The Morgan City daily review. (Morgan City, La.) 1916-1920, 1916-11-02
RAISING ROAD FUNDS
Important Saving Effected BY lssu-
ing Highway Bonds on Deferred
Serial Retirement Plan.

People Of country intending to
raise funds for highway improvement
would do we'll to consider the advan-
tage to them of the deferred serial
plan over the ordinary sinking-fund
plan of retiring long-term bonds.
Under the serial plan, certain a
mount of bonds is retired each year
and the bonds 50 retired cease to be
an interest charge on the community.
Under 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 en-
tire life Of the bond. The country,
therefore, pays interest on the
money so borrowed and in addition
sets aside each year as sinking
fund an amount sufficient to retire
all the bonds when they become due
The sinking is deposited with banks
and earns some interest. This inter-
est ordinarily is 3 per cent, whereas
the county has to pay or 6 per
cent to its bondholders. The serial
plan is much cheaper method of
raising money for road improvement,
even when the sinking fund earns in
terest as high as per cent, and in
the opinion Of the road specialists of
! op%~ cho,,1J ho ,,<i111ol
when ever it is possible to market
serial bonds.
In study Of road bond issues of
several countries, J. E. Pennybacker
and M. O. Eldridge, of the Division
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
$8O,7O2, and in the third county
$65,367 over the other plan with a
sinking fund bearing interest at 3
per cent. With sinking fund earn
ing 4 per cent, the saving would have
run as high as $72,288 in one of
these counties. These conclusions ap-
pear in the recently published De-
partment Bulletin 1913, Economic
Surveys of County Highway I'm
provement.
The following concrete examples
are taken from this bulletin:
Gin Dallas County, Ala, the bonds
amounted to $350,OO0, payable in
I. 30, years at per cent. Assuming the
sinking fund to bear 8 per cent in
:. terest, as set forth in the chapter on
Dallas County, the total financial
burden to the county for interest and
the liquidation of the bonds during
the 3O-year period will be $745, 7O2,-
80. An equal amount of bonds at the
same rate Of interest, if issued under
the deferred serial bond method,
with the first bonds payable 6 years
from date of issuance and an equal
amount payable each year thereafter
for "a years, would cost the county
at the. end Of the 80 years $685., 200,
or difference, as compared with /,
the sinking-fund method, of $80,702.
If per cent should be realized on
the sinking fund instead of per
cent, the saving for the deferred, ser
ial plan would still be $47,216. !
"Lauderdale County, Miss, which
issued 100000 Of and 1-2 per
cent bonds, adopted the deferred
serial-bond method, with the first
payment coming II years from the
date of issue and the last payment
IS years. If the county had issued
the bonds on the 5-25 year basis the
cost would have been $9O6,875, as
compared with the cost on the basis
odopted of 1912, 232, or difference
of $65,367." Il
Even in the case of a small issue
the advantage of the serial plan is
illustrated in Dinwiddle County, Va.
49,. o.. i 80 %.J,e { u