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

simply pledge the full faith and CT edit of the state to the payment thereof As state cannot be sued, bondholder with only this pledge Is compelled to rely solely on the moral obligation created by the bond. He is unable to enforce that obIiRa- ton by legal proceedings or to com pei the legislature to levy tax which would produce sufficient rev enue to. pay his bond and the ia terest thereon. By the constitutional amendment authorizing the present issue of bonds, the motor vehicle license tax is created a special fund for the payment of the principal and interest of these bonds and the leg islature Is required to increase this tax whenever necessary to meet th;s obligation. The bondholder Is thus gwen the extraordinary right of sub jeeting this particular fund by legal proceedings to the payment of his bond. It will thus be seen that in addition to the moral obligation created by the states pledge of It's full faith and credit to the payment of these bonds, there is created this special fund which the bondholder can subject by legal proceedings 10 the payments of his honds. -
 ''In the last analysis 1t is a ques- , ton of the future ability of tho obligor to pay. As stated, Alabama for over 10 years has lived on an income produced by levy of only so per cent of the ad valorem tax permitted by its constitution, with out creating any new indebtedn ess. It is state of large area with q constantly increasing population It ranks first In many agricultural products. It has varied industries. Roger Babson says. Alabama, be- cause of its fuel and water power, ranks all states in the possibilities for industrial development.
 Safety of Bonds
 When you consider the states r. rancial condition, it's power largely to increase it's revenue, the short term which these bonds have to run, the fact that it Is q serial issue maturing only $500.000 annually. the special right given the bondholder to en- force his obligation, the limitation that Is placed upon the legislature to create indebtedness and the ex- treme improbability of the sources from which taxes can be derived by the state decreasing. I think you will reach the conclusion not only that these bonds are as desirable as those Issued by any other state Ain he union, but that they give the bond holder extraordinary rights not usually given by such bonds. It seems to me that under such condi- tions an ad valorem tax limit he- comes technical objection which could not reasonably be supposed In any way to affect the desirabiiity of the bonds."
 In commenting on the statement of Attorney General Davis, the Daily Bond Buyer said it had discussed the state'sf bond issue with Governor | Rilby, the attorney general and other i representatives of Alabama and that some information had ben furnished which was not in possession of the | journal at the time the original ar ticle was written.
 The Daily Bond Buyer said Cover nor Kily had informed 1t that ne would recommend to the legislature the submission to the people of a constitutional amendment whicn would remove the tax limitation.
 We never entertained any doubt as to the ability or the willingness of Alabama to pay off the bonds she is now marketing" commented the Daily Bond Buyer. Our only point was that until the tax levy limit is removed so far as meeting debt charges are concerned, the investor will demand higher return on his money and the state must pay this added interest charge. We hope Gov . ernor Kilby's recommendation to Inc | legislature will bear fruit with r.- spect to state taxation and also that the limitation applying to munici nal | tax levies to pay debt charges will also be removed from the constitu- tion.'