New-York tribune., 1909-04-05
BRIEF PREPARED TO AID
GENERAL TRACY.
Bureau of Municipal Research Sees
Chance TO Fir Permanently
Method of Com putdtiOn.

rl;.a-ior Of Jefferson NJ. Levy for an Injunction
restraining the Controller and the Board Of
Estimate from certifying approving of con-
tracts for the construction of the Fourth ave
nue. subway in Brooklyn. TO investigate and re-
mort on the debt mourning capacity of the city
~ New York. The bureau was represented at
su the hearings of the referee, and after formu-
lating its OWE conclusions on the evidence taken
submitted them 20 General Tracy. in the belief
that they would be Of service in the preparation
OF his report. which, II is expected. viii be
ready for submission 10 the courts.
From the evidence taken regarding the bor-
rowing capacity OF the city. as on June 80 1908.
the bureau reaches the conclusion that the
actual borrowing limit that date was only
S25SNg0 as against the Controllers figures OF
81 SnaW0 on the other hand. according TO the
method Of computation followed in the brief"
the debt limit as on January l. 1909, S51.-
ela000 as compared with S4S.0e0,0O0. the fig
rrss given out ley Controller Metz.
The belief is expressed by the bureau that
.he present investigation by General Tracy offers
an opportunity To settle for ali time method Of
computing the debt limit that would prevent
certainty and confusion in the future.
INCLUSION OF FLOATING DEBT.
The most important change in existing meth
o5s urged in the brief" is with regard TO the
extent 10 which the floating Indebtedness in
CURED by the issue of revenue bonds shall be
included in computing the borrowing capacity. 1t
has been the custom in the past to include all
revenue bonds issued in anticipation of taxes,
matter in what year issued except those issued
in anticipation Of taxes OF the current year
The Bureau Of Municipal Research points out
that the constitution clearly provides that the
only outstanding revenue bonds which should
be included are those outstanding against the
rad of lo7-ipS Ta-ipd of
fve years from the Gate when the computation
is made.
In support Of this view it is pointed out that
the Board of Estimate. in authorizing an issue
Of s36.0oo.000 Of corporate stock TO wipe out
that portion Of the uncolected taxes of levies
prior to 1905 deemed uncollectible, practically
abolished, asset against which revenue
bonds could be issued remain outstanding,
the uncollected taxes Of leves prior to that year
Controller Metz. in making up his debt state
ments. has included only that portion of the
s3So0oo ooG OF corporate stock authorized to wipe
out UncolleCtibie taxes of the levies prior 90
1875 which actually issued at the time the
tomputation made. The bureau maintains
that the whole of this S56. .000. 600 II corporate
stock whether issued or not, should be Included
in the computation. The reason urged for this
change Is that, under the existing method of
including all revenue bonds outstanding except
those Of the current year it IS possible for the
Controller. by increasing or reducing the amount
of revenue bonds issued against uncollected
taxes OF former years in any year in which il
i sought to ascertain the citys borrowing
racity. either 70 increase or reduce that limit
w1L as he has absolute power in determining
What amount OF revenue bonds shall be issued
z: any time within the limits set forth in the
constitution.
IDTDVEES
The next important change urged in the brief
IS in reference 30 the proportion OF sinking fund
holdings that should be added the gross debt
and the proportion Of sinking fund holdings that
should be deducted in arriving at the net debt
when computing :he borrowing margin. II has
been the custom. in arriving at the citys gross
debt. 10 add to the amount Of bonds outsta nding
n the hands cf the public those held BY the
sinking fund less ali water and county bonds,
On the ground that these bonds exempt. but
in ascsrtaining the net debt TO deduct the entire
holdings Of the sinking funds. including exempt
water and county bonds regardless of the nat
ure Of the debt for the redemption OF which they
are held. The Bureau OF Municipal Research
holds that this practice should be modified. and
that exempt water and county bonds held by the
sinking funds for the redemption of bonds that
are not exempt should. in computing the gross
debt, be deducted from the outstanding obliga-
fions Of the city and should be included an
asset Of TIE sinking fund in arriving at the net
debt IL support Of this change it is urged that
when exempt bonds become holding of the
sinking fund whose assets pledged for the
REDEMPTION Of non-exempt bonds those bonds
should b. disregarded in arriving at the gross
debt. but that only such exempt water and
county bonds as held for the redemption Of
exempt bonds by the sinking fund should be
deducted in getting at the net debt
Heretofore. it has been customary to deduct
from the gross indebtedness the cash proceeds
OF bonds sold. but not transferred to the ac-
counts for which they were sold at the time
Of the computation. The bureaus brief urges
that this cash should not be deducted from the
gross Indebtedness unless it is available only
FOR the purposes for which the bonds sold.
This change in method applies TO cash receipts
from the sale Of corporate stock sold for va
Fi"us municipal purposes" not transferred. and
which because the bonds have been sod for the
oelshiuAy indefinite various municipal pur-
poses' may b. transferred TO any within the
"hoie range OF permanent Improvement ac-
counts
BUDGET APPROPRIATIONS.
me last definite change urged is that the
yearly contributions included IN the budget ap-
Lr"priations for the redemption Of bonds pay
eoie from taxation in the year to which the
budget applies and the annual instruments paid
NUN budget appropriations for the redemption
bonds payable from taxation in the future
should Dc deducted from the value of sinking
'uha holdings at the first Of each year. The
reasons for this change are obvious. If the
money necessary 60 redeem bonds IS paid to the
sihking funds then either the bonds or the
money must be deducted from the value Of the
sinking fund holdings.
POINTS NEEDING CLASSIFICATION