The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1924-04-20
FORESEES DANGER
IN BOND POLICY
Mitchell Wants Tax Levy
Directly Applied
To Schools

n.ining engineer. believes additional tax
levy proposed for Birmingham schools
should be applied directly to construc-
ton and maintenance rather than to in
terest and sinking fund. In a formal
statement made Saturday, Mr.. Mitchell
said
The sale of bonds by a municipality
of the size and wealth of city like
Birmingham is theoretically and funda-
mentally wrong, for the reason that,
unlike an industrial corporation organ
lied for profit where it is expected that
the bonds of such q corporation shall be
paid from the profits of the business,
the city has no profits with which its
bonds may be liquidated, but must de-
pend upon their payment out of its capt.
tai derived from it's taxes; and, in addi-
ton to the paying of its bonds, there is,
also, the interest on the bonds to be
paid. Every dollar of interest paid out
of the taxes is q clear loss, in so far as
value received in construction is con-
cerned
If we were to approve by our votes
the present proposed bond issues
$500, 900 for school purposes, and
$3.50, 600 for n public library, making a
total of $4,150,000--it would mean that
we are to take out of the taxes, each
year for the next 80 years, $207, 800
for interest, or a total Of $6,225, 900,
and paying it over to the bondholders,
for which we shall get absolutely moth,
ing in return. This sum added to the
principal. 81, 100000, will make total
of $1O,375,000 which will have to be
paid out of our taxes collected in prin-
cipal and interest for the use of this
81, 10000, in order to complete the
liquidation of this batch Of bonds.
The present bonded Indebtedness of
the city of Birmingham, according to
its financial report for the year ending
September 80, 1923, is shown to be
$40, 1884, 800, upon which an annual in
terest in the amount of $519, 1855 is be-
ing paid and, if no more bonds should
be issued than those as reported out
standing, the interest charges alone
from now until maturity will amount to
more than 100000, which, added to
the principal, makes the bonded debt
which the city now owes and will be
bound to pay by maturity more than
$50, 100000
Disastrous Results
1t does not need an expert mathema-
tician to figure the cost to the taxpay-
ers of this method of financing the city's
affairs, nor a prophet to forsee its dis
astrous results. If, to the present bond
I'd Indebtedness, as above stated, we
should add that which would result
from the proposed bond issue, the then
combined total indebtedness would
amount to more than $4,000, 900, con-
siderably more than half of which rep
resents interest, for which we will get
nothing in return; thus, instead of get
ting value received in material develop
ment, we get less than so cents for every
dollar OF our taxes. If this program is
followed to its logical conclusion the
city will be plunged into an enormous
and ever-increasing debt to be passed
on to posterity which by judicious fl
nancing can and ought to be avoided.
The safe, ecOnomica1 pan and solution
OF the problem, and the only one seen
to avoid the further accumulation of this
enormous debt, and whereby the full
value of every dollar of taxes collected
can be realized, is by increasing our tax
levy by such an amount as will take
care OF our present needs, and upon a
continuous policy or program until such
improvements as are required shall have
been provided, after which a reduction
in the tax would be in order. As great
as is the loss to the taxpayers in inter
est charges, the outstanding bonded in
debtedness can be met with the present
tax levy, to the extent that when the
last Of the bonds mature the city will
be enabled to wipe out its entire bonded
debt, and at the same time, if desired,
further reduce its tax rate by, such an
amount as is now required to provide
for interest and sinking fund for its
present bonds.
Ii the city commission had asked for
an increase of mills in the tax rate
for use in necessary building improve
ments, instead of for the purpose for
which it did ask the increase, and could
be depended upon to exercise anything
like frugality in the expenditure of the
money, which would no doubt provide
sufficient funds for conservative build
program, the voters could probably have
been prevailed upon to grant such a re-
quest. However, there is good authority
for believing at this time, in their pres
ent frame of mind, the voters cannot be
depended upon to sanction any more
bond issues, nor increases in the tax levy
for the. purposes stated in the election
call. They want full value for their
money, and rightfully so, something
which they have thus far failed to get.
The voters of this city would do well
to adopt the slogan mo more bonds
for any purpose, but pay as we CO."
Every citizen should bear in mind that
he or she is part of the debt-paying
machinery in the municipality in which
he or she lives; for, whether property
owners or net. every article Of living is
charged with the taxes of the property
owner and the tenant and passed on to
the consumer.
Every citizen should also bear in mind
that the bonded debt of a municipality
is equivalent to blanket mortgage on
every piece of property within the cor