The Birmingham age-herald., 1920-07-29


 tives of five of the leading banks of Jefferson county were called into con- sultation with your board and this commmittee for the purpose of discuss ing and advising as regards the gem eraI situation. It was thought possible that temporary loan might be given the county by the banks to meet the situation pending the sale of the bonds At the request of the bankers your board appointed a certified public pub lie accountant to prepare and submit to the banks financial statement of the | county. Sufficient time was not avail ble for the accountant to prepare more than an approximate statement. Un- fortunately, the nature of this state ment was such that the bankers felt they were not justified in making the | county a temporary loan.
 THE 1919 CONTRACTS It speedily developed that there was a need for money to apply upon the 1919 contracts now under construction, but which were contracted for in August, 1 1919, prior to the bond election. Pay ment for contractors April estimates amounting to about s125O00 was due May 1o but could not be met owing to l lack of funds. This condition continued until June 12, when both the April and
 
 ! to approximately $275,000, were due and unpaid.
 l In view of the emergency which ex- isted and the urgent necessity for pay ment of April and May estimates, you 1 informed us that you had made ar | engagements whereby s500000 of these bonds were to be purchased by the Ala bama Bond Company at par and &C., crued interest. The necessary payment to the purchaser of 10 per cent was to be made by the contractors, whose April and May estimates were unpaid. It was stated that each contractor | would pay approximately 20 per cent of his estimates, and in this way-raise the $5o,000 necessary to complete the sale of s500,000 of new bonds. It was also stated that a test case would be taken to the courts at once in order to determine whether the board of reve- nue in an emergency, could legally sell bonds below par.
 This committee, for the reasons given in the following paragraphs, approved the sale of $5Oo,ooo of road bonds in accordance with your plan as outlined above. We also approved of your plan to carry a test case to the courts. Our | reasons for these recommendations are given below.
 l. Owing to lack of sufficient funds Ito pay the contractors estimates, it would have been only a short time. pro- vded additional funds did not become available, until suits against the county to compel payment of these estimates would have been taken to the courts. Such suits would have been costly and have resulted in definite loss to the county for large sum of money. These suits would also have seriously injured the credit of Jefferson county, a con- dition which all citizens wish to avoid. 2. The contractors were entitled to prompt payment for all work com. pleted, and it was known that unless payment was made promptly, certain contractors working for the county would have been seriously embarrassed at an early date It was clearly the duty of the county to pay these con- tractors in accordance with their con- tracts, and thus save such contractors from financial difficulties.
 8. Many business houses had sold equipment and materials to the con- tractors, and unless the estimates had been paid, some contractors doubtless would have had difficulty in meeting bills for such materials and equipment. If such bills had been left unpaid sew eral local firms would have possibly found themselves in financial trouble.
 4. Most of the roads to be improved under the 1919 contracts were so torn up as to be in nearly an impossible condition.
 In order to save the people seri-
 ous inconvenience and costly de-
 lays, 1t was vital that funds either
 be provided to complete the cion-
 tracts at least place the roads In
 n passable condition.
 We greatly regret the necessity of using even a portion of the proceeds of these bonds.-to pay old obligations. The use of this $50o.00o of the bond funds on old contracts will of course, prevent the use of such an amount on new construction. Our committee and the general public was at first under the impression that it would be illegal to use the proceeds of the bonds for other than new construction. The county attorney advises, however, that there is legal right to use this money for construction contracted for prior to the bond election. We do not be- lieve, however, that morally it is right | to so use these funds. because it was clearly understood By the people of | the county that the s5.oo0, 900 worth of new roads without regard to contracts | previously awarded. Even though no | difficulty had been experienced in sell 1 ing the bonds, the new programme | would have been greatly curtailed be- cause of the necessity of using sev- eral hundred thousand dollars of the | bond money to complete old contracts.
 COUNTS FINANCIAL STATUS
 We verbally recommended that your board immediately take steps to ascer- tain exactly the present financial status of the county. The figures recently given the bankers by the accountant, MT. F. Hopkinson Smith. together with | other figures and estimates which we have, clearly indicate that Jefferson county has obligations of several hun dred thousand dollars-in excess of the funds available to meet such obliga- tions This situation is not one which should be allowed to drift along. It should be met without delay By the most energetic and efficient means which you can employ.
 On June 14 Judge Dan A. Greene of the county circuit court decided in the test case previously mentioned that the county could not sell bonds below par. The board of revenue then appealed to the supreme court for ruling on this question. On June 30 the supreme court Issued a decision to the effect that it would be illegal to pay commission of 10 per cent for the sale of these bonds, holding that such commission constituted a sale below par. How- ever. in/view of the agreement between the Alabama Bond Company and the contractors. such contractors paid the necessary commission of 10 per cent