543194


i.9




THEE GI[FT OF
PAR   M  W!, R....I.........




A


P.7, Q.  W  cP~,
c   4-A vi 0




j




ADVISORY COMMISSION
ON
TAXATION AND FINANCE.


FINAL REPORT
OCTOBER, 1908.
NEW YORK:
MARTIN B. BROWN COMPANY, PRINTERS AND STATIONERS,
Nos. 49 TO 57 PARK PLACE.
1908.




MARTIN B. BROWN
~ PRESS ~
so
NEW




TABLE OF CONTENTS.
Final Report of Commission......................................
Letter of the Mayor to Chairman of the Commission..............
Report of the Committee on Taxation and Revenue on Uncollectible
Arrears of Taxes, etc........................................
Report of Mr. Purdy on the Personal Property Tax..............
Report of the Committee on Taxation and Revenue on Personal
Property   Taxation..........................................
Report on the City Debt in its relation to the Constitutional Limit
of Indebtedness, containing a proposed amendment to Section Io
of Article VIII. of the State Constitution......................
Report on the System of Accounts and Statistics of The City of
N ew   Y ork...................................................
Report of the Committee on Taxation and Revenue on Collection of
Arrears of Real Estate Taxes and Assessments................
200281


5
II
13
49
79


99
125




I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~




Chairman,
EDGAR J. LEVEY.
Colmtmittee on Taxation and Revenue.


LAWSON PURDY,
EDWIN R. A. SELIGMAN,
FRANCIS LYNDE STETSON,


JOSEPH HAAG,
EDWARD L. HEYDECKER,
DAVID E. AUSTEN.


Com01mittee on The City Debt and Special Assessments.


EDWARD MI. SHEPARD,       HERMAN A. M\ETZ.
JOHN L. CADWALADER        FRANCIS KEY PENDLETON,
FRANK J. GOODNOW.


Committee on A4ccolnuting anid Statistics.
FREDERICK A. CLEVELAND,, JULIAN D. FAIRCHILD,
HERMAN RIDDER,             TOHN CRANE.
JOHN C. HERTLE.




I




NEW YORK, Octoter 29, 1908.


Hon. GEORGE B. MC:CLELLA.N,
Mayor,
The City of New York.
SIR-In February, 190, you requested the following named
gentlemen to serve as an Advisory Commission on Taxation and
Finance:
Edgar J. Levey,             Julian D. Fairchild,
John L. Cadwalader,         Lawson Purdy,
Morris K. Jesup,            Frederick A. Cleveland,
Edwin R. A. Seligman,       John Crane,
Edward MI. Shepard,         John J. Delany,
Charles T. Barney,          Frank A. O'Donnel,
Herman Ridder,              Alonzo Bell,
Francis,ynde Stetson,      Frank J. Goodnow,
John C. Hertle.
Upon the death of Mr. O'Donnel you appointed Mr. Joseph
Haag to fill the vacancy, and in like manner to fill the vacancy
caused by the death of Mr. Bell, Mr. Edward L. Heydecker.
When Mr. Delany resigned you designated Mr. Francis Key
Pendleton as a member of the Commission in his stead. The vacancies caused by the death of M\r. Barney and Mr. Jesup have
been filled by Messrs. Herman A. Metz and David E. Austen.
The Commission met on March 6, I905, and elected Mr. Lawson Purdy as secretary; in your letter you had named Mr. Edgar
J. Levey as chairman. Three sub-committees were appointed on
Taxation and Revenue,
City Debt and Special Assessments, and
Accounting and Statistics,
and to them were referred the several subjects mentioned in your
letter of appointment.  From time to time, as each sub-committee completed its examination of the portion of the work re



