Carolina watchman. [volume] (Salisbury, N.C.) 1871-1937, 1916-12-27
GOOD
ROADS
RAISE FUNDS FOR HIGHWAYS
Important Saving Effected by Issuing
Good Road Bonds on Deferred
Retirement Plan.

From the United States Department of
A~griculture.)
People of a county intending to
raise funds for highway improvement
would do well to consider the advan-
tages to them of the deferred serial
plan over the ordinary sinking-fund
plan of retiring long-term bonds. I'm
der the serial plan, a certain amount
of bonds is retired each year and the
terest charge on the community. I'm
der the sinking-fund plan none of the
bonds is retirable until the end of a
definite period, and the entire sum
raised bears interest for the ertire
life of the bond. The county, there
fore, pays interest on the money so
borrowed and in addition sets aside
each year as a sinking fund an amount
sufficient to retire all the bonds when
they become due. The sinking fund
is deposited with banks and earns
some interest. This interest ordi-
narily is only three per cent, whereas
the county has to pay five or six pei
cent to its bondholders. The serial
plan is a much cheaper method of
raising money for road improvement,
even when the sinking fund earns in
terest as high as four per cent, and
in the opinion of the road specialists
of the department should be utilized
whenever it is possible to market Sc
rial bonds.
In a study of the road bond issues
of several counties, ]. E. Penny
hacker and M. o. Eldridge of the divi-
sion of road economics, Office of public
roads and rural engineering, found
that the serial plan, if it had been
adopted by several counties, would
have saved the taxpayers in one
county $154,269, in another county
$50, 7O2, and in a third county $65,367
over the other plan with a sinking
fund bearing interest at three per
cent. With a sinking fund earn
ing four per cent. the saving
would have run as high as $72,2SS
in one of these counties. These o n
illusions appear in the recently pub
lished Department Bulletin 1913, Eco
nomic Surveys of County Highway I'm
provement.
The following concrete examples
are taken from this bulletin:
"In Dallas County, Ala, the bonds
amounted to $350,000, payable in 80
years at five per cent. Assuming the
sinking fund to bear three per cent in
terest, as set forth in the chapter on
Dallas county, the total financial bur-
den to the county for interest and the
liquidation OF the bonds during the
30-year period will be $745, 702.SO. An
equal amount of bonds at the same
rate of interest, if issued under the
deferred serial bond method, with the
first bonds payable six years from the
date of issuance and an equal amount
payable each year thereafter for "a
years, would cost the county at the
end of 30 years $665.OOO, or a differ
ence, as compared with the sinking
fund method, of $50 02. If four per
cent could be realized on the sinking
fund instead of three per cent, the
saving for the deferred serial plan
over the sinking-fund plan would still
be $47,216.
"Lauderdale county, Mississippi,
which issued 100000 of five and five
and one-half per cent bonds, adopt
ed the deferred serial-bond method,
with the first payment coming II years
from the date of issue and the last
payment % years. If the county had
issued the bonds on the 5-25-year basis
the cost would have been $906,S75, as
compared with the cost of the basis
adopted of $972,232, or a difference
of $65, 1867"
Even in the case of a small issue
the advantage of the serial plan is
illustrated in Dinwiddie County, Vir-
ginia. This county issued $1O5,0O0 of
five and six per cent bonds, payable in
30 years, but the bonds are callable
after 20 years. Assuming that they
will be retired at the end of 25 years
on the sinking-fund plan, with inter-
est on sinking fund at four per cent,
the total cost would be $21S,O31,
whereas if they had adopted the 6-25-
year serial method the cost would be
$2O1, 100, or a difference of $16,931.