Evening star., 1932-03-05
BANKS ARE URGED
/ TO AID u. S. CITIES
Credit Relief Declared an
Obligation Upon Financial
Institutions.
Dispatch to The Star.

NEW YORK, March Sample
means for the unfreezing of credit made
available by Congress place squarely up
to the banking interests the obligation
10 relieve American municipalities OF
the threat of insolvency which menaces
their credit, ties up public works i'm
movements, and threatens civil en-
ployes throughout the country With
unemployment, according TO the cur
rent Engineering News-Record. Sum-
marizing the initial results OF a Nation
wide study of the municipal credit situ-
alton. the publication states that the
border line of insolvency has been
reached in many American commune
ties almost wholly because of collapse
of the country's money system, rather
than essentially through the faults and
shortcomings of municipal governments.
"Credit unfreezing Is the intent of
the measure recently enacted by Cong
ress, and it should tend to ease the
severity of the 1882 municipal crisis"
saws the engineering publication.
Congress has now placed ample means
in the hands of the banking establish
ment. and if the latter lives up to its
essential responsibilities those means
Will become dfdlldDlC W pCllillU
continuance of city operations as we'll
As Improvement works. Certain 1t is
that no change in city operating meth
ods-such as tax collection in advance
of expenditure-can be accomplished
rapidly enough to save the day. The
danger is two-fold: Complete stoppage
of public works construction and crea-
ton of a disastrous tidal wave of un-
employment in the ranks Of public serv-
ice, an eventuality that can make an
utter wreck of the reconstruction for
which everyone is laboring just now."
Funds Sharply Reduced. 4.
Cities in all sections Of the country,
the survey reveals, are struggling to
continue operations with sharply re-
duced funds. The morale of their en-
ployes has been badly shaken; staffS
have been decimated. Salaries are re-
duced or remain unpaid. Improve
ments have been halted. Properties
are being neglected and valuable facil-
tiles left unused.
These evil effects, though due to
the money and banking system, were
accelerated by certain municipal prac-
tees" says Engineering News Record.
1T has been the almost universal Gus
tom of cities to spend money before
they collected payment for their serv-
ices in the shape of taxes. Short-term
bank loans secured by future tax pay
ments made this possible; and banks,
indeed, were by no means hostile to
this procedure, for it meant a sizable
income for them. But today the secu-
rity OF future taxes on which the prac-
tice rested is under cloud, and since
at the same moment the desire for
almost complete liquidity of bank funds
has risen to astonishing heights, usual
short-term loans are difficult to obtain;
even on usurious terms they have been
extended only reluctantly.
TAX payments are in a bad way.
Delinquencies have increased to the
highest point in history. Not only does
the average home owner find tax pay
ments at this time very hard, but
even those owners who are able to pay
look with such ill-favor on taxes that
some of them deliberately withhold
their tax payments Naturally, then,
the banker feels doubtful whether his
loans are likely to be repaid promptly.
Naturally, also, he seeks to impose con-
ditions on the city in order to make
repayment surer; and this means first
of all such reduction of city expenses
as will make the budget balance.
Balancing budgets these days means
not increasing the income, but cutting
down on the expense side. Moves of
this nature are hampered, however, by
the number of irreducible items. A
large part Of the budget Is for debt
charges which cannot be cut without
destroying the city's credit Much of
the remainder is for mandatory items.
such as salaries fixed by legislatures
for police, fire and school department
employees. I With so many inflexible
items, to make the cuts demanded en-
tails measures that are doing much to
cripple the vital service functions of
local government. Further, this de-
velopment comes at time when
greater demands than ever before are
being made for unemployment relief
funds.
mo immediate solution of the dilem-
ma is apparent. Now is the time when
sound local governments are greatly
needed to maintain healthful COM
munity life. They are in danger of
oeing o Wfeckeo FnnoS ee are needed nee but
pressure is relieved it will be found
that the reconstruction of damaged
municipalities will cost many times the
amount required now to keep them
functioning"
Unpaid taxes, sarcastically referred
to as the golden assets of accounts
receivable" are shown in the survey to
be at the bottom of the financial diff
ficulties of large cities as well as small
ones. New York, Chicago and Phila-
delphia are cited as among communi-
ties which have been forced through
financial straits to take on in recent
months the appearance OF insolvency.
Budgets Attacked.
Municipal budgets, the survey report
points out, have been mercilessly at
lacked by bankers, business men and
organized tax payers. and although no
rational study has been made of the
reasons for the present scope Of mu-
nicipal services or their efficiency in
operation, the cities have been forced
to institute drastic reductions in oper-
ating costs. In this process the techni-
cal services have suffered most.
"A municipal corporation" says En-
gineering News-Record, ''is a co-opera-
tive enterprise charged with the duty
manded of 1t. Years ago those de-
mands had largely to do with the
maintenance Of law and order, the pro-
lection of life and property. Today
the education, health and convenience
of the urban population bulk largest
among the demands. Municipal gov
ernment also has become charged with
many chronological services that were
undreamed of when Andrew Jackson
rode his horse over the mountains to
Washington. It is these services that
have made urban civilization possible.
"As custodians Of the public's inter-
est. city officials have the primary obli-
CATION Of defending and upholding the
v,1fritU SarVtrag and nnNneino ct
tempts to restrict them. They know
the essential character of these saru