Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1920-08-14
loan OF S3,25O,OQO
(. TO OBUY CITY BONDS
Mayor, Stotesbury and Hadley
Explain Reason for Purchase
Of Civic Paper
REPLY. TO COUNCIL QUERY

The sinking fund commission has
made public letter stating why IT
bought no part of the recent $4,000 900
city bond issue when bids were opened
but later purchased S2.075, 900 of the
bonds at a one point advance from a
banking syndicate.
The letter was sent by the commits. &.
sion to Richard Weglein, president OF
Council. 1t was written after Coun-
Gil passed resolutions demanding an ex-
PLANTATION.
Council asked the commission where
( Il got the money to buy the bonds. when
II made a statement June 30 showing
the commission had a cash balance of
s1OS. 1923. AZ. vet a month later was
able to buy 81. $50 900 worth OF the
bonds, including those from the syn
The answer Of the commission reveals
for the first time that It made ten
norary loan to the city of S3.2'o'oo
eighteen davs before bids were opened
for the $4,000 600 city onnd lSSmei
Tho commissioners are f.. 1. Stotes'
burv. Navor Moore and City Controller
Hahier The criticism is made that
Mr.. Stotesbury. as head of DrexeI y
r. was n member of the Syndicats
which realized profit from the BOND
sale. -, ,,h,ic bv
Mr.. Weglein: ,., 90 1000
.ur,. .Lo orosidcnt and members Of the
CITY Council of the city of Phiadel-
HGentlemen-In reply to your reSo
ht;on of the 9th day Of July. l9?o. rc =
ouesting the sinking fund commission
ers to furnish certain information pear
Ing upon their purchase OF portion
Of the S4 900. 900 twenty year per
cent city loan due July /; l94o' we suo-
nit the following details: n.,.,u
ION June 81. 1920, the city ofhclals
designated by law to negotiate TEN :
norary loan in anticipation Of cash re-
re;nts (as provided in act of Assembly
enproved June %. 1919. known as the
New city Charter addressed to the
commissioners request Tor teth ,
norary loan Of So. $50. 900. stating that
owing to a small amount OF caSh IN -
the treasury the city would be unaole
10 pay semiannual interest ana qnarlrr-
ly sinking fund on the cltv oeo., d "'cJ
semimonthly payrolls at the enn OF
Time as we'll as other current ooliga i
fions unless this relief was obtained
Section of Article NN11 of the new
city charter permits temporary ioans
In anticinstion Of cash receipts to the
extent of 10 per cent o. the eStinlateu
receipts for the current year, whlcn eS-
teblishes the present limit OF such
temnorarv loan 81, 443 .5G}.14, the con :
troiier's estimate of receipts for 1920
being S54. AS. .631 Al. The commission =
ers resolved to accommodate the city
ne reouested provided the city solicitor
would render an opinion approving such
procedure.
"Such an opinion was received. and
on June 2S the temporary loan OF So
CSC, 900, with interest at the rate oil d
per cent per annum. was made 10 the
CITY treasury. leaving. as shown by our
reports for the quarter ended June So
a cash balance of only Sl'I ,S23.4s IN
the hands Of the commissioners. ne
commissioners were. therefore. not IN
=, possession of the requisite cash tn per,
init of their bidding for a portion oI
the $4,000. 900 offering of city. loan,
bids for which were opened July IL.
1920, but upon the loan being sold and
the proceeds. 81 900 900 Of cash, being
available to the city treasury. the above
referred to city officials designated by
law to negotiate temporary loans in an
ticipation Of cash receipts, advised the
commissioners of the sinking fund that
they desired to repay 81 3,OOO,OOO OF the
temporary loan, thereby Immediately
STOPPING
city upon all but $3.50 600 thereof
which repayment was made, and the
commissioners were then in possession
of funds to buy 50 .A75 900 of the new
S4 900 900 loan for the sinking fund.
The Loan Awarded
"The $1,000 900 city loan was
awarded to a syndicate consisting o
Drexel & Co.. Brown Bros. & Co. auc
the Guaranty Trust Co., of New York
at par and accrued interest. Elimnat
ing the above mentioned syndicate
'all or none" bid. the aggregate of al
other bids for this loan was but S725,
600. and if it had not been for tht
syndicate's bid the loan offering would
have been a failure. The syndicate
subsequently, agreed to sell $2,975. .O0C
of the loan to the commissioners for the
various sinking funds and S2j 900 for
the fire insurance fund at 500 % and
accrued interest. whereas they were
offering the bonds To individual invest
ors for S10l.2 - and accrued interest.
in January last when the city sold
$4,000 900 city 4l4s at a slight nre
MUM, the commissioners of the sinking
fund were able to buy 81 900 900 there .
of from the successful bidder at a SIM .
lar advance Of one quarter of per
cent. The long established practice has
been. If the commissioners had funds u
invest and a now city loan appeared
attractive 10 them. to buy portion
thereof from the successful bidder at a
nominal profit. If the commission has
cash available it frequently bids for new
city loans when offerings are made
There is this factor to bc borne In
mind. however. when considering the
relative advantages Of buying direct
from the CITY at public offering ant