The Birmingham age-herald., 1922-07-23

all OUblOil Oil bllC oCGOAlQ anu SAAAA total premium to $500.
 The Daily Bond Buyer of New York attacked the Albama issue, contend ing that Alabama bonds were not first-class investments because of the limitation on the tax rate which Is imposed by theA constitution. Tn s Journal said Alabama Is now one ot the few states in the nation which limits the right of the state and sub divisions to create financial means through taxation for the payment of their. obligations.
 7~ Davis Replies
 Attorney General Harwell c. Davis prepared an answer to the criticisn which was published In New York financial newspapers. and in thrse days after the answer appeared, the holder of the option exercised It's right 10 take over the remainder of this years issue of highway i'm provement bonds.
 Attorney General Davis contended that no safer investment could be found than this issue of highway bonds, because not only does the state pledge it's full faith and credit to the payment of principal and in terest, but the constitution itself sets aside the motor vehicle fund, which can be used forl the other purpose than the payment of principal and interest. He also pointed out thai Alabama Is not expending all funds which come into the state treasury but during the past three years has retired floating obligations totaling $2,000, 900 and has retired $500,000 of the states permanent bonded indept- edness.
 In answering the charge that the securities offered by the state of Alabama are not of the best, Att torney General Davis said:
 Stnte Finances
 Alabama Is not expending It's en- tire income to meet current exnanses. During the last three fiscaEsy ears the governor of Alabama has paid $2.000,000 of the states floating in debtedness and retired $500 of the old bonded indebtedness. The state is dlscounting it's bills. Several million dollars has been spent during the last three, fiscal years in erecting a modern penitentiary and improving the properties of various education- al and eleemosynary institutions of the state. These improvements ace permanent and will not require such expenditure again for a number of years. It appears from these facts that the state has had each of the last three fiscal years a surplus of more than s5o0oo0, which Is the amount of this serial issue of bonds failing due annually.
 Ad Vniorem Tax.
 .'The legislature of Alabama has authority ana power to increase the revenue derived from ad valorem taxation. The present revenue law of this state requires the tax author tiles to assess property for ad va lorem taxation at only 60 per cent of it's reasonable cash value (General Acts of Alabama 1919. Page S11, Sec- tion S5). This is a statutory rule which can be changed at any time by the legislature so as to require property to be assessed at 100 per cent of It's reasonable cash value Even if 1t is assumed that property is now assessed at 60 per cent of It's reasonable cash value 1t is estimated that the assessed value is less than 35 per cent of the actual cash vaiueJ the Legislature has the power to in- crease the income from ad valorem taxation sixty-six and two thirds per cent by requiring 100 per cent valuation. So far as the bond holder is concerned. he is as much protected by the power of the legislature to increase the income of the state from ad valorem taxation by in- creasing the assessable value of the property, as he is protected by in creasing the income from such source by an increased tax rate. Alabama has for over 10 years lived on revenue derived from assessing ad alorem taxes on oniy 60 per cent of the reasonable cash value of its property and has within that period created no new indebt edness.
 Alabama has no limitation on It's authority to increase it's income from sources other than ad valorem taxation-the state received over s7.000,000 from other sources than ad valorem taxation during the fiscal year ending September 80, 10e1. There Is no constitute onal limita- tion on It's power to increase this character of taxes. It will be noted that the larger percentage of the in- come of the state Is derived from this source.
 Outstanding Debt Law.
 'Alabama has constitutional debt limit. Section 213 of the pres ent constitution of Alabama pro- kibits the legislature from mourning any new debt except to suppress re- bellion and to permit the governor to make temporary loan of not over $S00.000 to meet deficiencies in the treasury. As the state IS discounting ltS DfllS, the governor QOeS not llnu 1t necessary to exercise this power to make temporary loans. This debt limitation has prevented creating debts by the legislature to such an extent that the present indebtedness of the state including this issue of $3.000. 900 of highway bonds, is less than one and one-fourth per cent of the assessed value of the taxable property of the state. Not only is there this general debt limitation but the constitutional amendment authorizing this bond issue prevents the issue of such bonds ir an amount the interest on which exceeds the net receipts from motor vehicle li- censes collected during the last fiscal year. While the constitution can be changed by vote of the people. the present constitutional debt limitation Is certainly some assurance to the bondholder that the state will not become hopelessly involved finan- cially.
 Laws Flexible
 ~The bondholder is given the ex, traordinary right to enforce the pay. ment of his bond by legal procedure A large majority of state bonds