Henderson daily dispatch. (Henderson, N.C.) 1914-1995, 1943-05-08
State Control
Proves Value
On Local Debt
In thr Sir Waiter Hotel.
Daily Dispatch Bureau,
BY LYNN INSECT

Raleigh. May &.-Iialf Il dozc,,
small towns ~ North Carolina are
h"p"icssly m dr;uuI, on bond pay
mcn'r and IL Ill m'cnIS and pun.
poses utterly bankrupt.
In"t may sound strange when the
State i;>ril and many counties ana
MUNICIPALITIES are more concerned
about investing SURPRISES than about
paying OF! debts. Il affords an uj-
ruriuui'y To- pay tribute To the e.
iIc!cot operation %! the Local Gov
tnmcnt Commission. the agency
mat mas been responsible for -
financing the debt structure of gov
c!uluyulul Subdivisions and for su-
pcgN!Sng bond issue. since 1881.
Charles NJ. johnson. State treas.
urcr and cX-uiiiciu chairman of the
commission. would like To report =
NcElrc' record IN adjustment of
" md" SEQ freely lsSucd in the late
iwcU'IcS and necessarily dciau!rcd
during II. depression era which tuI-
lowed. The record ISN'T perfect. but
Il i very good.
The State itself has never default
cd a single penny on payment OF
principal OF interest. Currently not
one %! '"c loo counties j. in default.
Not more than S.x. perhaps less. ui
Inc municipalities have been unable
! tu work out their problems 10 ml,-
tEHl satisfaction OF bundholdcrS, and
these towns are all small 900 or
!ca~ population.
When the local government COM
mission WAS set up III 1881 and be-
gun serious study %. the problem.
nc dolUuitIng uu.ts Tell into four
general classes.
FIRST were those - temporary dit
t'cu!'y. Short tsr loans IN antiCipd-
ton @! tax collections could not be
paid when due and could not he re-
I u'wcd on tn, SAME basis. II was Il
Iuplc matter for tho State agency
} - ASST in adjusting these problems.
/ md all parties were satisfied. Later
| payment WAS made IN full.
| The second Group included cuun-
! tics and towns whose credit strlIC-
| tuvv Was DaSICally sound. but be-
cause 10. improper arrangement of
maturity dates could not meet bond
| Payments as they Tell due. This sit
UaiinU WIS mC; 10y issuing new bonds
with GIilrlCut dU, dates and nobody
| lost anything.
The ihrd aud largest class includ-
cd governmental units which haG
Just "uvcrbrught" such things as
water systems and street paving and
which could not hope to pay out in
| full. Adjustment OF these problem.
was not much more difficult. The
solution III most instances was I,
kip the interest and amorti2c Il sub
StdntIdl part of the principal over q
much longer term of years. Thu
EOndhuldCrs took a terrific licking il
tina; arrangement. but all investor!
were taking a licking then and The
solution worked out by the State
saved them much more than cOulc
have gotten otherwise.
Tho fourth group. very small il
number and almost insignificant il
amount dcfaultcd when compared &
the tota. outstanding debt of al
North Carolina subdivisions. includ
cd those towns that were so hope.
iCssly in debt no adjustment could be-
made. II is almost unanimously
| agreed nOw that they ncycr Ough
to- have issued bonds in the frs
place. sympathy for the bOndhOldcr
X lCsSCnCd by lack of respect 70
their judgment IN buying them.
Attempt 60 deal with these com
munitICS was not left To- the last be
cause II was more difficult. but be
cause there was just no other cours,
| to take. The towns couldn't pay VIVA
| they owed. the bondholdcrs wOuldn'
| accept what they could get. Pendin
| now is a suit IN Federal court agains
l the town of Walnut Cove. Anon
| thc towns similarly situated arc Pol
| j. ok svillc. Nass and Wagram. though
| silt has not been instituted by an,
bundhOldCr against them.
The Local Government Commits
sion is not fighting the Walnut Gov
action. In fact. the commission rain
or welcomed it as precipitating
showdown. If the South Carolina
who brought the action gets judg
| ment. there will almost certainly b
| filed suits by other bondholder
; TnSlap,nnt Tnp tbn,,, 1.