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Show - SHKT, Slt Lake AMEHCSHl WESTERN . U . City, A Op . ; VOLUME 1 MONDAY. APRIL 29. 1974 SALT LAKE CITY, UTAH NUMBER 4 Utah Foundation Reports: .v ,u ""7 AS DmSrlOOin) KaoeS EcOnOmV u-- ww The current turmoil in financial markets suggests that an era of inflation is bringing an era of interest rates in its wake. During the incipient downturn of late 1973 and early 1974, short-terrates fell at least Vt percentage points below last summer's highs, and long-terrates fell V4 percentage point or more below their earlier peaks. But during the recent turnaround, short-terrates have made up most of their earlier declines the prime business-loarate in some cases has exceeded while its earlier peak most long-terrates have risen to new record levels. These developments, temporary as they may be, have caught many market participants flatfooted, and have led to serious problems for bond dealers who found themselves overloaded with inventories of suddenly cheapen-ed securities. In the area of short-terbusiness financing, this situation has forced a reassessment of the generally accepted view that the prime rate would continue downward to the neighborhood of 8 percent by midyear. Part of the explanation for the sudden shift can be found in the growing belief that the nation will soon snap . out of its slump but not out of its inflation fever. (Preliminary estimates indicate that anreal GNP declined at a nual rate and that the general price level rose at a rate during that period.) Part of the explanation can be found also in the market's reaction to the maintenance of a firm policy stance, inferred from Chairman Arthur Burns' recent statement that the Federal Reserve is "determined to follow a course of monetary policy that will permit only moderate growth of money and credit." But much of the shift can be attributed simply to the soaring costs of doing business in an inflation-wracke- d atmosphere. A look at the scene will indicate the magnitude of the problem. two-dig- it two-dig- it m m 1973 nt m ! m . first-quart- first-quart- er er nt anti-inflatio- n . bank-lendin- g Record of 1973-7- 4 Corporations this year have sub stantially increased their long-terfinancing, but even more significantly, they have matched the unbelievably level of short-terhigh early-197- 3 banks and in the the at financing commercial-pape- r market. Still, the with early 1973 is not exact; parallel credit the structure of short-terflows has differed between the two periods, largely because of the absence of the constraint on the prime rate formerly exercised by the Committee on Interest and Dividends. Early last year, with the prime rate held back from advancing in tandem with the commercial-pape- r rate, business borturned rowers increasingly to bank lines as a cheaper source of credit, and the outstanding volume of more costly commercial paper declined sharply. m m m n One common thread runs through the pattern of early 1973 and early 1974. Then as now, the rate upsurge was 'triggered primarily by the growing realization in the market that inflation pressures were even stronger than anticipated. And then as now, aggregate demand was stronger than expected, and many observers concluded that the monetary authorities would g soon restrain the money Some of these factors are again supply. at work, especially in view of increased price pressures and the likelihood that these pressures will continue as the mechanism is dismantled. See details page 7 n Incumbent Republican fast-growin- Legislator Is Up For Re-electi- on price-contr- Soaring Inventory Costs i economy, Despite a inventory levels continue to rise as businessmen react to materials shortages and rapidly rising costs. Thus, business-loademand has soared, reflecting business borrowing to finance speculative holdings of inventories as a hedge against inflationary price increases. (For some firms, however, the speedy turnover of inventories has eased their liquidity position and reduced the need for substantial inventory financing.) Also, corporate longer-terincluding bank borrowing term loans has risen to record levels as a means of financing a spending boom. In addition, the expected continuation of strong price pressures has led many borrowers to ignore current high levels of interest rates in their financing plans. However, the banks' task' can be complicated by the recent turmoil in the bond market. That, market has been suffering not only from a surfeit of new corporate issues, but also to some extent from the banks' action in lending funds to business borrowers rather than investing them in Treasury and agency securities. Sharp rate increases and investor apathy have made it impossible for underwriters to sell new corporate issues without sharp price cuts, thus pushing up the yields required to move future offerings. still-sluggi- y J, sh i , n ' Utah Power Light Co. directors Wednesday accepted the low bid for the sale of 1,400,000 shares of preferred stock. & The preferred stock issue brought the utility approximately S35.2 million. Proceeds from the sale will be used to retire short-terborrowings incurred for the utility's construction program. The successful bidder for the 1,400,000 shares of S25 par value cumulative preferred stock, Series F, was a group led by The First Boston Corp. The bid was $25.1299 per share to the company with a dividend rate of $2.34 per annum. It will be offered to the public at $25.4340, which price will yield 9.2003 percent. Last security offering of Utah Power & Light Co. was in September 1973 when it sold 800.000 shares of common stock. The last preferred stock offering by the companv occurred in March 1971. Foundation, the private research organization in an analysis of the 1974-7school finance program enacted by the 1974 Budget Session of the Utah Legislature. Total operating funds available to local school districts were raised from to $242 million $217 million in 1973-7in 1974-7by the 1974 legislative