6


ferred to it. it reported to the Commission, and five separate reports have been presented to you by the Commission, copies of
which are annexed to this report as appendices.
The first report presented by the Commission was in December, 1905, upon the subject of the City's uncollectible arrears of
taxes. It was shown that the uncollected taxes on October I,
I905, for the years I898 and prior, amounted to $I2,700,872.39,
and that the uncollected taxes outstanding on October I, I905,
for the years I899 and I904 inclusive, amounted to $50,823,942.21,
making a total of $63,524,814.60.
The Commission has made an estimate of the exact sum uncollectible and had found it to amount to $33,791,172.95, of
which amount over $30,000,000 was on account of uncollected
personal taxes.  The method by which this conclusion was
reached and the reasons supporting it are fully set forth in the
report submitted to you on December 22, I905. Having ascertained the total of uncollectible taxes, also having ascertained that
this sum was increasing under the methods in force at the time
by a sum approximating $3,000,000 a year, the Commission undertook the drafting of legislation to meet this condition, and
submitted a series of bills to the Legislature of I906. Three of
these bills were enacted as chapters 207, 208 and 209 of the Laws
of 1906.
By chapter 208 of the Laws of I90o, the Board of Estimate
and Apportionment of The City of New York was directed to
authorize corporate stock of The City of New York to be issued
to any amount equal to so much of the deficiency on the first day
of January, I905, in the product of taxes theretofore levied and
deemed by the Board to be uncollectible as shall not have been
provided for in prior tax levies or by the issue of corporate stock
of The City of New York. The intent of this act is to permit the
funding of the total of arrears of uncollectible taxes up to the
date named, January I, I905, and thereby to wipe out the uncollectible arrears up to that date. When all of the corporate stock
authorized bv this act shall have been issued the uncollectible
arrears up to January I, I905, will have been funded and will disappear from the City's books of accounts as unpaid taxes.
By chapter 209 of the Laws of I9o6, amending section 248
of the Greater New York Charter, the Board of Estimate and
Apportionment was directed annually to include in the budget
a sum equal to so much of the deficiency on the preceding first




7


dlay of January in the product of taxes theretofore levied and
deemed by the Board to be uncollectible as shall not have been
provided for in prior tax levies or by the issue of corporate stock
of The City of New York or by such corporate stock, duly authorized by said Board to be issued. The intent of this law is
to provide a way by which the amount of uncollectible taxes,
ascertained each year, may be included in the budget for the ensuing year and may be stricken off from the City's books of accounts as assets. Under the operation of these two laws, when
the discretion vested by them in the Board of Estimate and Apportionment shall have been fully exercised, no uncollectible arrears should any longer appear on the City's books of accounts
as assets.
The other law enacted in I9o6, printed as chapter 207, adding
section 894-a to the Greater New York Charter, was intended
simply to cure an administrative defect. By its provisions the
Department of Taxes and Assessments was authorized on giving
ten days' personal notice to the party in interest, to add to the
assessment-rolls of the current year such valuations of real and
personal estate as may have been omitted from such assessmentrolls on the first day of the opening, of such books. This power
did not exist prior to the passage of this law.
The second report of the Commission was presented in December, I906, and was a review of the question of the taxation
of personal property. The report considered the effect of the
taxation of personal property in The City of New York, and
found that the law was impracticable of operation and unfair in
so far as it was enforced. The Commission did not present any
drafts of bills to carry out its conclusions, but recommended that
this question is of immediate importance to the City, and suggested for your consideration the desirability of bringing the matter to the attention of the Governor and the State Legislature.
This report was quoted with approval by the Charter Revision Commission of I907, and they recommended that the question of personal property taxation should be submitted to a vote
of the people of The City of New York.
In December, I907, a report was presented by the Commission on the collection of arrears of real estate taxes and assessments. This report reviewed the existing method of enforcing
the payment of arrears of real estate taxes and assessments and
water rents, and found that these methods were wholly inade



8


quate to enforce the rights of the City. Accordingly, the Comnmission reported a bill to amend the Greater New York Charter
relative to sales of lands for taxes, assessments and water rents,
which was enacted by the Legislature of 1908, and which went
into effect on October I, 90o8.
By the provisions of this Act the old method of enforcing
such charges by the sale of a lease was abolished and in its place
is substituted a method requiring the sale of the tax lien of the
City to the person who will pay into the City Treasury the amount
of the taxes, assessments and water rents, with interest, penalties,
and charges, for the lowest rate of interest upon. acompetitive
bidding. The lien of the City is to be transferred to the purchaser by an instrument to be known as a " transfer of tax lien,"
and which by the terms of the Act is assimilated as closely as possible to a mortgage on real estate. The delinquent taxpayer is
allowed three years in which to pay off and discharge this transfer of tax lien, and in the event of his default the foreclosure of te
tax lien is provided for in a court of record by a procedure similar
to the foreclosure of a mortgage. The substance of this change
is the substitution of a judicial foreclosure whereby the rights of
all parties in interest may be protected for the administrative act
of the Collector of Assessments and Arrears in an ex parte proceeding. As the law became operative on October I, I908, the
Commission is unable to report upon the results of its administration, but it believes that the Collector of Assessments and Arrears will be successful in collecting the greater part of the arrears of real estate taxes, assessments and water rents, by means
of the active and efficient efforts which he is taking to carry out
the provisions of the Act.
In April, I907, the Commission submitted a report on the City
debt in its relation to the constitutional limit of indebtedness,
containing a proposed amendment to section IO of Article VIII.
of the State Constitution. This report carefully considered the
question of the margin of debt incurring capacity of the City. It
was ascertained that on January I, I907, this margin amounted
to $3I,I43,218.73, and that the total bonded indebtedness of the
City at that time amounted to the sum of $544,522,362.23. The
report also considered the factors enlarging the City's future
debt incurring capacity, and also the probable future indebtedness
to be incurred, and reached the conclusion that if it is inevitable
that the debt incurring power of the City should be enlarged such




