Evening star., 1932-09-05
'C|TY BORROWINGS
HELD TO MINIMUM
CurtaiIment of Expenditures
Continues as Tax COL
lectionS Show Drop.
Special Dispatch to The Star.

NEW YORK, September 5.-The two
factors of low credit and diScriminat-
ing municipal bond market and the uni
versal policy in State and city govern
merit of curtailing expenditures have
had pronounced effect on municipal
financing.
Figures available for the eight months
to August 81 indicate that the total of
new capital raised in that period of a
municipal character was $3.50 200, 900,
compared with over $1,000 900 in
the same period of 1881.
The Reconstruction Finance Corpora
ton has, through its different divisions
and the agencies allied with it, attacked
the problems of the banks, the railroads,
the holders Of home mortgages and is
assisting either directly or indirectly
private corporations and individuals. 1t
has not so far, however, taken up, in a
way that gives much relief to the situa-
tion, the position of the small munich
pality that has borrowed up to its limit
from its local bank and cannot refund
its temporary notes by the issuance of
long-term bonds. The heavy falling
off of tax receipts is most frequently the
handicap In rearranging the debt status
OF such city. town or borough. Notes
OF municipalities have become as much
OF frozen asset" in bank portfolios
throughout the country as real estate
mortgages.
Thawing- Out Process.
The thawing-out process in such loans
will be a slow one. There are a great
many municipal bonds of small Eastern
cities carrying coupon rates of to 51b
and per cent that have recently been
selling at discounts Of 10 to IS per cent
from par. Obviously these munich
palities could not successfully promote
a public sale of their obligations. All
that the banks can do under the cir
cumstances is to carry the temporary
notes and await better times and a
stronger municipal bond market. When
this comes there will be large amount
OF refunding of municipal paper. Ow-
ing to the economy policy that will then
still be in effect, the amount of new
capital issues of this class is not likely
to be heavy.
Recently New York bank made a
survey throughout the United States in
an attempt to discover how far economy
was actually being practiced in various
States and cities. The results showed
that IN 81 States, II counties and 88
cities a great majority indicated they
had balanced their budgets and were
operating at lower level of expenditure
than year ago. The common practice
was to reduce salaries and wages of
municipal employees an average Of 10
per cent, although in some cities it was
twice this amount. Where mandatory
laws prohibited compulsory reductions,
voluntary cuts were taken by police
men, f1remen, school teachers and
others paid out of the public purse
In most Of the communities it was
found that projects for public works OF
improvement, where not imperatively
| needed, had been abandoned. Ordi-
narily these would have been financed
either temporarily by the local banks
or permanently in a long term bend
issue. In either case the loan would
have added to the debt service of the
city or town and thereby increased the
tax rate. There is everywhere an
urgent demand for lower taxes and for
reduced assessments in line with the
depreciation in real estate values.
Present Improvements.
1t Is pointed out that there may be
danger in pairing down expenditures tee
closely and that public improvements
along sanitary or educational lines may
be neglected through stressing economy
too strongly. BY and large, however
this danger is not regarded as serious
at the present time. In a majority Ct
communities the Improvements made
at public expense exceed requirements
and have been extravagantly conceived
and promoted. The present embargo
on small town bonds is not without its
compensation where it does not involve
the suspension Of facilities. such as the
schools. to which the public is entitled
even in the most extreme credit emer-
| gency.
(Copyright, 1922