New-York tribune., 1910-02-16
BAD FOR THE CITY
TOO M4NY RETENUE
BONDS ISSUED.
Edoar J. Lerey Says Reform
of City's Financial Methods
Imper0tiCc.

~
eae1. =. which money was obtained
of budget needs has been
-. @.r-or in adversely afectinS the
of the city's fifty-year corporate
This IS the view expressed pE
I,evev. president OF the 1l''o
h'7os company. and former Deputy
- 7.bose articles on the imam
.,,;on Of thc city attracted much
o'ai ,.st z-esr. Speaking to a IT'D
-enor-1er. Mr. LeNey salo'
have been compelled of recent
sake rather a gloomy We" OF
-, in which the citys hnanciai
,.-srions have been conduc'eo' II
al the more pleasure TO DC aoie ~
-. o,,r how much more faNoraois 'ii0
,;.,,.-ion : now that the ne" auliiin-
-,r-s+ion has taken Office MOI on's
-, +l,e e1ayor and the other menihers
: ,bc Board Of Estimate dlsPla9 Gu ~
4,,l ,a,5tiaus and scrUtinizins a'll-
- :, regard 10 public expenditures
-. ,..e-,,re we'll for an economical ad-
.--:-,i.,-a,io,7 during the next four years
b,,+ the new Controller, Nj frerloei s07''
seems thoroughly alive 10 the oPPoi
.,,nitjes which the administration u ii'
oe5oe affords in this regard
Whatever doubts may have heen eA-
--eseed in the past in regard 10 INC
(i.,-e credit have been due not SO inu'h
. .r,- inherent weakness in the CITY
a-s-,o,a1 condition as TO errors of hnah-
20, -,enar4n4nt and failure to take ad-
,-sr.a~e of opportunities for conouctihs
- financial affairs in the same puSiiis
ii,e manner that would nc expected from
oecars IF ? private corporation
..R,,7 existing conditions will not ma
.--..,,,- 7,,,r,o,-e-' continued Mr. LeNey,
rr,r-i1 this question Of the ely eAces-
.i--e floating debt is squarely ana nom
,r-1z. faced. lust so long as the present
course iz -ersisted in II viii be necessary
70 raise more money each gear pF llie
s=re of revenue bonds than the charter
s-1t17orizes. The city cannot utilize u'-
,-ol1e~-ible taxes as a basis for oh'alh-
,,-- money for budget expenditures year
after YEAR without piling Up UNPAID TeFe-
rr5o Fonds II hicr have nc tangible secur-
i,,- hack Of them. or without using Tor
-re redemption az these bonds moneys
.,,-horized to be expended for entirely
different purposes
IAN CONSTANTLY VIOLATED
I-nde- the prov isions Of the charter
tl,e-.-4,z.eroi5-r ~ a1ala.>r11sd- -bn1royE-
-t7cF7 sums as may be needed 10 pay
f,.aret appr0r,riations each year These
arc substantially the words Of the char
fr~ section dealing with the issue of
revenue bonds. The rest Of the section
sf-7riv states that under no circum-
stances whether FOR the payment Of
budget appropriations or not, shall the
amount SO borrowed exceed in any year
the amount OF the tax levy for that year
This means that the city has the right
10 borrow hv the sale of these bonds
about tuo-thirds Of the amount Of taxes
-ezied
As 2 matter Of fact. in later years
~ have been flooding the market with
huge issues Of these revenue bonds. ex-
ceoding the tax levy by many millions
of dollars. IT is true that much of the
money so raised Is required TO refund
revenue bonds issued against uncollected
arrears Of leyies of previous years. But
II - -G-lA Il Lc Ll4Gl l44LNlI VI IL - OcIN
. refund revenue bonds issued against
arrears Of taxes that are absolutely un-
coilectible. just as The Tribune has so
dearly pointed out.
The practice Of using the proceeds
from the sale Of corporate stock and
MONEYS obtained from the sale of reve-
rge tonds issued against the unColleCtcd
tsres II the current year TO redeem reve-
rUe bonds which are legally a charge
against arrears IF taxes Of previous
wears that cannot be collected is abso-
lgteiv -ontrary not only 10 the spirit. buc
20 The specific wording Of the charter is
vel The extent 20 which this has been
dcre during the last three years has
teen plainly demonstrated in the Trib-
Ire articles
But there Is another phase of the
question upon which sufficient stress has
rot been laid The flooding of the
money market each year with these huge
issues q revenue bonds has very seri-
olsly affected the sale Of flfty-year cor
porate stock These revenue bonds are
-ssueG for short terms, and almost al
Nsys bear q rate Of interest exceeding
that paid upon corporate stock They
are much easier 10 convert into money at
Snort notice than q ifty-year bond, and
30r that reason are the very kind of
security banks and other financial in
eliluons are anxious to get.
l GO not mean TO say, of course thats
i the annual issue of revenue bonds
"ere cut in half, as il should be, the
d''lFe amount Of money shut out from
investment in these securities would be
invested IN corporate stock. Other kinds
" securities would doubtless absorb
some Of il. but il docs follow that if
ms were done there would be a much
oetter market for the city's ffty-year
corporate stock"
HOW TO IMPROVE CREDIT.
Would not q cleaning up Of the tenn
porsry debt at present outstanding in
violation % charter provisions tend TO
improve the city's credit" Mr. Levey
Vas asked.
Undoubtedly il would. Al present no
the knows just where the city stands
sS temporary debt is q nebulous thing
investors in city securities look upon it
an unknown quantity. IL is some
ing that cannot be gagged. Naturally,
9en condition has d depressing effect
-p'n the advantageous sale cf fifty-year