9


enlargement should be accomplished only by authorizing the exclusion from the bonded indebtedness to be charged against the
City's debt limit, of bonds issued for the acquisition of property
or for the construction of railroads, docks or other improvements,
owned by the City, from which the City receives current net income in excess of the interest payable by the City, and that any
constitutional amendment designed to accomplish this should provide a nearly automatic scheme by which, should such enterprises
ever become non-supporting, the bonds issued to defray the cost
should immediately be counted in estimating the City's indebtedness. In the amendment to section o0 of Article VIII. of the
Constitution presented by the Commission in this report, careful
provision was made safeguarding the City from the continued
exclusion of debt incurred for the acquisition of property not
sufficiently productive as to pay interest charges.
This question of enlarging the debt-incurring power of the
City was considered by the Legislature of I908, and an amendment to section io of Article VIII. of the Constituticn, based upon
the report of the Commission, was passed by the Legislature.
In June, 1907, the Commission presented a report on the system of accounts and statistics of The City of New York. The
existing system was analyzed and its defects pointed out. Briefly,
these were shown to be (I) a lack of a system of controlling accounts; (2) a lack of uniformity of an accounting system in the
different departments, and (3) a lack of control over expenses incurred in the different departments, and (4) a failure to furnish
detailed infornation as to expenses incurred. The Commission
suggested the outline of a general accounting system whereby in
addition to securing uniformity of accounting, the Comptroller
should be give:- a wider control over the departmental accounting heads. The Conmmission also suggested that the Comptroller's
office is overburdened with administrative detail, and presented
alternative recommendations designed to remedy this condition.
The Comlmission has considered the propriety of a change
in the time for collection of taxes, and has reported its conclusions against the proposed change. The real reason for the urgent
demands made (luring the past few years for a change in the
date for the collection of taxes is the large deficiency in the collection of taxes. The past deficiencies due to uncollectible taxes
have been provided for by the authorization of an issue of corporate stock and current deficiencies are provided for annually




IO


in the budget under the provisions of the laws enacted pursuant
to the reports of this Commission. A further deficiency in the
current funds of the City is due to the inability of the City to
enforce the collection of taxes on real estate. The former remedy
for the collection of taxes on real estate by the sale of leases was
so ineffective that it has been resorted to but six times in thirtytwo years. The amendment to the charter reported by this Commission and -enacted by the last Legislature will relieve this situation, and under these changes the Commission believes that
the reasons for the suggested change will disappear.
We have reported upon all the subjects submitted for our
consideration, and bills have been enacted to carry out our recommendation for legislation.
In May, 1905, $I2,000 was appropriated for the expenses of
the Commission, and the sum of $3,456 has been expended, mainly
for printing. There will be no further expenses except the printing of this report.
Having completed the work assigned to us, we respectfully
present this as our final report and request our discharge.
EDGAR J. LEVEY, Chairman.
LAWSON PURDY, Secretary.




T


LETTER OF THE MAYOR TO CHAIRMAN OF THE
COMMISSION.
CITY OF NEW YORK.
Office of The Mayor.
November 5, 1908.
EDGAR J. LEVEY, ESQ.,
Chairman Advisory Commission on Taxes and Finance,
No. I35 Broadway, N. Y. City:
MY DEAR SIR-I have received the final report of your Commission, and desire to express to you and, through you, to the
members of the Commission, my heartiest thanks for the service
you have rendered to the City since your appointment in February, I905.
The problems the Commission was requested to consider were
difficult of solution and of vital importance to the City. You
have labored earnestly and with remarkable efficiency.
The Legislature was so impressed by the character of the
Commission and with the clear and logical presentation of the
reasons for its recommendations, that the laws were enacted as
proposed without agitation and without opposition. The Commission has brought to the consideration of these problems the
highest order of ability in law, finance and administration. It
would hardly have been possible for the City to have secured
for hire the services rendered without compensation by you and
your associates.
Respectfully,
(Signed)   GEO. B. MCCLELLAN,
Mayor.




I




ADVISORY COMMISSION
ON
TAXATION AND FINANCE.


REPORT
OF
COMMITTEE ON TAXATION
AND REVENUE
ON


UNCOLLECTIBLE ARREARS
OF TAXES, ETC.


DECEMBER, 1905.