action. This resulted in an increase of $25 million, or 11.5, in available funds for school operations. The Foundation study notes that the $25 million increase in school funds provided this year came on top of a $23 million boost in operating funds authorized by the 1973 Legislative Session. Since there has been little or no change in school enrollments during this period, nearly all of the boost in school funds can be used for higher salaries, expanded school programs, and increased costs. Total school operating funds per school child will average about $844 in 1974-7compared with $756 in 1973-7Among the forty Utah school districts, the total operating funds available per pupil will range from $769 in Jordan District to $1,810 in Daggett District. A recent special election authorization, however, will raise the amount listed for the Jordan District somewhat. In addition to raising the overall level of the school program, the 1974 Budget Session also provided increased funds for handicapped children and vocational education programs. Total funds for handicapped children will be raised by 16 and vocational programs will receive a 25 increase under the 1974 legislation. Foundation analysts point out that several of the categorical programs will be packaged together under the new school finance law, and districts may use their share of the funds appropriated for this package on any one or all of the programs included. 5 Although the 1974 Budget Session provided a school finance program in excess of that recommended by the Governor, it did not specifically earmark any of the funds for free textbooks and supplies in the high schools. The Foundation report notes', however, that the new law does provide that local districts "may furnish free of charge to students in grades 9 through 12 textbooks used by those students." 4 5 In This Issue: Peter K. Ellison Incumbent Utah Republican Legislator Peter K. Ellison, 31, is a candidate for to a second term in the Utah House of Representatives from District 23, which includes the area east of 9th East between 70th and 90th South. The youngest member of the 40th Legislature to serve as a committee chairman, heading up the Labor Committee, Mr. Ellison is a lawyer and is vice president and trust officer of Zions First National Bank. In his first term in the House of Representatives he also served on the Judiciary Committee and on the Business and Commerce Committee. "One of my main concerns is cutting taxes," said Mr. Ellison, who helped boost a successful fight in the 40th Legislature to cut the sales tax, the income tax, the property tax and the inheritance tax. "When there is a surplus, as there has been, it is our duty to cut taxes as much as we can," said Mr. Ellison. "Another concern I've had is finding out what the people I represent think about the issues before the Legislature. "I plan to continue a practice I've set up of holding town meetings and of distributing thousands of questionnaires to my constituents at my what find to out expense they want," said Mr. Ellison. A graduate of the University of Utah College of Law, Mr. Ellison is a member of the Uljah Bar Association, the Salt Lake County Bar, and the American Bar Association. In 1973 he was chairman of the Utah n Cancer Society's fund Bike-A-Tho- drive. 2 Legals Probate New Partnerships Suits 3 Divorces 5 5 3 3 Births 6 Building Permits 6 Third District Court 7 Decisions . Court Supreme 8 New Corporations 10 Small Claims Court 10 Trust Deeds 10 Business Licenses .... 5, plant-equipme- UtahP&LSells Preferred Stock Two of the largest school operating fund increases in Utah's history have come at a time when school enrollments in the state have leveled off. This fact was pointed out by Utah 4. m m Supreme Court Decisions m Parallel With 1973 m n Some borrowers have reacted by postponing planned security offerings. If this situation continues, corporations may be unable to pay down short-terbank debt from the proceeds of new bond issues, and instead, may seek further bank loans as a substitute for the funds that otherwise would have been raised by bond financing. Also, any delay in obtaining funds from the capital market would leave corporations short of funds to invest in CD's, just at a time when banks are likely to be turning to the CD market for funds to meet increased bank-loademand; William Burke Pressures on the banks continued in until the CID developed its two-tie- r system, permitting rates on large business loans to move in line with market rates. But as long as such pressures continued, banks were forced to bid for needed loan funds at high marginal rates, especially in the market for CD's. ' large-denominatio- Sjj, Fund Largest Increases Have Come With Level Enrollments Bankruptcies Mortgages 10 10 Quit Claim Deeds Water Service 11 11 12 12 12 Liens Business Telephones ... Bountiful Power Uniform Commercial 12 Code Filings Atty. General Opinions . 14 15 Bankruptcy Sale , West Jordan Building Permits Tax Liens Warranty Deeds 16 17 17 Salt Palace Calendar of Events May 1974 DATE EVENT FACILITY Utah Funeral Directors Embalmers Assn. Utah Power & Light Co. Veterans Party Salt Lake Symphonic Choir Furniture Market for Charity League of Utah Consumers Utah State Dental Association Skaggs Companies, Inc. Meetings S.L. Co. Employees Banquet Mr. Western America Contest Associated Food Stores Meeting Intermountain Kennel Club Utah Power & Light Stockholders Meeting Steve Miller Band Admission: Peter Pan Admission: & 2 - 3 3-- 4 3-- 5 4 13-1- 7 15 18 19 19 20 27 $4.00-$5.00-$6.0- 2- 9June 4 Assembly Hall Little Theatre LT-M- R Dates of listed games are subject to change. WHL Playoff Ticket Prices: ABA Playoff Ticket Prices: S3.50-S4.50-S5.5- 0 ticket information, call Salt Palace box office: All events subject to change without notice. 363-768- 1. 128 Exhibit Hall Assembly Hall Arena 0 ABA and WHL playoff games to be announced. For Assembly Hall, MR 127 Assembly Hall Little Theatre Salt Palace Suites Assembly Hall Arena . |