New-York tribune., 1909-04-19
j. H4NPDEN DOUGHERTY
EXPLAINS FEATURES.
City's Bonds Obligations Issued for
Improvements and Those Incurred
for Current ETpenseS.
By J. Hampden Dougherty. Member of the Charter
Commission.
SIXTH ARTICLE

Z
have classified all these obligations with precision.
and defined them by identification that is by exact
statement of the purposes for which they may sew
orally be issued.
a city. like individual private corporation
may incur debt for improvements capital opera
tions current expenditures. If the city opens
& street provides park or water system
city stock is issued pay for these improvements
and in order defray its annual expenses, 1t often
needs to anticipate the collection of taxes by rails
ing money upon short bonds. The citys money
obligations for capital purposes are assessment
bonds city stock. Obligations issued to meet
current expenses are should be, revenue bonds
and special revenue bonds. The exigencies of the
sinking fund system have necessitated a further
class of bonds described in the preceding article on
the sinking fund system general fund bonds
which thus far have been issued by the city 10
itself upon the transfer of their cash equivalent
from the redemption fund" the general fund
The Charter Commission assumes that corporate
stock should never be issued to pay current eN-
penses Hence it has drawn a clear line OF de-
maTkaton between such stock and assessment oohuS
or the one hand and revenue and special revenue
bonds the other hand Corporate stock is to be
Of three classes only:
%. Stock redeemable from the Sinking Fund
of the city New York
(2). Stock redeemable from the Water Sinking
Fund created after consolidation.
90. Stock redeemable from any sinking fund
created under the provisions of the rapid transit
law.
No corporate stock Of either class may be issued
except to provide means 10 pay for permanent I'M
provements including the acquisition of real prop
erty of franchises. 10 redeem maturing stock
assessment bonds retire and refund the city
debt.
ASSESSMENT BONDS
Assessment bonds are issued 10 pay for improve
Inents or public work for which the city IS expect
ed be reimbursed by assessments upon property
benefited; in other words. the assessments should
provide funds to redeem the bonds at their matur-
wholly partially borne by the entire city are
fully collected. and consequently that there is
deficit in the funds established to pay the princ-
pal Of assessment bonds II it were practicable 10
Eoresee what assessments might eventually fall
upon the city at large. corporate stock might be
issued in first place 10 provide the cost Of TN
provements that eventually become a charge upon
the whole city. but experience shows that this IS
not practicable.
Assessment bonds are classified according to the
rtIrposes Of their issue. The first class known
street and park opening bonds. is TO provide means
necessary TO pay all awards made by the commits
sioners OF estimate and assessment in proceedings
10 open. widen or extend any street, park park
way or 10 acquire title 10 lands required for any
bridge tunnel approach thereto The second
class known as street improvement fund bonds, Is
to provide means to pay the expense OF regulating
grading curbng. Tagging and paving streets con
structIng and drains and of work Of like
description.
In the first class Of cases "A fund known the
street and park opening fund IS provided TO pay
the bonds 2 maturity This fund. besides what
ever ca sh may be In st on January /. 1910 and
whatever the laws then ia force shall re
Quire to he paid into it, is to consist Of proceeds
OF sale OF street and park opening bonds moneys
collected from assessments and moneys received
from the sale OF corporate stock issued 10 provide
such proportion of the expense OF any assessment
the Board Of Estimate and Apportionment shall
direct to be paid 10y the city at large From this
fund all awards in the various street and park
opening proceedings paid. together with the
costs and expenses OF such proceeding.
The street Improvement fund is provided for the
redemption OF street Improvement fund bOnds-that
is. of the class and consists, besides
cash balances on January l. 1910 and moneys
which by law must be paid into it In the interval
Of all assessments not expressly pledged by pre-
Vous legislation 10 any sinking fund and all pro-
ceeds Of sale Of corporate stock issued defray
the proportion of cost of any local Improvement
directed by the Boad Of Estimate and Apportion-
ment 10 be paid by the city large
Assessment bonds may he issued for various |
other purposes. for example TO meet the |
deficit where for any reason the expense Of a
local Improvement fails he fully collected from
property benefited Such bonds may be issued |
also whenever the amount in the street and park /
opening fund or the street Improvement fund shall
be insufficient to pay. they become due, any |
bonds heretofore issued by the city payable from
said funds respectively II the supplies of either |
fund fail to meet the demands upon it, other pro !
vision must be made these obligations |
whether they be bonds awards contracts for |
work. It has sometimes been the practice to |
cash in any fund indiscrminatey for any exigency |
whereas each fund should be kept as separate as |
If IT were in the hands Of different trustees
LIFE OF BONDS AND STOCK
Assessment bonds run for periods not exceeding
ten years; corporate stock may run fifty years
Until 1897 the Legislature reserved to itself prac-
tcaly full control Of the authorization of city
bonds but the charter of that year placed the
power for most purposes in the Board of Estimate
ANN FfirTaTT1 gha
and it is now exclusively in the Board of Esti-
mate, save that the Legislature is stin at liberty
IN authorizing or directing some special city work
10 require the city to issue it's corporate stock
The subject of the citys debt mourning capacity
opens a wide realm, into which It is unnecessary /
10 enter save to state that in ascertaninr the
power Of the municipality TO become indebted all |
its money obligations for permanent improvements |
and for the acquisition of real estate in street and
park opening proceedings must be counted Cor
porste stock issues plainly constitute the naior
part of its bonded Indebtedness and assessment |
bonds, being primarily city obligations although |
largely redeemable from assessments. also be |
treated city Indebtedness and such the opinion
of General Tracy in his recent decision.
From the gross of stock issues certain
bonds held by the sinking funds may be deducted |
In accordance with the holdings OF the courts. TO
ascertain the cty's debt, and water bonds is |
sued since January 1904 also deductabIe But |
neither revenue bonds special fund bonds enter
into the computation unless the revenue bonds
have been outstanding and unpaid five years after
the taxes which they represent became due and |
payable In that the constitution explicitly
requires that they shall be counted in determining
the funded debt.
Although both revenue bonds and special revenue
ponds represent temporary Indebtedness, created to
pay current expenses of administration, one class
revenue bonds) is 10 be quidated out OF the taxes
1f the year their issue, while the other class
special revenue bonds is to be redeemed out OF
he tax levy for the year next succeeding the year