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Show I RETIRING ROAD BONDS j Life of Highway, Not Economic Term S of Bond, Should Determine D Length of Loan a In - K K ru (Prepared by the U. S. Department of Agriculturet tn fl K m52SZBSa5a5asa5HSaSHEEH2SasaSHFaSE5asa5HSHSE5HSHSa5BSHSHSHS2S2S?ta Teams Destroying Lawns to Avoid Mud Roads, Bennington, Va. Tho propor mothod of retiring rural highway bonds Is ono of tho serious problems which must bo worked out by county commissioners and others Intrusted with tho oxpendlturo of road funds. The threo methods usually followed for meeting bonds at maturity aro known as tho sinking fund, annuity, annu-ity, and sorial bond planB. Slnklnn Fund Bonds. Tho majority of highway bonds now outstanding havo been Issued as straight termlnahlo bonds to bo retired by sinking funds. Tho torm of theso bonds varies from 10 to 40 years, with an avorago of noarly 25 years. Tho fund to retlro them is accumulated accumu-lated by annual installments paid by tho taxpayers, and is supposed to draw intorost continuously and to accumulate accumu-late a sufllclont amount to dlschargo tljo debt" at maturity. Tho Interest which tho sinking fund draws Is usually usu-ally from ono to two per cont lesB than t.ho Interest paid for tho loan. Flvo per cent highway bonds aro com jmon with tho sinking fund calculated to draw tbreo and ono-half per cent In tores t. Tho following tablo shows tho. annual an-nual paymonts which, with intorost at threo, thieo and ono-half and four per cent, compounded semi-annually, will amount Co $1,000 at tho ond of a term of years, Annual Payments. Years. """ 3 Pet 3ttPct. 4 Pet. 5 &8S.2G90 18&3672 1SU79S 10 87.1403 S5.120S S3.13GS 15 , 63.6780 61.70SO 49.7928 20 37.1300 35.2499 33.4426 25 Z7.34G9 25 6606 23.S829 30 ,.... 20.9423 19.2739 17.7113 Thoro aro many objections to tho sinking-fund method of retiring high way bonds. It may not bo posslblo to obtain continuously tb roqulred rate of Interest on tho sinking fund to dlschargo dls-chargo tho debt at maturity. Tho ox-lstcnco ox-lstcnco of tho sinking fund is a constant con-stant tomptation to municipal officers to ubo it for purposes ether than tho purposo originally intended. If a county, for example, Issues bonds for a Bocond object, It Is easy to arguo that tho Binkfng fund already accumulated accumu-lated may bo used to purchase tho now securities and tho finances of tho community com-munity aro likely to bocomo much confused. con-fused. This 1b particularly truo ainco tho ofllcors in charge of such operations opera-tions aro froquontly changing. Sinking Sink-ing fund tax levies may bo doforrod through carolos8noss or under pressure of othor noods. Tho sinking fund always al-ways requires caroful attontion, bo causo it dooB not progress automatically automat-ically in most cases. It has somo times been entirely noglocted. Tho total cost to tho community of a bond lasuo retired by a sinking fund will bo conaldorably greater In tho ond than the coat of tho same bond iasuo mado by either tho annuity method or by tho serial method. Dy tho annuity method of Issuing bondB both tho principal and interest aro discharged by constant annual or semiannual paymonts. Tho amount of each payment or installment Is determined de-termined by tho term of tho bond. It usually 1b necessary to subdivide tho bond iasuo into individual bonds of $100. ,?500, or .JljOOO oacli. Tho result-irfg; result-irfg; periodic payment of principal and intorest mujLxorXliKbtly-bocaysQ-of l'tlff',ifetijJpt..-'-pridor tho' annuity plan tho amount of principal retired '. Is Binall at first and constantly Increases In-creases wlillo tho Intorost chargo decreases. de-creases. Tho sum of interest and principal prin-cipal remain constant, and this is an advantago as tho tax is thon uniform. Serial Bonds. Tho serial bond differs somowhat from tho annuity bond, because, In stead of keeping tho annual payment of both principal and interest constant, tho amount of principal that Is retired re-tired each year nlono remains fixed. This typo of bond has becomo moro common for highway purposes in re-cont re-cont years, and during 1912 and 1913 tho number of serial issues oxcecded tho number of Issues for any other single given term. Tho ofllco of public pub-lic roads recolvcd reports from theso two years for $15,300,819 In tho serial highway bonds, which is over 20 per cent of tho total county and district bonds for which tho period or term of isauo was reported. Tho first retirement re-tirement of Borial bonds is sometimes doforrod for a numbor of years. Tho continued success of highway bonds as a means of road improvement will depend largely on whethor or not tho county authorities follow theso principles of sound road financing: (a) A, steady and well administered system of meeting interest and providing provid-ing for tho rotlroment of bonds on maturity, whether by means of a sinking sink-ing fund, by tho annuity mothod, or through serial paymonts. (b) Tho limiting of expenditures for road improvements to sums which are warranted by tho actual saving in cost of hauling that tho road improvement improve-ment will effect. In this item may also bo considored increased tonnage which follows road Improvement. (c) Expending bond moneys only on roads of such a character that a f--i M-" NM 1 B-" CJMtf MM1 m B MM B " - - wmm i ' i mm hm . l?ly ". l"f' $ r-Bh I,,, ' , fc fc. sh.,y, fr ii - Coralllno Rock Road, West Palm Beach, Fla. satisfactory sharo of this monoy may bo regarded as a pormanont Improvement. Improve-ment. This means that tho bond is-8Uo is-8Uo should not be spread so thin over an exorbitant mlleago that tho Improvement Im-provement will bo largely superficial and practically disappear' in a very short tlmo. It means, also, that' a largo percentage percent-age of tho bond isauo shouid go into building a satisfactory and pormanont foundation for tho road which will call thereafter principally for resurfacing repairs, rather than for frequent com ploto reconstruction. (d) Provision for propor maintenance main-tenance and repair of a bond-built road throughout tho life of tho bonds, so that when bonds aro retired tho county coun-ty will Ft 111 havo an actual and valuable valu-able property to show for lta oxpendlturo. oxpendl-turo. (o) Limiting tho torm of bonds so that tho llfo of tho bond will not ex-coed ex-coed tho llfo of tho improvomont. |