The Wallace miner. [volume] (Wallace, Idaho) 1907-current, 1915-04-22
PAVING BONDS USUAL RATE OF INTEREST
AND HOW THEY RATE AS An INVESTMENT
AN INSTRUCTIVE LETTER FROM A WELL KNOWN INVESTMENT
FRM-wALLAcE PAYS NO THAN OTHER CITIES
ON SAME CLASS.

Ine independents nave Deen unlOf.
tnnate, to say the least. in the selec-
ton Of points of attack in their as
saults upon the present citizens AL
ministration and the citizens ticket
Assuming that the people would ac~
cept the scurrilous insinuations afld
general charges made by the Walker
Mahoney- McKissick organ as true
without asking for bill Of particulars,
the Independents now find themselves
confronted with an array of facts that
absolutely refute these base msina-
tons and allegations and present an
argument which the Independent or
gan dare not attempt to answer.
The independent organ has 'epeat-
edly charged that the paving binds
were sold at an exorbitant rate Of in
terest. These bonds bear interest at
per cent. are payable in 10 Years and
may be redeemed at any interest per-
iod after one year. They We're taken
by the paving company at par. The
Press Times says the interest rate is
outrageously high and intimates that
there was grating in connection with
the transaction. Now let us get at the
truth regarding paving or improve
ment bonds. The Miner has made
some investigation to determine whe-
ther or not the people of Wallace have
been imposed upon in the bond issue.
The matter was submitted to Ferris
& Hardgrove investment bankers,
Paulsen building. Spokane, whose
business it is to know the value Of the
various classes of bonds and other Sc
curities. for they are in the business
of buying them. They We're not pur-
chasers of Wallace paving bonds, how
ever, and have no interest whatever ir
them. The question of interest rate
of this class of securities was put up
to this firm and this is their answer.
The Truth About Bonds.
Spokane, WASH, April 1o, 1915.
Dear Sir-Answering your inquiry
as to the interest rate usually paid by
municipalities on special Improvement
bonds and the basis on which such
bonds are secured by investors, etc., we
will state that special improvement or
assessment bonds are looked upon BY
bond dealers and by investors very
much as a mortgage or mortgage Sc
curity. They are not, of course. d.
rect obligation of the city and are only
lien AGAINST the property in partic-
uIar district for which the city acts as
aaent in creating the district and issu-
ina the bonds. This fact confuses peo-
pIe not experienced or acquainted with
these securities when they hear OF
town ISSUING per cent direct os'Iea-
ton bonds and the same city issuing
7 per cent improvement bond. The
difference in rate is entirely due to the
fact hat in the first case the city ane
all the property in il stands RESPONSE
BILE during the entire life Of the bond
and in the second case only the prop
erty in the district; each properly
owner being able to pay his tax ane
release his property entirely from
the lien.
The rate of interest which special
assessment bonds carry is, we believe
in most Idaho cities 7 per cent and as
dealers, we have come in touch WITH
per cent Improvement bonds issued
by Coeur d'Alene, Pocatello, Welser'
Payette and ST. Mares. Boise has
outstanding a great many per CEN
Improvement bonds and we believe
that practically all of it's bonds with
perhaps the exception of one or two
issues, have been per cent. In the
state of Washington many of the cit
les issue 7 per cent bonds, including
Aberdeen, BeIingham, Wenatchee and
Yakima.
We find that investors buying bonds
issued by municipalities in our west
ern states expect an earning rate Of
about per cent which does not seem
an unreasonable rate. Where bond
bearinu a lower rate of interest is is
sued, the bond dealer and investor ns-
uslIy figure a discount, making It pos
sible to handle the bond on about 7
per cent rate.
In judging the market for bonds and
the proper rate of interest, there are
a great many things to be considered
which can not be covered in short
letter. The size and age of town is
an important feature, and, of course
bonds issued by large cities such as
Seattle, Spokane and Portland will
sell at a lower rate of interest thar
bonds issued by smaller cities, such
ss coeur d'AIene, Wallace or Wsnat-
chez. even though the security might
not be any better.
You may have noticed the purchase
bv two Spokane hanks Of LARGE
block Of Los Angeles per cent i'm
provement bonds. We believe that
practically all of the California runi-
cioslities issue per cent improve
ment bonds.
We trust the above will give you all
the information which yon desire.
Yours very truly.
So 50 n A - -