| Show I How Interest Burden den I On Municipal 1 Bonds May Be Eliminated By Daniel W. W Hoan Mayor o of Milwaukee Local units of government Inthe in inthe inthe the United States are bonded bonded to the extent of or Computing interest at 4 this indebtedness imposes an annual annual an an- nual interest burden upon local government amounting to the colossal colossal colossal co co- co- co figure of at least After three years of unparalleled unparalleled business depression when all cities are arc faced with shrinking taxable property valuations and consequently diminishing tax r revenues revenues rev rev- venues v- v with the result that many of them are arc unable to meet their interest charges not to mention payment of principal on the bonds outstanding and moreover are forestalled from issuing additional addition addition- al bonds for needed public works which would provide employment and ease the burden of furnishing outdoor relief this Is a 0 matter that challenges the earnest thought of public The city of Milwaukee Is the only city that is laying aside a apart apart apart part of its interest accruing from various sources into an Amortization tion fund which after a period of 20 years will win entirely wipe out its bonded debt The fund now amounts to and is increasing increasing increasing in in- creasing at a higher percentage than the increase in bonded debt When the entire debt is retired Milwaukee will be able to operate on a cash basis and is already financing fi- fi half alf of its permanent Improvements improvements improvements Im im- out of direct taxes Meanwhile there is a way by which municipalities could free themselves of the interest burden on future bond issues On July 9 1932 I addressed the following letter to Senator William E. E Borah on this particular question question question ques ques- tion July 9 1932 Honorable William E. E Borah Senator Washington D D. D C. C Dear Sir You are arc reported to have said in the press of July speaking speak speak- ling ing in behalf of the tho Glass substitute substitute substitute sub- sub to the Goldsborough stabilization stabilization sta sta- program I We have sufficient gold Inthis in inthis inthis this county to justify upon a sound basis currency expansion to the extent of billions if sary Why in the name of the suffering suffering suffering suf suf- fering millions In this country can you not propose an amendment amendment amendment amend amend- ment to these propositions that cities villages and counties un un- der ler proper restrictions shall exercise exercise exercise ex ex- the special privilege which has belonged to banks to de deposit deposit deposit posit their local bond Issues with the Comptroller of Currency and secure this currency for circulation circulation tion This will win save millions of or dollars of interest to 10 these local communities and help preserve them f from om bankruptcy Why inthe in inthe inthe the name of God must the banks have all the concessions I telegraphed Senator La Follette Follette Follette Fol- Fol lette on June 2nd and have received received received re re- re- re no reply from him Are you not big enough to take the side of the people on this question I am enclosing a copy of a resolution which was unanimously unanimously unanimously adopted within the last 30 days by the League of Wisconsin Municipalities at which delegates delegates delegates dele dele- gates were present Since the above letter Jetter was written written writ writ- ten Congress has adjourned and nothing has been done about the matter However the action of the League of Wisconsin Municipalities ties which adopted a resol resolution tion in favor of the exchange of municipal municipal municipal pal bonds for federal currency has aroused wide spread interest and andI I have personally received numerous numerous numerous numer numer- ous letters from municipal officials officials I als inquiring about the details of the plan a The plan Is simply this Inasmuch Inasmuch Inasmuch Inas Inas- much as the U United States government gov gov- eminent has accorded to national banks the special privilege ge of ot depositing depositing depositing de de- de- de positing federal bonds with the U.S. U.S. U.S. U. U S. S Treasurer as collateral for an equivalent amount of National Bank notes the various cities should be accorded the same privilege privilege subject to proper restrictions restrictions restrictions by permitting them to deposit deposit deposit de de- de- de posit their municipal bonds and secure secure secure se se- se- se cure the equivalent amount of currency currency currency cur cur- rency with which to finance public public public pub pub- lic works In this way the cities would escape the payment of Interest interest interest In in- terest on bonds and the government government government govern govern- ment would have ample security for the repayment of the bonds In annual installments There is no security better than the bonds is issued issued issued is- is sued by a solvent municipality which are a first lien on all taxable taxable taxable tax tax- able property within suc such l There is no reason why banks should have a of issuing currency secured by federal fed fed- federal eral bonds The fact is that municipalities municipalities mu mu- are more entitled to this privilege than are the banks Municipalities are arc concerned mere mere- ly with conserving their financial resources s and reducing the burden upon the taxpayers whereas the banks are actuated by private profit and a handsome profit at that because they receive interest from the government on their federal federal federal fed fed- eral bonds and draw interest on the currency which they receive from the government on the strength of the bonds realizing as much as 10 per cent and 11 per percent percent percent cent if not more Those who arc are so hysterical about tax reduction entirely overlook overlook overlook over over- I look this huge item in municipal expenditures In Milwaukee it would mean a saving of about per 1000 of the assessed valuation if the city which has a first-class first credit rating were put on a II par with national banks and allowed to exchange its bonds for federal The government though its Reconstruction Fi- Fi nace naco Corporation on is loaning billions billions billions bil bil- bil- bil lions to banks railroads insurance companies and other private in in- situations and is beginning to extend extend extend ex ex- tend limited loans Joana to states and cities clUes for relief purposes But the most practical form of ot relief to municipalities would be the plan outlined above which would save hundreds of ot millions of dollars annually annually annually an an- in interest on municipal bonds and would cost the government government government govern govern- ment nothing I repeat why in the name of God must the banks have hove all aU the concessions |
