The Birmingham age-herald., 1904-09-25
DISCUSSES ALA s BONDED DEBT Mr. Harding Sketches History of States Indebtedness PROPOSES REMINDING PLAN Total Bonded Debt Amounts to &, ,357,- 500, of Which ss,4os, 500 Natures
 In 1so6-Extra Session of
 Legislature Urged.
PROPOSES REMINDING PLAN

President W. r. G. Harding of the First National Bank discusses the state debt in the following letter.
 To the Editor of the Age-Herald:
 For some time past there has been more or less talk of an extra session of the legislature being called this fall to take action on the judiciary system of the state.
 Whether or not such call should be deemed expedient by the governor, I would like to urge upon him, the advis- ability of having the legislature assemble in the near future to consider the best method of funding the bonded debt of the state, the greater portion of which IS now approaching maturity, and to secure action that would result in a large an- nual saving of interest, and in the ex- tinguishment of the states debt within the expectancy of the younger members of the present generation.
 Alabama's Total Bonded Debt.
 The total bonded debt of the state amounts to S93 600, of which amount $954,O00 was funded four years ago with 4percent. bonds maturing January 1, 1920. O. the remainder, $966, coo, bearing per cent. will mature January l. 1906, and S,4SI6OO, bearing 5per cent. interest will mature July 1, 1906
 The annual interest charge on the bonds maturing within the next two years amounts to $4l0520 and it has been the laudable ambition of the recent state administrations to reduce this heavy bur den upon the tax payers of the state.
 History of Refundng Legislation.
 Nearly twelve years ago on Feb. 2. 1893, an act of the general assembly was approved by the governor which pro- vided that he should have authority to open negotiations for the consolidation and adjustment of the bonded debt of the state on an interest basis not to exceed 4 per cent per annum. Under section 3 of that act the governor was authorized if such negotiations proved successful, to prepare bonds not to exceed the then ex- isting debt of the state to mature in not over 50 years fro-1 the date of issue. The act provided that these bonds should be placed in the hands of the state treasurer, who should exchange them for outstand- ing bonds, with the proviso that no bonds issued under the act should be disposed of at less than par.
 No practical results followed the pas sage of this act as the bondholders were unwilling to make the excnange of secur- ities contemplated and on Feb. IS, 1895, the succeeding legislature authorized an issue of 50 year bonds, bearing interest at not to exceed 4 per cent, and for ar amount not exceeding the existing debi of the state of Alabama, and were SUD- | ject to redemption at any time after | 15 years from date of issue in the inverse order of their exchange, viz: those thai were first exchanged were the last to be redeemed. The same legislature also au- thorized the governor before disposine 1 Of these bonds to advertise for popular | subscription for 3 per cent. bonds in 1 small denominations, providing that these bonds should not be sold at less 1 than par. Governor Oates advertised for popular subscriptions for these bonds under this act, but the rate of interest l being too low r. } subscriptions were re- l ceived.
 In February 1898 the legislature enact ed the present law, which authorizes the | governor to appoint one or more banks l of bankers in New York or in Alabama l financial agents to carry on negotia- 1 tions and make exchange of bonds, au- l thorizing him to pay such agents reason able compensation for their services out l of the proceeds of the new bonds. This act contemplates a saving to the state in interest by exchange for the outstanding 5 per cent bonds, others bearing a lower rate of interest not to exceed per cent, and does not provide for any increase in the present bonded debt debt of the state 1t being required that the exchange be made dollar for dollar As the state ad- ministration has endeavored to sub stitute for the presen lives, a bond ap- proximating per cent, 1t Is not surpris- ing that no exchanges have been made.
 Interest Rate on New Bonds. I understand that tentative offers have been submitted to the state authorities to loat a bond at less than 3-1 per cent. basis, but I have reason to believe that these effers if carefully analysed would prove to amount to nothing more than requests for options. During the past six months unusually favorable none. tary conditions have prevailed for plac. l ing high grade securities at a low rate of interest. The country during that per. | iod has been sober and sane. the specu lative fever whieh had ragged for three or four years previous has entirely sub sided and the attention ot investors hal been directed slmost entirely to issue | of undoubted security without particula | reference to income.
 These conditions still prevail, but sign l of returning business activity are evi ] dent and 1t is reasonable to suppose tha speculative issues will again come int 1 favor. with the inevitable result tha l gilt edged state andmunicipal bonds vii l be less in demand. It is known that tn wish nearest the heart of the present ad ministration is to fund the state debt O | a 3 per cent. basis. The existing law l however, requires that the bonds be sol at not les than par. and that the presen debt of the state be not increased. i view of the fact that bonds of the stat
 of Massachusetts, which are regarded a
 the standard by the savings banks of tn
 ca bearing 3-1 2 per cent. interest, ma
 turing in 1914 are purchasable at a figur
 yielding an income of more than S,21 pc
 cent. and the bonds of the state O
 Louisiana as well regarded as anl
 southern security, bearing 4 per cent. in
 terest, can be bought on a $40 pereen
 basis it would seem that the expectation
 of selling Alabama bonds without com
 mission at par on per cent. basis IS
 in the language of Ingalls, an iridescenl | dream.
 Our neighboring state of Tennessee
 with assessed values in 1903 of s4l2'5lG, 4l3
 against Alabaml's assessment of sSOS'
 625,Gs2. has a bonded debt of about $l4,- 100000. Of this amount S12,3O7,3OO, Is ir
 per cent bonds due July 1, 1913. These
 bonds have a market value around 96
 yielding the investor a return of 3-1
 ner cent. The state of Mississippi with a
 bonded debt of $3,OO0,000 recently negot-
 lated at par an issue of s500.000 bonds al 3-1 2 per cent. an- 1t is still in doubt as
 to whether the purchasers will carry
 out their contract, having as yet received
 no money for the bonds. The state oi Tennessee is obligated under it's laws tt
 purchase and retire each year a propor
 ton of it's bonded debt; thus by legisla
 tive enactment it's bonds are given (