The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1905-04-24
SERIAL BONDS ARE
BETTER FOR CITIES
EXPERIMENT NOW BEING TRIED
BY NEW YORK is EXPECTED TO
PROVE POPULAR WITH OTHER
MUNICIPALITIES.

New York, April 23.-(special)-
speaking of bond issues foated by cities,
towns, ETC.. the New York Financier of
April "a will say:
The question of bond issues is becom-
ing one of vital interest to every city,
village, county and hamlet in the United
States, where constantly Increasing debts
are being piled up for posterlty. Street
improvements, schools, public govern
ment structures, and every other sort of
work tending to make TIE city beauti-
fur are contracted and paid for by bond
issues
New York is at the present time try
ing an experiment with state serial bonds,
and its result might be considered in
solving the problem for smaller points.
The difference between the straight"
and the serial method of retirement
concerns the maturity of issue. The
straight method means maturity at thirty
years; the serial plan, in from one to
thirty years. 1t is usually the custom TO
accumulate sinking fund which, theo-
retically, should just equal the principal
of the debt at the time of redemption.
There are q number of objections to the
sinking fund retirement. Firstly, money
intended for the fund does not usually
reach its destination; secondly the ctys
bonded debt and sinking fund will event
ually become a large amount of money
to be handled and invested. There is OBJ
lection that a fixed amount turned into
the sinking fund may or may not be
equal to the principal of the debt at the
date of expiration, interest on investments
varying from time to time. There is the
further objection that the municipality
must pay interest on the entire issue of
bonds to maturity-that is, the interest
charge on bond issue is as heavy in the
last as in the first year Then there is
the temptation to divert the sinking fund
to other purposes, retiring the securities
through a refunding issue, thus practi-
! cally making no payment whatsoever.
A great many of these objections would
be obviated by adopting the serial meth
cd. Under that plan it is necessary to
make an annual appropriation for retir-
ing a certain portion of the bonds, and
there could be no passing over this APP
preparation from one year to another,
LOT the DdnheIS must NC pdiu loi TIC
securities as per agreement. In this way
the tax payers would be likely to realize
the cost of heavy debt far more than
they do under present systems. Citizens
would have an object lesson in their
tax bills each year which would instruct
as to the cost of public improvements.
No large debt could be rolled up under
these conditions, and there would be no
necessity for the creation of a sinking
fund and its attendant dangers. With
each payment the interest on the charges
of bond issues would decrease as the
outstanding amount of the bonds de-
clned.
The serial plan affords the city an
opportunity to pay off Indebtedness from
year to year, instead of saving redemp-
ton money in sinking funds, and paying
off the obligation in a lump sum. 1t Is
an admitted fact, however, that serial
bonds do not bring the same price as
| straight" or long term bonds, but it
will prove boon to the city in the end
to issue serials rather than the old meth
cd of straight redemptions.