Director of the Census, a large portion of the new debt in Massachusetts might, with almost equal propriety, be classed with municipal indebtedness, since it represents obligations incurred by the State for the abolition of grade crossings and the building of armories, both of which are for the benefit of local communities, and for such local improvements as those of the metropolitan water, sewer, and park districts around the city of Boston. County indebtedness, taken as a whole, showed a decrease from 1870 to 1880, but a gradual increase since the last-mentioned year. The_aggregate debt of counties stood at $187,565,540 in 1870. It fell to $124,105,027 in 1880, but increased to $145,048,045 in 1890, and to $196,414,052 in 1902. part of the total debt declined from $4.87 per capita in 1870 to $2.47 in 1880, and $2.32 in 1890, but increased to $2.50 in 1902. It will be seen that, taken together, the debts of the States and Territories and of the counties form but a small portion of the total public debt. Whether we regard the absolute amount or the amount per capita, they amounted to less than one-sixth of the whole in 1902.

This

It is, as will be seen, when we take up the figures for the debt of cities, villages, townships, precincts, that we lay our finger upon the source of the greatest increase. In 1870 this portion of the debt, which at that time included the indebtedness of school districts, was put at $328,244,520. By 1880 the debt of these local divisions, exclusive of that of school districts, had increased to $706,847,166, and by 1890 to $744,244,110, while in 1902 it stood at $1,387,279,569, or more than four times what it was in 1870, and not far from twice what it was in 1880. Meanwhile the debt of school districts increased from $17,580,682 in 1880 to $46,188,015 in 1902. The per capita burden of the local debt was estimated at $8.51 in 1870. By 1880 the same class of debt, exclusive of that of school districts, showed a per capita burden of $14.09. In 1890 it fell to $11.89, but in 1892 it increased to $17.66, or nearly half the total per capita burden of debt of all kinds. The school district debt, it may be remarked, increased from $0.35 per capita in 1880 to $0.58 in 1890, and for 1902 no change is recorded from the latter figure.

In one of the tables compiled by the Census Bureau there are grouped together the total and per capita indebtedness, less sinking fund assets of counties and the minor civil divisions, including school districts, for the years 1880, 1890, and 1902. The figures given in this table are of interest as indicating the localities in which the burden of local debt has been greatest of late years. An examination of this table discloses the fact that in 1902 Rhode Island led all the other States as regards

the per capita amount of the local debt, with the sum of $56.84. This amount represented an increase of $20.32 in the dozen years that elapsed since 1890. Next in order came New York, with a per capita debt of $56.56, an increase of $23.31 since 1890. The State of Washington was third in the list, as regards per capita indebtedness, with $51.40 in 1902, as compared with only $8.14 in 1890. The District of Columbia was fourth in the list, with a per capita debt of $50.42, but this represented a decrease of $35.44 as compared with 1890. Massachusetts was fifth in order, with a per capita debt of $49.85, an increase of $16.67 over 1890. It should be remembered, however, that the indebtedness of the State itself, which, as has been said, was largely incurred for local purposes, increased from $9,812,198 in 1890 to $65,964,005 in 1902, and that the per capita burden of the State debt increased from $4.38 in the former to $22.87 in the latter year. New Jersey was sixth in order, with $40.85 per capita in 1902, an increase of $7.42, as compared with 1890. Indian Territory had the smallest per capita local debt in 1902 namely, $1.53; Arkansas being second, with $2.25; Mississippi coming third, with $3.45; and North Carolina and West Virginia following with $4.41 and $4.78, respectively. In all these cases increases are shown as compared with 1890. Speaking generally, the burden of local debt is heaviest in the North Atlantic States, and least in what are classified as the Southern South Atlantic group.

Municipal Extravagance.—Full returns from the first fifty cities of the country place the total indebtedness above the billion mark. The tendency is to increase rather than diminish the totals. In New York, for example, the city is already committed to and has under consideration vast public improvements, such as the extension of its system of water supply. its subway railroads, its park system, its school facilities, the enlargement of its police and fire departments, the building of bridges, schools, libraries, museums, and hospitals, and the opening, grading, and paving of streets. Other cities, too, have their schemes for public improvements, though on a less extensive scale than in this wealthy and ambitious metropolis.

It is interesting to note that municipal extravagance is not confined to this country. In a noteworthy address before the Institute of Bankers in London, Mr. Edgar Speyer, of the firm of Speyer Bros., of London, and Speyer & Co., of New York, sounded an emphatic and well-timed warning against extravagance, not only municipal, but also national and individual; and though this warning was directed more particularly to the British nation, it would apply with hardly less force to this

country. Municipal expenditure in Great Britain during the past ten years (to 1905), Mr. Speyer declared, had reached a total of more than $6,300,000,000, an excess of over $2,600,000,ooo as compared with that of the previous ten years. To this general extravagance on the part of the nation, its cities and its citizens, he attributed the increase of British imports and the lack of increase of British exports.

It would be difficult in the matter of general extravagance to draw a parallel between the United States and Great Britain, for the latter country is still suffering from the effects of the Boer War, while the United States fortunately has been spared from a conflict of so costly a character; but in municipal extravagance there is evidently much similarity between Americans and Englishmen.

