community in which they are issued. The Legislatures in granting authority often impose, as a condition, a petition of the taxpayers or a vote of the electors previous to a sale of bonds, and they are almost invariably covered by a provision for a sinking fund, which means that they are to lay aside each year a certain amount to be used in taking up the bonds at maturity.

At the head of all bonds we would, of course, place the United States Government bonds. Second, the State bonds, and third, the bonds issued by municipalities. As the first two either bear a very low rate of interest, or are sold at a high premium, the latter is becoming more and more sought after by all classes of investors. Many are also used in their own sinking fund.

They are held largely by banks and banking institutions, trust and insurance companies, as well as by individuals. So highly are these securities considered that in a number of the States the various moneyed institutions have been authorized by statute to invest in such bonds, although issued by municipal corporations situated in other States. Such statutes, however, usually require that the municipality whose bonds may be thus held be not indebted above a certain percentage.

The rapid settlement of the vast territory of these United States and the marvelous growth in number of the various municipalities through it, as well as the phenomenal increase in population of the latter during the last fifty years, added to the increased municipal conveniences and necessities required by modern society, have compelled municipal corporations to resort to some means of obtaining money in order to make immediate local improvements for the health, comfort, convenience and general welfare of their inhabitants, and not to wait, before obtaining these, to raise the money therefor by the slow process of taxation. The means pursued to obtain this end by municipal corporations is the issuance of obligations, which are sold by it and the proceeds applied to obtain the needed municipal object. The obligations so issued are to be afterward paid by taxation.

This system is now so extensively adopted for the purpose of obtaining money for immediate use that it is estimated that at least $150,000,000 of municipal bonds are annually issued in the United States and placed upon the money market. These securities find a ready sale, and are regarded, for good reasons, as one of the safest ways of investing money.

A municipal bond, if legally issued, is one of the safest of investments, because it is the obligation of an American community, is payable from taxes, and the financial standing of

the municipality issuing the bond enters largely into the value of the bond. The high sense of honor in our American municipalities is such that notwithstanding the immense volume of municipal bonds issued in this country annually, the number of bonds that are repudiated, or even attempted to be repudiated, is so small that its percentage is scarcely ascertainable. A security whose payment experience has shown to be so certain that the risks are practically infinitesimal, can but be a good investment. Of course, the value of the bonds depends largely upon the fact of their being legally issued. The legality and regularity of the issuance of the bonds, the authority of the municipality to borrow money for the purposes for which the bonds are issued, and its legal authority to negotiate the bonds in question, is, and should be, one of the questions carefully investigated before investing in them. These questions of regularity and legality are questions for legal minds.

In selecting these bonds for an investment one must take into consideration the following: population, valuation, amount and nature of the various items of public debt, the value of the city's public property, the revenues of its water works and other proprietary institutions, the character of their industries, the amount of business done by their banks, whether they depend upon agriculture, manufacturing or mining for their prosperity, what the transportation facilities are, of what class of people the population is composed, whether the purpose of the issue is some needed public improvement or a measure of questionable soundness adopted by a party of enthusiasts to advance personal interests.

There is also much the same distinction made in rating of the credit of municipalities as of individuals. To illustrate: New York City, St. Louis, Cincinnati, Philadelphia, and Boston sell their credit on about a 3.35 per cent. basis; Detroit, Indianapolis, Milwaukee, Minneapolis, and St. Paul on about a 3 per cent. basis, while Chicago sells on a 3 per cent. basis.*

The per capita of debt in each of these cities is: New York, $102.50; St. Louis, $40; Boston, $105; Detroit, $20; Indianapolis, $15; Milwaukee, $24; Minneapolis, $30; St. Paul, $54, and Chicago, $10.

There is, however, quite a marked difference between the assessed valuation of the property in these cities and of the assets and property owned by each. New York has a sinking fund investment of $127,000,000; Chicago, $2,433,000. New York assesses real property at about its true value, and its tax rate is 14.3 per cent. Chicago assesses at about 75 per cent. of its

*Not current market quotations.

real value, and has a tax rate of 15.82 per cent. All things being equal, Chicago, with the smallest per capita debt, should have the highest credit. Unfortunately, few other things are equal, so that the small per capita of debt is offset by a bad system of financing, which, it is claimed, is gradually growing better.

The rate of interest received by the investor on municipal bonds varies from about 1 per cent. on United States Governments to, say, 4 per cent. on the bonds of the smaller municipalities.

However, the bonds issued by the smaller but substantial municipalities for school purposes and other needed improvements are, perhaps, the most satisfactory investments to the average investor; as such bonds are obtainable at a rate of from 4 to 4 per cent. interest, which is quite a difference between the net interest to the investor produced by the United States Government bonds.

It is getting to be the general custom in some of the States to require that municipal bonds be registered by a responsible trust company, in order to avoid the possibility of an over or duplicate issue.

If the indebtedness of a municipality is but moderate, and if, in the opinion of a competent and experienced attorney, such bonds are legally authorized, issued, and registered they are properly regarded as one of the safest modes of investing

money.'

