The Richmond palladium and sun-telegram. [volume] (Richmond, Ind.) 1907-1939, 1913-12-05
BLUNDER OF MAYOR
IS EXPENSIVE LOSS
TO C|TYS FINANCE
Exchange of Sinking Funds
For Street Bonds Stops
Interest Return.
NEW ISSUE OF BONDS
REGARDED SOLUTION
Treasury Gets No Return
From $4,000 Non-Inter-
est Bearing Bonds.
BY w. r. POUNDsTCNE.

To relieve the municipal light plant
of total of $4,000 of non-interest
bearing special street Improvement
bonds, which we're purchased under
the impression that they paid per
be required to authorize bond issue
to retire the bonds in question, the
new bond issue PROBABLY bearing I
per cent interest.
This fact. brought to light today. is
another chapter in the notorious $2H,-
600 deficit which the state account
ants found in the special street i'm
prOvement fund. This deficit oCc'lr-
red prior to 1906, under a former Zim-
norman admin stration. and since that
time the city has been attempting to
find satisfactory ways and means for
retiring the bonds issued for the mon
les due the special street improve
ment fund.
Zimmerman Boasts.
Early last spring when Mayor Zim
norman had an inspiration 10 pur-
chase the outstanding bonds. totaling
in value little over $4,000. with the
monies in the light plan and city sink
ing funds, he proudly announced that
he had laid to rest one and for all the
vexatious question.
He pointed out that the monies OF
! the two sinking funds were resting il
! banks drawing a paltry 3 per cent
| interest, but he would now purchase
| with these monies the outstanding
! bonds which bore 5 per cent interest
In consequence the two funds would
be reinvested at a per cent increase
in interest.
| Prior to the mayors decision to use
the two sinking funds to purchase the
| special street Improvement bonds, A
| NJ. Gardner. at that time city attor
ney, had called in the outstanding
bonds, and in conjunction with Cit!
| Controller McMahan had drafted al
ordinance authorizing the noating o
a loan of $4,000 which, with the
$4,000 the city had in bank, would b'
used to purchase the called bonds.
Defeats Ordinance.
When Mayor Zimmerman heard o
the proposed plan to float a SIS, 5,00t
loan, he was exceedingly wrought up
and succeeded in having the ordi
nance defeated in council last June
An ordinance was then prepared b.
at the mayors orders, authorizing tn
purchase of the bonds with the monte
in the two sinking funds, and this OF
dinance was passed by council.
Following the passage of this ord
nance the called bonds were taken u
under its provision, the light plan
sinking fund paying over $13.265.3
and and the city sinking fund, $3.50
a total of $19,O15.35
Now it has been discovered that tn
bonds in which the monies of the tw
sinking funds are invested cease
bearing interest when they were tai
en- over, because they had been calle
in by the city attorney, the calling i
being, in effect, the serving of motto
on the part of the city that it il
tended to stop paying interest on ther
and would retire them.
Interest Lost.
The net result today of the blunde
on the part of the administration ha
been the loss of percent interest o
the two sinking funds since they Wer
withdrawn from the banks and inves
ed in the bonds.
A plan to rectify the error. now pre-
posed to relievAthe two funds of thei
non-interest paying bonds. is for tn
city to authorize a bond issue for tn
amount of the street improvemer
bonds held by the two funds and pc
nit the two funds to take over thi
new issue, paying for it with the mol
/ interest paying bonds they now holt
This would retire the special stree
improvement bonds, as former Cit
Attorney Gardner desired to do, an
would give the two sinking fund
bonds bearing from 4 to Az per cer
interest.
, If this plan could not be carried o,
it has been suggested that the cit
use the money received from a ne
bond issue to purchase outright fro
the two sinking funds the non-interet
} bonds they now possess.
1t is admitted by all who are f
miliar with the case that while th
, city can not pay interest on the bono
I the two sinking funds now hold, it
= unfair not TO pay over TO them inte
: est on the bonds.