New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1910-02-10
THE CITY,s FINANCIAL PROBLEH.


THE CITY'S FINANCIAL PROBLEM.
Ex-Controller Metz is angry over The
Dribune's exposures of the financial mis-
management which characterized his ad-
ministratiOn. He says: Il found things
''in rotten condition and did my best to
better them That view is the natural
one for him to take and Is i'll u meas
ure true He inherited from Controller
circuit the practice OF juggling with &C
counts. depicting trust funds, throw ng
the revenues of the city into general
pot. using the proceeds of revenue bonds
for other purposes than those author
lied by law and spending permanent
Improvement funds raised OF corporate
stock To meet budget requirements. He
did find q rotten condition, but un-
fortunately he did not force the city at
once to face the situation sQuarely, as
il is our expectation that Controller
Prendergast Will now do, but made the
bad methods his own until he could not
escape responsibility for them, as his
successor can.
Mr. Metz points out that he did at
tempt to deal with the old revenue
bond issues against uncollectible taxes
and secured authority to issue S36,oOO,-
600 of corporate stock for the purpose.
He did issue S3OO0e00 TO re. .eem rev
enue. bonds, and then the panic of 1907,
he says. made it impossible to sell bonds.
He deserves credit for doing so much.
He failed, however, TO stop the practice
which was at the root of all the trouble.
In 1907 he sold S71,000.000 of corporate
stock and miSapplied S6,000.000 Of ii, au-
thoriZed for specific purposes, TO redeem
other old revenue bonds in disregard OF
the law Moreover, that redemption WIS
not awaited of TO reduce the burden OF
revenue bonds, but merely to turn them
over and give an excuse for increasing
that burden. In spite of the official dec
laration of the city that S36.O00,GOo,
long carried as a bookkeeping asset, was
not an asset but a liability which the
city must meet by an issue of corporate
stock, the Finance Department persisted
in regarding it as what Mr. Metz once
humorously called IAN mcollectible as
were to be paid out of it. At the end
Of 1907 there were only S10,0O00o0 of
revenue bonds out III excess of the
charter allowance: by the end of 1908
the excess bond issue had grown to S30
100000, and last year the rake'S progress
went on, bringing it up TO S33OO0,O0O.
After admitting an excess in 1906 and
getting legislation 10 wipe it off the
slate the city went on to pile it up
higher each year The law is explicit
in allowing the issue of revenue bonds
for any year only TO meet the require
ments of the budget of that year, and
to the extent of those requirements. Yet
in 1909 Mr. Metz issued S29,G000O of
revenue bonds against the taxes Of that
year in excess of the years budget re-
quirementS, and the proceeds did not
go TO the years budget at all. but to the
redemption Of old revenue bonds He
could not raise money TO deal with the
problem on account of the panic; yet in
the last three years be has issued S212,-
100000 of corporate stock for the most
recklessly wasteful expenditures.
There was the trouble. He had TO
play the jUggler, keeping the balls in
the air in order to maintain the eXt"aV-
agant course of the administration. II
he had made radical reform and really
cleaned up the abuses left to him, Il
would have been necessary to tell the
people frankly the state of the finances
and call upon them TO face the incon-
venience of reform. SO the nuisance is
left for the new administration, with its
embarrassment and its opportunity. Ii
ii does not 90 to the heart of the prob
lem, but undertakes TO temporiZe with
unsound methods Of Juggling between
accounts, it will be as helpless after
time as Mr. Metz became. If it under
takes thorough reform of conditions
for which it is not responsible, the peo-
pie will stand by ii, however incon-
venient the reimbursement may be. The
only harm that can come to the city's
credit will come not from facing the
facts, but from leaving the city in the
eyes of the banking community the prey
TO financial methods which gave no guar
antee against the depletionS of trust
funds, the misapplicati0n OF corporate
stock proceeds and the issue of bonds
unauthorized by law.