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\Y
STATEMENT
OF THE
BOARD OF COMMISSIONERS
OF THE
Port of New Orleans
ERNEST M. LOEB, President
/Is to the Issue of $25,000,000.00 State of
Louisiana, Port Commission Harbor
Improvement Five Per Cent.
Gold Bonds
•• •••'flip tipilCljpg'vf the large, modern grain warehouse and elevator
6H tHe'rlvè» frönt •between Sonlat Street and Peters Avenue Is now an
hsájirerJ fact, the Board of Commissioners of the Port of New Orleans
hàvînéfôl^ jnojiey in bank to pay for its erection.
• • •• • ••»,
That there is an aurgent necessity for a publicly owned elevator
of this sort has long been recognized by our business men as well as
by several of our public boards, but the problem of financing the en¬
terprise proved a difficult one.
When the Dock Board first began to study the question of financ¬
ing the proposition, it was found that it had the authority to issue
bonds for this purpose under Article 322 of the constitution, which
gives it the right to erect and operate warehouses and other structures
necessary to the commerce of the port of New Orleans and to pay
for the same by issuing mortgages or bonds against the real estate
and building erected thereon. This article, however, provides further¬
more that such bonds shall be paid by preference out of the receipts
of the warehouses, and, so far as such net receipts are insufficient,
out of the entire receipts and revenue of the port after payment of
prior bonded obligations; and it further provides that 'each issue of
bonds under said authority shall be subordinate to previous issues
thereunder.'
The bankers who were consulted in this matter all pointed out
to the board that it would probably be quite easy to float a small bond
issue for the purpose of buying a site on the river front and erecting
an elevator thereon, but they explained that such an issue would be
a third lien on the revenues of the port as a whole and that it would
probably be well-nigh impossible to sell any bonds in the future, be¬
cause such bonds would then constitute a fourth, fifth and sixth lien,
etc., and no investor would purchase the bonds if he knew that four or
five other issues had a prior lien on the revenues of the port.
The city of. New Orleans has just such a scheme of financing by
having a fixed debt tax of 1 per cent., and for that reason various bond
issues which the city has floated, instead of all ranking alike as they
do in other cities, have a different lien on this same tax, with the re¬
sult that some of the city of New Orleans 4 per cent, bonds sell at 95
and others at 89, although both are undoubtedly safe, except that one is
subordinate to the other in the lien of this 1 per cent, debt tax.
In order to prevent the Board of Commissioners from getting
into a similar position and thus jeopardizing its ability to finance the
future needs of the port of New Orleans, it was suggested by the
bankers that a comprehensive plan of financing for such future de¬
velopments be laid out now and that one large bond issue be author¬
ized, of which portions should be sold from time to time under very
careful restrictions.
This plan appealed to the board as being very practical and it
therefore promptly consulted some of the leading local attorneys (in¬
cluding Mr. Bernard McCloskey and Mr. Edgar H. Farrar) concerning
the feasibility and legality of such a bond issue, and it further called
into conference the three leading firms of bond attorneys in the coun-
try, namely, Messrs. Dillon, Thompson & Clay, of New York; Messrs.
Wood & Oakley, of Chicago, and Messrs. Caldwell, Masslich & Reed,
of New York. All of these attorneys approved the general plan, and
co-operated in drawing up the ordinances and act of mortgage which
has been passed by the board and recorded in the mortgage office.
All of the bankers and business men who have examined this
mortgage have expressed the opinion that Its provisions are very clear,
very safe and very favorable to the future development of the port,
although the restrictions on the future sales of bonds are such that
no undue inflation need be feared.
In short, the provisions of the mortgage are as follows:
First—The board has the right to sell (and has sold) $1,250,000
of the 5 per cent, harbor improvement bonds for the purpose of ac¬
quiring the property lying between Soniat Street and Peters Avenue,
and for the purpose of erecting a modern grain elevator thereon. In
accordance with the terms of Article 322, the mortgage carries with
it a first lien on the real estate acquired with the proceeds of the bonds,
and also a first lien on the general revenues of the port after the first
issue (of 1909) and the cotton warehouse bonds (of 1914) are taken
care of.
Second—The mortgage provides that its total shall not exceed
$25,000,000 and that the board shall have the right to issue additional
bonds from this total from time to time for the further improvements
only under the following conditions:
"(a) The net earnings of the port of twelve months prior to the
sale of the additional bonds must have been at least one and one-half
times the annual interest necessary upon the additional bonds to be
issued, and before these net earnings are determined all operating ex¬
penses, interest charges and sinking funds on the bonds already out¬
standing must be deducted.
"(b) The proceeds of such additional bond sales can be used only
for acquiring additional bonds for sites for warehouses and other
structures.
"(c) All bonds issued hereunder are to be certified by a trustee.
"(d) All property which will be acquired with the proceeds of
these bonds (and no other property) will be covered by this mortgage,
and all bonds issued under this mortgage will be of exactly the same
rank."
The board firmly believes that this plan will make it possible to
finance the future needs of the port, provided, of course, that the earn¬
ings increase sufficiently to Justify the additional expenditures, but
in order that the board may not be embarrassed in any way by the
provisions of this mortgage in the future in case unexpected develop¬
ments should come up which would make this plan seem undesirable,
the right is specifically reserved in the mortgage to close it at any
time, which would leave the way open to do any other financing which
may seem preferable.
This means, of course, that if the board desired to close the
mortgage, it has now authorized to-morrow it could do so, and the
$1,250,000 of bonds now sold for the purpose of the additional land
and the erection of the grain elevator would then stand as an inde¬
pendent issue, just as the cotton warehouse bonds, and the board could
accomplish the result at any time by passing a simple resolution to
that effect.
In other words,_the action which the board has taken has paved
the way to finance the future needs of the port without great diffi¬
culty, and at the same time has given up none of its rights or privi¬
leges to change this plan at any time if it is deemed desirable.
With this statement of the facts concerning the above bond issue,
the wisdom and legality of which we have already submitted to the
best business and legal talent of the country, and inviting further in¬
vestigation and criticism by those competent to do so, the Board of
Commissioners of this port believe they have accomplished much that
will redound to great and lasting benefit of the city of New Orleans."
New Orleans, La., July 2, 1915.
Poarîï of (íommisaiotters of tlje ^ort
of Jißto Orleans
ERNEST M. LOËB, President
ANDREW M. LOCKETT, Vice-President
WALTER VAN BENTHUYSEN, Secretary
CHAS. D. O'CONNOR
WILLIAM O. HUDSON
TILEY S. McCHESNEY, Asst. Sect'y and Treas.
JAMES WILKINSON, Attorney
Jicto (©rkans, Louisiana
Second Port U. S. A.
HAÜSKR PRINTING CO., NEW ORLEANS