Municipal Indebtedness.-The report of Director North, of the Census Bureau, in regard to the finances of cities of 8,000 inhabitants and over, says:

"The importance of municipal statistics may be noted from the following facts: The indebtedness, less sinking fund assets, of the 148 cities containing over 30,000 inhabitants in 1903 was $1,106,821,651, and of the 151 cities in 1904 was $1,228,216,933. The indebtedness of the cities of the latter group increased during the year 1904 by $110,083,797. The indebtedness of cities containing 8,000 to 30,000 inhabitants in 1903 was $173,718,313, and the last statistics compiled recorded an annual increase of $10,098,961. The aggregate for the two classes of cities in 1903 was $1,280,539,964. The foregoing, combined with other facts relating to the increase of municipal debt, makes it certain that the present debt of cities of the United States containing over 8,000 inhabitants is in excess of $1,600,000,000, or greater than that of the combined debt of the national and State governments and of the counties, school districts, and other minor civil divisions.

"The payments and receipts of those cities having a popula tion of 8,000 and over were greater than those of the United States Government in 1902, but somewhat less than those of that government in its last fiscal year. They also exceed the payments and receipts of all State and local governments.

"In 1900, 33 per cent. of the people of the United States resided in cities having a population of 8,000 and over, and in a few decades over one-half of the people will reside in those cities. The problem of self-government is therefore becoming one of city government, and no class of statistics is of such vital importance as that relating to cities, and especially to cities containing over 30,000 inhabitants."

Relative Merits of Municipal Bonds.-In 1904 there was in default through commercial failures $144,000,000;_ the total failures for five years aggregated $670,000,000. They were years of great financial achievement and industrial prosperity. During the same period no municipal bonds lawfully issued for legal purposes were in default. An investigation among banks and bond houses demonstrated that there have been no defaults in legal municipal bonds of the more settled communities in fifteen years. Municipalities have learned by experience that it is cheaper to pay their debts than be relieved of the burden by repudiation. Repudiation is the most expensive form of payment. States and municipalities that have practiced repudiation have irreparably injured their credit. The difficulty they experience in placing a loan, and, after placing it the high interest they are compelled to pay, is a burden which only years of faithful performance can lessen. In recent years this was realized by the citizens of Tacoma, who, rather than have the credit of their city questioned, raised by a popular subscription money to pay the interest about to fall due and in danger of default. In a debate on the relative merits of municipal bonds as compared with commercial paper one of the principals emphasized the safety and security of municipal bonds in times of commercial panic and financial stress for: (1) their genuineness is readily ascertainable; (2) the condition of the municipality is no secret; (3) the provision for their payment is made in advance by due process of law; (4) if ample provision be not made it may be compelled; (5) a municipality, generally, may not burden itself but for a very small proportion of the value of its property; (6) default in the payment of the interest on the principal of municipal bonds is of exceedingly rare occurrence; (7) the Government of the United States has accepted municipal bonds and municipal bonds only in lieu of Government bonds as security for United States deposits.

"Straight" and "Serial "Bonds.-The municipal bond issue question is of vital interest not only to investors but to every city, village, county and hamlet in the country. Every form of city improvement work is now contracted and paid for by bond issues, and there is a large and rapidly increasing debt being piled up for posterity. The matter of retirement is most important. The difference between the "straight" and the serial" method of retirement concerns the maturity of issue. The straight method means maturity at thirty years; the serial plan, in from one to thirty years. It is usually the custom to accumulate a sinking fund which, theoretically, should just equal the principal of the debt at the time of redemption.

There are a number of objections to the sinking fund retirement. Firstly, money intended for the fund does not usually reach its destination; secondly, the city's bonded debt and sinking fund will eventually become a large amount of money to be handled and invested. There is objection that a fixed amount turned into the sinking fund may or may not be equal to the principal of the debt at the date of expiration, interest on investments varying from time to time. There is the further objection that the municipality must pay interest on the entire issue of bonds to maturity-that is, the interest charge on a bond issue is as heavy in the last as in the first year. there is the temptation to divert the sinking fund to other purposes, retiring the securities through a refunding issue, thus practically making no payment whatsoever.

Then

A great many of these objections would be obviated by adopting the serial method. Under that plan it is necessary to make an annual appropriation for retiring a certain portion of the bonds, and there could be no passing over this appropriation from one year to another, for the bankers must be paid for the securities as per agreement. In this way the taxpayers would be likely to realize the cost of a heavy debt far more than they do under present systems. Citizens would have an object lesson in their tax bills each year which would instruct as to the cost of public improvements. No large debt could be rolled up under these conditions, and there would be no necessity for the creation of a sinking fund and its attendant dangers. With each payment the interest on the charges of bond issues would decrease as the outstanding amount of the bonds declined.

The serial plan affords the city an opportunity to pay off indebtedness from year to year, instead of saving redemption money in sinking funds and paying off the obligation in a lump sum. It is an admitted fact, however, that serial bonds do not bring the same price as "straight" or long term bonds, but it will prove a boon to the city in the end to issue serials rather than use the old method of straight redemption.

Study of Indebtedness of Thirteen Cities, A.-There appeared, in 1905, in the annals of the American Academy of Political and Social Science, a series of studies on the municipal debt of thirteen large American cities. The writers succinctly outlined the debts. One item in the outline in each case was headed, "proportion (of debt) used in profit-bearing enterprises." This item was as follows for the cities named:

New York, for water, $76,745,993; for docks, $56,228,200; for rapid transit, $43,616,000; total, $176,590,113.

し