The Waterbury Democrat., 1941-01-27

is necessarily dependent on the ac- tual program of capital expend1- lures when this is finally deter mined by the proper authorities. A general policy can, however, be pro posed. I would suggest that the following principles be carefully considered in connection with any financing that may become neces- Sary.
 FIRST, because of the size of
 the present total debt feel that
 the full scheduled debt reduction
 be made each year except for
 such provisions as may be made
 for new capital improvements.
 This, in spite of the fact that the
 present schedule of debt reduction
 is relatively high.
 SECONDLY, that capital im-
 prOvementS be financed in such 8
 manner as to avoid any increase
 in the tax rate above what would
 be required if these improvements
 were not made. It must be re-
 membered that an unreaS0nably high tax rate defeats it's own pur-
 pose, since it tends, over period of years, to reduce both the grand list and the income available To- cally for the payment of taxes.
 THIRDLY, there should be a net reduction in the total debt made in every year and the es- tablished schedule of debt reduc- tiOn, even with any contemplated new financing, should provide for a substantial and definitely cal- culated reduction in the total net debt over a period of years.
 FOURTHLY, no new financing should be permitted to increase the required debt service above its present levels.
 FIFTH, the financing program should be so arranged as to per- init an eventual drastic reduce ton in the amount of money re- quired for annual debt service with consequent important ef- feet on the tax rate.
 In order to determine the possi- bility of arranging financing, if such financing should be necessary, which would meet the fundamental requirements of a sound long range financial program, have made in- quiries from the best available sources of information on municipal financial affairs and have assembled data from these sources. I have prepared a schedule which am submitting herewith for the study of the Board of Finance to serve as a sample of co-ordinated financial program. This schedule provides for the issuance of bonds which may be either issued for specific pur- pose or issued as refunding bonds.
 It is possible that it will appear to be desirable to use the method of refunding bonds for the f1nanc- ing of at least a part of the pro- gram because of the greater flexi- bility which this method will pro- vide. However, in this case, it is particularly important that funds made available by the issuance of refunding bonGs be definitely allo- cated for use only for capital im- provementS. It is highly urldesir- able that any such funds be used for current operating expenses. Permanent financial improvement can only be obtained by reducing the present debt structure and the use of refunding bonds to cut down the amount required each year for the payment of debt service only gives temporary relief without ac- complaining any real correction of our debt problem. I, therefore, sug- gest the creation of 8 separate capi- tai budget to which all of the pro- ceedS of refurding bonds shall be assigned if any use is made of this method of financing.
 This sample program will provide for substantial amount of capi- tai improvements. It will not in- crease but will permit a gradual decrease in the annual debt service. It provides for net reduction in the total debt each year and total reduction during the period of 1941 to 1852 of more than seven million dollars.
 It must be understood that this schedule would necessarily be ad- justed to meet the requirements of any actual program of capital irn- provements that may actually be decided upon. When and if capital improvements are to be made and the financial requirements of the are known, I respectfully that consideration be given to the development of an actual program for city financing designed to accomplish an eventual improve ment in the city's financial posi- ton and that consideration be given to the suggestions toward that end which I have attempted to outline here.
 Respectfully submitted,
 THOMAS M. CONLON,,
 Comptroller.