The Twin Falls times. [volume] (Twin Falls, Idaho) 1905-1916, 1916-11-21
UNCLE SAM SAYS
SERIAL PLAN BEST
Road Building Bonds Should Be
Retired Steadily
SINKING FUND PLAN COSTS MORE
TO TAXPAYERS.
United States Department of Agricul-
ture in Weekly News letter, Ex-
plains System.

People of county intending to raise
funds for highway improvement would
do well to consider the advantages to
them of the deferred serial plan over
the ordinary sinking fund plan Of re-
firing long-term bonds, says the Week
ly News Letter of the United States
Department of Agriculture. Under
the serial plan, certain amount of
bonds is retired each year and the
bonds so retired cease to be an inter-
est charge on the community. Under
the sinking fund plan none of the
/ bonds is retirable until the end of
definite period, and the entire sum
raised bears interest for the entire life
of the bond. The county, therefore,
pays interest on the money so borrow
ed and in addition sets aside each year
as a sinking fund an amount suffici-
ent to retire all the bonds when they
become due. The sinking fund is de-
pisited with banks and earns some in
terest. This interest ordinarily is only
three per cent, whereas the county has
to pay five or six per cent to its bond
holders The serial plan is a much
cheaper method of raising money for
road Improvement, even when the
sinking fund earns interest as high as
four per cent, and in the opinion of the
road specialists of the department.
should be utilized whenever it is pos
sible to market serial bonds.
In study Of the road bond issues of
several countless j. K. Pennybacker
and NJ. O. Eldridge, of the division of
road economies, 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 $154269 in
another county SSO7O2, and in a third
county S65,367 over the other plan with
a sinking fund bearing interest at
three per cent With a sinking fund
earning four per cent, the savings
would have run as high as S72,2SS in
one of these counties These conclu-
sions appear in the recently publish
ed department bulletin 1893, economic
surveys of county highway improve
ment.
The following concrete examples are
taken from this bulletin:
in Dallas county, Ala, the bonds
amounted to $350,000. payable in thir-
ty years at five per cent Assuming
the sinking fund to bear three per cent
interest, 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
thirty-year period will be $745, 702.80
An equal amount of bonds at the same
rate of interest, if issued under the
deferred serial bond method, with the
first bonds payable six years from the
date of issuance and an equal amount
payable each year thereafter for TWEEN
ty-four years, would cost the county at
the end of the thirty years, $665,000, or
a difference, as compared with the
sinking fund method, of $SO,702. 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, Miss, which is
sued 100000 of five and five and a
half per cent bonds, adopted the defer
red serial bond method, with the first
payment coming eleven years from the
date of issue and the last payment
twenty-five years. If the county had
issued the bonds on the 5-25-year basis
the cost would have been $500, 875, as
compared with the cost on the basis
adopted of $972,23 or a difference of
$6.367."
Even in the case of a small issue
the advantage of the serial plan is il
Illustrated in Dinwiddie county Va
This county issued $1O5OOO Of five and
six per cent bonds, payable in thirty
years, but the bonds are callable after
twenty years. Assuming that they will
be retired at the end of twenty-five
years on the sinking fund plan, with