The Birmingham age-herald., 1924-01-15
CONTINGENT SINKING FUNDS

{ CONTINGENT SINKING FUNDS z Suggestions from time to time from the city commission for bond issues to nrovide for needful public improve ments are causing many citizens to q think seriously about the possibilities
 pro and con. It is assumed that within the next decade or two bir- niingham will authorize a number or bond issues to meet demands from the people for public benefits com mensurate with. a great and growing
 community. Such a policy in munl- cipal finance will be wise or foolish
 according as it be safeguarded by complete and accurate Knowledge Of
 community needs derived from com : prehensive surveys of conditions, by economical and official administrative : management, and by proper protec- z tion of the public credit through such & sinking-fund or surplus provisions as ..@ will take care of maturing obligations | in interest and principal.
 Some general figures in this con- s&nection are worthy of attention. The city tax rate is a dollar and half on the hundred dollars of assessment. Fifty cents of that, under the law, ; goes to the general fund, fifty cents ato the board of education and fifty iscents to the interest and sinking fund Y to provide payments on all outstand- ing bonds. This interest and sinking fund is invested so as to yield what are considered fair returns. The con- < stitutional limitation on bond issues is seven per cent. of property assess ments. At present these are about 145,O0O,000, which would restrict the city to $10,150,00o in bond jis- sues. The constitutional restriction does not apply to waterworks, school and public improvement bonds, which latter include sewer and street im- provements assessed against and paid by property owners. Outstanding .school and public improvement bonds now total about five million dollars. which leaves the city a margin of about five millions for future bond issues under the constitutional lini- tations.
 < It.would appear, therefore, that un- der proper safeguards the people could authorize certain further bond issues to provide for needful permanent inn movements. It should be kept in mind, however, that the interest and sinking fund, or one-third of the city taxes, which must be applied to ma turing obligations in the form of all outstanding bonds, will increase only in proportion to increases in property assessments. Hence caution should be taken against issuing more addi- tional bonds than can be taken care of by this fund, or else sufficient ad ditional sinking funds should be set aside and properly invested to pay interest and principal on additional bond issues.
 Under economic and businesslike administration there should be set aside from regular receipts sinking or 1uLu, 4AtCtCoe, WASh which to provide for those emergencies and improvements which accompany community growth This is a proper part of budget-making, and is far reaching in it's economic possibilities. It is the expression of vision in muni cipal management. Such policy is founded on business foresight and is more economical than the practice of issuing bonds at high rates of interest to care for such contingencies as are sure to arise, a practice that necessi- tates a constant and increasing drain upon available funds for current ex- penditures, and increases the dangers of inability to provide needful public benefits. These frequent issues are a hand-to-mouth policy which finds little justification in sound business principles. Providing sinking fund to care for emergencies and improve ments is preparing for the future. Some bond issues may be necessary, but multiplication of bond issues cur. tails just so far those resources which future developments are going to de- lnand.