The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1904-01-01
MUNICIPAL BOND MARKET
YEAR 19O3 CHANGED THIS FIELD
OF INVESTMENT.
Demand for Their Securities Stimu-
lated by Law Exempting Them from
TaxatfOn-MarL<et Dull Lately.

OAANAAAA municipal DOAaAo ~ AAANA0hNs @~0-As
in the year a law was adopted by the Legis-
lature exempting Indiana State bonG-md
municipal bonds within the STAT from tax
alton. The law was intended to be sufficient
ly comprehensive 10 cover all classes of
bonds issued by counties. cities and towns
within the State, including gravel road and
drainage bonds issued by counties, and
street Improvement bonds issued by cities.
1t was found, however, that the decisions
of the Supreme Court of the State, already
rendered. when applied to this tax exemp-
ton law. limited its scope and effect to the
extent at least that doubt was created in
the minds Of good lawyers as to the law
covering and exempting bonds issued under
the gravel road. drainage and street i'm
provement laws.
The immediate effect of the adoption Of
the tax-exemption law was a stimulation in
the demand for state. county, city and town
bonds, and during the year since the adop-
tion of the law many United States govern
ment bonds have been converted aud the
proceeds reinvested in municipal bonds.
CAUSES o CHANGE.
The arguments which have persuaded in
vestors to convert their United States bonds
into tax-exempt county and city bonds have
been, and are, first, that the county and
city bonds, being legal for New England
savings bank investment, have practically
as wide a market as United States govern
ment bonds; second, they yield an income Of
at least three times the amount of the in
come yielded by United States bonds at
present market prices; third, they are sub
ject. to far less fluctuation in value than
United States bonds, because they are not
used by stock exchange brokers in New
York and Chicago as cash assets, for which
purpose United States bonds are largely
used by these people, and, therefore, in time
of distress, when United States bonds are
thrown upon the market in large amounts
for quick realization, prices suffer extreme
fuctuation, while prices OF county and city
bonds remain steady with very little varia-
ton; fourth, because the promise to pay
Of the county or city pledges all the taxable
property within such county or city for the
payment of the debt, and the owner of a
county or city bond may proceed in court
by suit against the county or city, in case
Of default, TO collect his debt by levying
upon such taxable property; and the funds
to pay this debt are derived from taxes di-
rectly levied upon these taxable properties.
The United States governments promise
to pay" is backed only by the sentiment
that the government will pay, with no
thought as TO how or from where the funds
wherewith to pay may be derived. United
States government has no power to levy
taxes for the payment of any of its bonds
and cannot go into any community and
take any property from it and derive funds
for the payment of its debt.
MUNICIPAL BOND ISSUES IN 1903.
During the year 1903 about the usual
amount of municipal bonds have been issued
and sold by the various counties and cities
and towns throughout Indiana. No bonds
whatever have been issued by the State for
any purpose. On the contrary, the State.
through it's finance board, consisting of the
Governor, treasurer and auditor, acting on
the advice of the Governor, has retired one
third of 81, 5000 % of the States outstanding
bonds.
Most notable among the issues in Indiana
were the city of Indianapolis boulevard
bonds. bearing 31z per cent, which sold in
April at a premium, and the Vigo county
Wabash river 4 per cent. bonds, which sold
in September, likewise. at a handsome
premium. These two issues are fairly repre-
sentative. The city of indianapolis bonds
"a ANoaA " LAX u Z Els
land savings banks, without exception.
from Massachusetts, down, and the Vigo
county bonds being legal investments Of
New England savings banks from Maine
down. The prevailing prices of the New
England savings bank market determine
the prices in the local or Indiana market.
The prices in Massachusetts, for several
years have ranged from 3S per cent. down
TO ais per cent. income basis. City of In
dianapolis bonds have averaged 3A per cent.
income basis price for, say. five years.
During the past year city of Indianapolis
bonds have sold at about 3.35 per cent. in
come basis, so that there has been no ma
terial change in prices for these bonds. In
diana county bonds have averaged a 3A per
cent. income basis for many years, and dur
ing the last year all good Indiana county
bonds have found a ready sale at 3h per
cent. income basis. so that there has been no
material change in prices for these bonds,
as compared with previous years.
BONDS FIND HOME MARKET.
il is worthy of note that during the last
year all Indiana county, city and town
bonds issued have found a home market
where the bonds could be approved by home
attorneys. A number Of attempts were made
by school boards to issue bonds under spe-
cial acts Of the Legislature, but these acts
were held by local attorneys, and the courts
of the State so far as invoked, TO be I'M
constitutional and the bonds therefore
were void. Some of these bonds were issued
and sold outside of the State.
The largest issues of gravel road bonds
during the year were in Knox, Greene, Glib
son and Carroll counties. During the first
half Of the year there was an active de-
mand for these bonds at prices to net 4 per
cent. TO AS per cent. The increased activity
and demand for money has been felt TO a
| degree and there has been a slight change
in prices for gravel road bonds which are
now selling at AS per cent, to AZ per cent.
income basis.
During the first half of the year and up to
Aug. l, the demand for all classes of munich
pal bonds and also high-grade corporation
bonds was strong and steady. From Aug. 1
10 Dec. 81 there was a marked decrease in
the demand and the bulk of the business
was done during the early part of the year.
The market has shown considerable activity
Of late, however. The general commercial
activity and expansion Of business, Incl
dent TO the prosperity of the last few years,
is. in part. responsible for the conditions
prevailing during the latter part of 1903.
EFFECT OF I~NTERURBAN LINES.
The great number of interurban electric
railroads constructed recently. together with
those undertaken and in progress of con-
struction, and those for which promotion is
now sought, are, in a large degree, respon-
sible for present financial conditions. Scarce
ly any locality is without its interurban
line. either in operation. under construc-
ton, or projected. The immense sums Of
money required to take care OF these enter