Belding banner. (Belding, Mich.) 1889-1918, 1916-03-22
Good Roads Department
Conducted Especially for the Banner by Hon. P.
r. Colgrove, President of the Michigan
Good Roads Association.

fifty-year sinking-fund bonds at 4
per cent" as explained to the finance
Convention Of that State, ''the differ
ence in interest between the sinking
fund and the serial-bond method was
the astounding sum Of Sy8,0OO,000;"'
q mere trifle, of course, but worth
saving just the same.
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
twenty-five years. They are object
ID TO because sit may not be pos
.ible to obtain continuously the re-
quisite rate of interest on the sink
ing fund to discharge the debt at
maturity" The temptation to use
it for purposes other than the pur-
pose for which it was created IS con-
itant. Sinking fund tax levies may
be deferred through carelessness or
under pressure for other needs" and,
inally, "the total cost fund will be
greater in the end than the cost Of
she 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
oy annual or semi-annual payments.
At first the amount of the principal
retired is small but constantly in
reases while the interest charge de-
.reases. Examples of how the method
works are given in an exhaustive
Bulletin issued by the Office Of Good
Roads of the Department of Agricul-
cure. On loan of 100000 obtain
ID on annuity bonds at per cent for
The period of twenty years the uni
form annual payment would be S.
024,259-note the decimal. Adjust
ID to 500 bonds, the principal repaid
1T the end of the first year would be
$1,000; the second year, $4,000; the
third year $1,000, 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 charged
would be $4,000; the second year S4, /
500, and so on until the twentiet
year the interest charge would
$3.50. The total amount of interes
and principal would be $106,405.
The other method Of issuing bond
for highway construction is called
he serial form which differs from
he annuity method in the fixed an
the case of serial loan of 100000
1T per cent for/the period of TWEEN
W years. The first year the payment
If principal would be $4,000, and the
payment of interest $4,000; the Sec
md year, the payment of principal
would be $4,000 and the payment of
interest of $4,750. The payment of
principal would continue the same
throughout the period of twenty
years but the payment Of the inter-
est would increase steadily until in
he twentieth year it would amount
to only $3.50. 1t is claimed by the
experts of the Good Roads Office that
total expense to the community un-
Ter the serial plan is somewhat less
than under the annuity plan," and
that by either plan the expense under
The sinking-fund plan. The serial
plan is preferred by investors be-
cause it is safer and for this reason
L has become the more common form
for highway purposes in recent
years. In the two later years for
which the records are available. 20
per cent of the total county and dis
trict bonds amounting 70 $15.300819
were of this form. II is the form
adopted by the railroads in issuing
equipment bonds for a period of ten
years with which to purchase rolling
stock. "The amount of bonds retir-
ed annually is carefully adjusted so
that the retirement is faster than the
deprecation of the rolling stock. The
difference between the outstanding
bonds and the value Of the equipment
in any year is the margin of safety"
1t ought to be the same with the
highways. because HIGHWAYS, how
ever well built, do not last forever.