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How Municipal Bond Values are Judged. It should be remembered that the interest rate varies in the different States. For instance, California can issue a block of securities, speaking of the towns, etc., bearing interest as high as 7 per cent. and 8 per cent., while the State of Idaho is also permitted to float bonds at this figure. Municipalities throughout the States of New York, New Jersey, Pennsylvania, Massachusetts, Rhode Island, Connecticut, etc., generally sell their securities on a 31 per cent. basis (1902-1903).

In figuring the value of a bond, maturing in twenty-five years, bearing 4 per cent. interest, in an amount of $30,000,let us say of Harksville, Ohio,-the first principal matter to obtain is a financial statement of the city. If the assessed valuation is large enough, and the taxes are of such dimensions as to warrant the payment of both principal and interest, and if no litigation is pending or threatened, the securities are considered a good investment; and in figuring an income basis of 3.60 per cent. they can be easily disposed of.

The next important point to consider is the outstanding war

rant and bonded indebtedness of the municipality. It must be remembered that every obligation which a city issues bears interest. The warrants fall due in two, three, four, or five or more years (these being issued and signed by the treasurer for work done by contractors or the payment of salaries), while the bonds can be fixed to mature in from five to fifty years. An excellent example of a bond value can be illustrated in the recent sale of a $1,000,000 4 per cent. ten and one-half year average building bonds, issued by the county of Cuyahoga, Ohio, and sold at a profit of $52,000, equaling 105.20, or an income basis of about 3.45 per cent. The standing of the county being excellent, all payments being met at the time of maturity, the bonds being for a goodly amount, and no litigation being threatened, all these factors aided in perfecting so pleasing a sale, both from the county and a banker's standpoint. In speaking of warrant indebtedness, the City of Minneapolis calls for sealed bids for the sale of certificates bearing date of some years back. These were evidently paid out to contractors, etc., and taken in by the sinking fund, which in turn offers the paper as an investment. This sale, however, will not bear upon the credit of the city, for payment has already been assured; and the warrants are offered to bankers, so that the interest may prove of benefit to the State, instead of lying idly in a safe until maturity.

Municipal Bonds, Legality of.-A New York trust company is authority for the following statements: "Nearly 50 per cent. of the public bond issues offered for sale are not properly authorized, requiring subsequent proceedings to satisfactorily establish their validity.

'Dealers and investors in securities of this class require that the legality of their purchases shall be established to the satisfaction of their attorney. This necessary precaution, however, usually occasions delay in the delivery of the bonds, and, not infrequently, results in the rejection of the bonds altogether, necessitating a re-advertisement and re-sale. In case of refunding bonds issued for the purpose of replacing bonds about to mature, such delays frequently result in serious embarrassment to the municipality.

"It is well known that when municipal bonds have been once rejected as illegal, they rarely bring as favorable a price at the second offering.

"The liability to delay causes the prospective purchaser to make allowance in his bid for such changes as may occur in the money market, as well as for the cost of legal services.

"It is therefore recommended that the municipality retain,

in advance of the sale, the services of an attorney making a specialty of municipal law, whose opinion will be satisfactory to dealers and investors generally, and to state in the advertisement for sale that the legality of the bonds has been approved by such atttorney, and that his opinion will be furnished to the purchaser; also that the bonds will be delivered at a stated place within a few days after the sale.

"The purchaser, being assured of the legality of the bonds without cost to him and their prompt delivery, will, in ordinary circumstances, add to his bid more than sufficient to offset the additional cost to the municipality."

Municipal Debt.-Reference has been made, says Bradstreet's, to the advance summary of the public debt of the United States for the year ending June 30, 1903, issued by the Census Office. The striking feature of the showing is the bulk and the marked growth in recent years of the debt of the municipalities and minor civil divisions of the country. It may be recalled that the total debt of the country, at the close of the fiscal year 1902, amounted to $2,789,207,463, which represented an increase of over $760,000,000 as compared with the year 1890, but a decrease of over $253,000,000 as compared with the year 1880, and of over $410,000,000 as compared with the year 1870, the census year next succeeding the close of the Civil War. The burden per capita, which stood at $82.99 in the last-mentioned year, fell to $60.66 in 1880, and to $32.39 in 1890, and rose from the latter point to $35.49 in the fiscal year 1902.

The decrease in the total volume of the debt during the period covered was mainly owing to the reduction in the national debt, which declined from $2,331,169,956 in 1870 to $890,784,370 in 1890, rising, however, to $925,011,637 in 1902. The per capita burden of this part of the debt fell from $60.46 in 1870 to $38.27 in 1880, to $14.22 in 1890, and to $11.77 in 1902, in spite of the increase in the volume of the debt itself between the last two dates. The debt of the States and Territories, which stood at $352,866,698 in 1870, declined to $274,745,772 in 1880 and to $211,924,765 in 1890. It increased to $234,314,190 in 1902; but, notwithstanding this increment in the amount, the decrease in the burden per capita was continuous. The rate per head of population fell from $9.15 in 1870 to $5.48 in 1880, to $3.38 in 1890, and to $2.98 in 1902. In the lastmentioned period the greater number of States decreased their indebtedness; but a few-notably Massachusetts-increased their indebtedness to a considerable extent, so that for the whole body of States and Territories a net increase is shown. It is noteworthy, however, that, as remarked by the