Richmond times-dispatch. [volume] (Richmond, Va.) 1914-current, 1915-08-12
FINANCING MUNICIPAL IMPROVEMENTS
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offer some Ideas on the subject OF
city finance as involved in the subject
OF public improvements in cities, and
especially streets. which are the most
usual form Of such improvements, and
largely typify others.
1t is obvious that any proper method
OF financing an Improvement of this
character should combine at least four
principles. namely:
First. IL must be legal Considera-
tons both of present necessities and
future credit imperativcly dictate the
avoidance OF any system open to Sc
rious attack.
Second, It should be fair The in
cidence of the burden should be IN the
right place.
Third. 1t should be conservative.
The value OF the improvements from
time to time. should reasonably rep
resent another way of saying that the
system should be fair. for. as we shall
see more fully hereafter. any other
system would put the burden OF i'm
prorements. In part, upon a genera
ton which has not enjoyed them.
Fourth. it should be practical: that
is TO say, any securities should be
attractive TO the class OF persons who
would naturally invest IN them.
Let US consider how far these prin-
ciples are observed In Virginia, and
the working OF the system now in
force.
Except in the instances. compare
lively rare, when street improve
ment is paid for out OF current reve-
nue., the funds for making it are pro-
bonds running usually for thirty years.
occasionally less, sometimes more.
Sinking fund provisions vary. but are
by no means uniformly, il they are
generally. adequate to discharge the
principal at maturity.
The average life OF paying may be
put at fifteen years. Assuming thirty
year bonds TO be issued. II results
that at the end OF the first fifteen
years another bond issue must be made
TO provide for repaving the street Al
the end OF thirty years, the city has
one bond Issue due, another outstand-
ing with fifteen years TO run. and
Il third one Immediately pressing for
consideration TO provide for the new
paving necessary, while on the asset
side OF the ledger there are two worn
out streets--value inland such a
sinking fund as has grudgingly been
created. Such system in the case
OF a business corporation would spell
bankruptcy.
i1ul TINS is Dy no means ali the
story. The bond issue is carried by
the city at large. Whether the street
be the most travelled thoroughfare in
the city or whether it intersect SUI
burban district founded on credulity
and maintained on optimism: whether
1t serve the multitude or the few:
whether its paving add nothing 10 the
values Of abutting property, or create
those values-in each case, the public
purse pays the piper.
Such A system is not fair. as the cost
is not properly distributed. II is not
conservative. as il accumulates liza
bilities against ever diminishing as
sets; it is not practical, as 1t keeps
the bonded Indebtedness pressing hard
upon the heels OF the bond-issuinG
limit and so impairs the marketability
of the bonds
Taking our two principal cities of
Richmond and Norfolk, the latest State
and city section published Novem-
Der 81 1910 of the Financial Chron-
icle" fails to disclose. with two cx-
ceptions-Omaha, Neb.. and Yonkers.
y. y. as to each of which somewhat
special circumstances exist-a single
city in the entire United States, within
limit of population. S given by the
1910 census, 10000 in excess of that
Of those two cities respectively, whose
net direct bonded Indebtedness is so
large.
It appearing, then, that the conse-
Qucnces of what we may call the Vir-
ginia system are just what might have
been expected a priori OF that system,
it remains to inquire what can be done
to remedy these conditions. Clearly, II
the principles above laid down are
sound, the remedy is to be found In the
application OF those principles. II mas
been said that the system should ne
legal, fair. conservative, and practical.
How can these requirements be at
tanned:
1t is believed that the remedy lies
along two main lines.
In the first place, all securities issued
by a city should be for term OF years
not exceeding the life of the improve
ment for which they are issued ana
provision should be made whereby the
securities so issued will be automatic
ally retired at maturity. This can be
ACCOMPLISHED as to each bond issue
made. either by creating a sinking fund
that will nay off tho issue when due. or
by issuing what dealers in municipal
securities call serial bonds" by which
are meant bonds some of which fall
dino and are paid each year during the
life OF the issue. until all are paid.
1t would he difficult. however, for our
Virginia cities. under existing condi-
tions. to provide the very high amorti-
zation charges that would be required
for street improvements under such
method, unaided as they are by any
contributions from the persons prin-
cipally benefited by the improvements