Belding banner. (Belding, Mich.) 1889-1918, 1916-09-27
The Problem of Financing Road
improvements


1t costs a great deal of money to
build good roads, and the question
that has given most concern to the
economists who have studied the
subject is the best way to raise the
necessary funds-always keeping in
mind the public credit. The success
ful prosecution of the work requires
steady supply Of money and exper-
fence has proved that this cannot be
obtained by annual tax levies in the
states and districts where the roads
are to be built.
How is the money to be raised for
road construction? By the issue of
highway bonds appears to be the
most practical way. 1t is the way, at
least, that about half the counties in
the United States have adopted to
solve this problem. The total amount
of highway bonds issued by the coun-
ties aggregate about 100000, 900,
and the total of all highway bonds,
including the bonds voted by the
states, as well as the counties,
amounted on the first of the present
year to not far from half a billion
dollars.
The majority of the highway bonds
so far issued are of the sinking fund
variety. They run from ten to forty
years, the average being nearly twen-
ty-fve years. They are objected to
because sit may not be possible to
obtain continuously the requisite rate
of interest on the sinking fund to dis
charge the debt at maturity" The
temptation to use it for purposes
other than the purpose for which it
was created is constant. Sinking
fund tax levies may be deferred
through carelessness or under pres
sure for other needs" and, finally,
1.-The total cost of bond issue retired
by sinking fund will be greater in
the end than the cost of the same
bond issue made by either the annuity
method or by the serial method.
By the annuity method, both the
principal and interest are discharged
by annual or semi-annual payments.
At first, the amount of the principal
retired is small, but constantly in
creases, while the interest decreases.
Examples of how the method works
are given in an exhaustive bulletin is
sued by the office of good roads of
the Department of Agriculture. On
a loan of 100000, obtained on an
nuity bonds of five per cent for the
period of twenty years, the uniform
annual payment would be $8,024.259.
Adjusted to 500 bonds, the princi-
pal repaid at the end of the first year
would be $4,000; the second year, 49,
200; the third year, $4,000, and so on
until the twentieth year, when the
amount of the principal repaid would
be $1,000, and upon its payment the
debt would be discharged. The first
year the interest charge would be S.,
900; the second year, $4,850; the
third year, $4,000, and so on until
the twentieth years the interest charge
would be $3.50. The total amount of
interest and principal would be $780,
405.
The other method of issuing bonds
for highway construction is called the
serial form, which differs from the
annuity method in the fixed annual
retirement of the principal. Take the
case of serial loan of 100000 at
five per cent for the period of twenty
years. The first year the payment of
would be $4,000, and the
second year the payment of principal
would be $4,000 and the payment of
interest $4,750. The payment Of
principal would continue the same
throughout the period of twenty