Aaa and Baa

Six young men sat down to telephones one morning last week in the office of County Treasurer Horace G. Lindheimer in Chicago, began to dial. Their assignment was to buzz every one of 4,000 delinquent personal property taxpayers, who owed Cook County $1,000 or more. Results at day's end: 171 responses, 129 promises, seven complaints that the taxes were too high, one part payment which amounted to less than the day's telephone bill ($25). Meantime, in another part of Treasurer Lindheimer's office, another crew of assistants was busy --without any lack of success--in mailing out the first checks of a $4,000,000 refund to 285,000 real-estate taxpayers, ordered by the Illinois Supreme Court, which held part of Chicago's 1934 tax assessment illegal.

Chicago's bonds used to be rated Aaa (highest grade), are now Baa (good). More typical of the effect of Depression on U. S. municipal finance, Richmond, Va. has slipped from Aaa to Aa, Milwaukee from Aaa to A, Detroit has lately climbed to Baa but it used to rate Aaa. Best municipal bonds are those in Massachusetts, where the State has power to reorganize the finances of weak municipalities and no city rates less than A. Among the worst are those of Florida, where Fort Myers and St. Augustine both rate Caa (poor) and the town of Frostproof rates Ca (one notch above worthless). Last week 500 delegates to the annual Conference of the Municipal Finance Officers' Association sat down in St. Paul's Hotel Lowry to investigate the whys & wherefores of such sorry ratings, learn how to steer a straighter course through Depression II.

Keynoter was the association's retiring president, Budget Director Arthur C. Meyers of St. Louis (Aa), who said: "The main factor that makes the problem of Relief, unemployment, taxation and debt so difficult is the lack of cooperation between the different levels of government." On behalf of the lowest governmental level, Budgeteer Meyers complained that city Relief bills are uncertain because WPA does not distinguish consistently between employables and unemployables. For Depression II he suggested a long-range program "by all levels of government, business, labor and industry." Main proposal: higher share to cities on State taxes on liquor, gasoline, automobiles, income, sales, inheritances. (The New Deal's long-range program for U. S. public finance is supposed to favor such tax-sharing with the Federal Government in return for Federal taxation of income from future State and local securities.)

Biggest bug in the bonnet of any municipal financier is how much debt his city ought to carry. One school of thought holds that cities should borrow as little as possible, cites Kalamazoo. Mich., which burned its last bond in November 1937. having embarked on a pay-as-you-go policy. The opposite school holds that cities are foolish to pass up the opportunity to make permanent improvements when money is cheap, and especially when Harold Ickes' PWA will give 'outright 45% of the money. Leading middle-of-the-roader is New York City's little Fiorello H. LaGuardia. who is financing Relief expenditures through an emergency sales tax, lately turned down a proffered PWA $2,700,000. explaining that he found it cheaper to finance necessary improvements privately. Last week Dun & Bradstreet's Frederick Bird gave municipal financiers a warning, a yardstick:

"No longer can the average city look to tomorrow's influx of population to lighten its responsibility for financial obligations incurred today. Nor is there much immediate prospect of skyrocketing assessed valuations to make tax levies appear smaller and debt burdens less onerous. . . . Very few municipalities with overall, net, tax-supported debts in excess of 15% of full taxable value escaped more or less serious default in the depression period. Very few whose overall debts fell below 10% became conspicuously involved in default.''

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