The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1913-07-08
SINKING FUNDS NEEDED.

| Atchison's predicament of having
a bond issue of more than a quarter
| of million dollars come due without
any funds to meet it, and with scant
possibility of the city being able to
refund this debt with another bond
issue on the same basis as the old
one, is surely a forceful lesson to
other cipalities-Topeka includ-
ed-on the necessity of their provid-
ing adequate sinking funds SO that
obligations of this sort can be met A
city without sinking funds to take up
all bond issues on their maturity will
sooner or later touch financial shoals.
More than that, such a sinking fund
is a money saver for the taxpayers
They have to provide the money for
it, it is true. But they avoid the
mountains of interest that are now
piled upon them through the common
custom of refunding a bond issue ad
infinitum.
In the current issue of The Com
mercial and Financial Chronicle there
is an interesting editorial discussion
of the situation that now confronts
Atchison. And it surely conveys a
warning of what is likely to happen
to other cities if they are negligent in
providing for a liquidation of their
bond issues. This editorial follows:
THE city of Atchison, Kansas. has
outstanding an issue of $266,950 4
per cent thirty year bonds, which ma
tured on Tuesday of this week Gully
-. for which no provision seems to
have been made. No sinking fund
was provided, but the mayor wrote to
a bond house in New York that, as
representative of the taxpayers, he
could not increase their burdens be-
cause of a temporary stringency OF
money. A new bond for the old one,
with the same rate that has salts
fed for thirty years, ought to be ac-
ceptable under the adverse circum-
stances and he regretted that this is
the best he can offer. The house, of
course, replied that they could not ac-
cept new bonds and must put the debt
to judgment; they also urged the city |
to bestir itself and raise the money |
needed. or the business of Atchison !
would inevitably suffer !
TT may be difficult to make the Of |
fcials of Atchison realize that the
option of extending maturing obliga- .,
debtor, and that the debtor cannot |
safely act upon the Micawberish as !
that a renewal on the old |
terms, though those may have been |
for many years, should be |
and will be now. Present conditions
govern that. Under those conditions,
4 per cent Atchison bonds would not |
be worth par, and an exchange of |
new for old would be a transaction
above the market and impossible. The
city of New York, or even the United |
States, could not convert a maturing
debt in this manner, at this time.
Possibly the loose talk against
capital and the notion that it is going
to be taught a lesson somehow may
have insensibly influenced the people
of this Kansas municipality. But
they should learn that the heartless-
ness of Wall street (whatever that
may be) has nothing to do with the
rule. unalterable by any statutes, that
financial obligations must be met.
That is not rule of hostility against
distant sections; it is rule of neces-
sity which financial centers hold as
rigidly among their own members as
elsewhere; contrary to hazy notions
which prevail about banking, every
bank here must meet its own obliga-
lions exactly as they are due. There
IS no favor; the penalty of loss of
credit is inexorab BILE. The proper
course for Atchison was to bestir it
self and raise the money, by a short
lime loan at such higher rate as may
De necessary. thereby saving itself
rom the consequences of default" n