
benefit. The chief benefit of the law Just
approved Is that Indiana investors may
purchase low-rate bonds just as they would
invest In government bonds Protected as
they are by the constitutional per centum
limit and further protected by exemption
from taxation they will take rank second
only 10 government bonds In addition TO
all this they viii not be affected so largely
by the general bond market. The bonds re-
Gently sold by the city of indianapolis were
sold with the market against them. Had
they been exempted from taxation they
would have brought a high premium or they
could have carried less interest.
GREAT GAIN IN INTEREST.
''The language municipal corporation in
cludes city. county. school and township
bonds. / have no statistics at hand to
show what amount the State issues an
nually in this class OF bonds. but it amounts
TO millions. These bonds have borne an
average rate of per cent. interest Some
counties still offer per cent. bonds, but
this Is because the counties are deceived
by the larger premiums that will be paid
High-inteTest bonds are deusive A pei
cent. bond win sell on a AS basis thus
bringing big premium, but a per cent
bond will sell on a 3.15 basis. thus gaining
enormously in interest and losing compare
lively little in premium. The gain in inter
est charges will amount to a large sum
when a decade has passed and WILL have
no Doubt. represent large net gain to the
state and municipal corporations over the
possible revenues from taxation"
The Indianapolis bonds for the improve
nnent OF the East market which were solo
March l brought higher price than die
the t2.500,000 of bonds issued by the city OF
Nes York If the law signed by Governor
Durbin Is effective before May l the $780,.
600 boulevard bonds issued by the city and
the 800 900 TO be issued by the School BoarC
win bring a premium sufficient TO brins
them 10 less than a per cent. basis.
The expectancy is that local securitie.
will now take their place actively in the
home market.