LETTER OF TRANSMITTAL.
NEW YORK, December 22, I905.
Hoii. GEORGE B. MZICCLELLAN,
Mayor of The City of Newz York:
DEAR SIR-Among the subjects which your Advisory Commission on Finance was requested to consider is that of the City's
uncollectible arrears of taxes. This subject was mentioned in
your last annual message to the Board of Aldermen and was
specifically referred to this Commission by your letter of February
28, I905, in the following manner:
"Methods of collecting and enforcing the payment of taxes in
The City of New York, bearing in mind the ever-increasing
amount of uncollected personal taxes and the difficulty of properly conducting the finances of the City with the product of the
tax levied each year falling further and further behind the total
appropriation."
Your Commission regards this question not only as one of
the most important referred to it for consideration, but also as
one which calls for immediate and comprehensive reform. Having reached certain practical conclusions in regard thereto, which
have been embodied in drafts for bills to be prepared for legislative action, your Commission desires at this time to make a
partial report, so that action thereon need not await the further
deliberation required for the other subjects now engaging your
Commission's attention.
At a meeting of your Commission, held December 20, 1905,
the Committee on Taxation and Revenue presented a report and
the Commission unanimously adopted the following resolution:
Resolved, That the partial report of the Committee on Taxation and Revenue be and hereby is accepted and adopted as a report of this Commission, and that it be transmitted to the Mayor
as a partial report of this Commission upon the matters submitted
for its consideration, with a suitable explanatory letter from the
Chairman and Secretary.




i6


In accordance with this resolution, we present to you herewith the partial report of the Committee on Taxation and Revenue. This report is the result of very careful consideration upon
the part of the committee, which has had frequent meetings since
its appointment in March.
In the report will be found a statement showing the uncollected taxes for the years I898 and prior at October I, I905, and
a statement of uncollected taxes for the years I899 to October I,
I905, in which is shown the actual levy, the amount collected, discounts, cancellations, uncollected balances, and the amount provided in tax levies for deficiency in the product of taxes. We
have analysed these tables and explained the reason why under
the provisions of the Charter and Tax Law of the State a very
large amount of taxes is in arrears, of which more than one-half
is uncollectible. We have made an estimate of the exact sum uncollectible and it amounts to $33,79I,172.95. Of this amount
over $30,ooo.ooo is on account of uncollected personal taxes.
About one-third of the tax levy on personal property each year is
uncollectible. This will continue to be the case so long as we have
our antiquated system of imposing taxes on all forms of personal
property in the same manner as upon real estate. In practice,
through what may be no fault of the Department, many persons
are assessed for personal property who have no property and from
whom in consequence no tax can be collected.
Bv skillful methods of financing the City, which we approve,
it has been possible up to the present time to carry on the City's
affairs without increasing the City debt on account of the large
deficiency, except as it has been necessary to issue a somewhat
larger amount in revenue bonds than should be issued. The
limit, however, has been practically reached, and unless provision
is made for the existing arrears and for preventing the accumulation of arrears in the future the financial department of the City
will be seriously embarrassed.
We were confronted with two problems. First, to provide for
the existing arrears, and second, to provide for an annual clearance of future arrears.
To provide for existing arrears we propose an act directing
the Board of Estimate and Apportionment to authorize corporate
stock of The City of New York to be issued to an amount equal
to so much of the deficiency on the first day of January, I905, in
the product of taxes theretofore levied and deemed by the Board




17


to be uncollectible, as shall not have been provided for in prior
tax levies or by the issue of Corporate Stock of The City of New
York. At first sight this may appear to increase the City's debt,
and hence to limit the amount which may be borrowed for needed
public improvements. A closer study shows, however, that in
order to provide the necessary funds for current expenses the
City is now issuing revenue bonds for the account of taxes of
previous years which are still uncollected, and these.revenue bonds
form part of the City's debt which limits its borrowing capacity.
The proposed act does not require the immediate issue of the Corporate Stock authorized by the Board of Estimate, but it may be
issued in such amounts, from time to time, as may be deemed
wise by the Comptroller, to retire outstanding revenue bonds
issued in anticipation of the collection of. taxes of previous years,
and to provide funds to meet payments upon the contract libilities of the City when the money provided for such payment by
previous issues of Corporate Stock has already been used for the
current expenses of the City. We are satisfied that the City must
be empowered to borrow an amount equal to the uncollectible deficiency in the taxes of past years, and it is cheaper for the City
to borrow this money on Corporate Stock than on revenue bonds
as it is doing to-day.
For reasons which we explained in our report the provisions
of chapter 639 of the Laws of I905 authorizing continually recurring issues of Corporate Stock to make good these deficiencies, we
consider objectionable and not in harmony with the plan we propose. We have therefore recommended its repeal.
The second problem, consisting of the annual deficiency in
the product of taxes, we have met by providing that the Board of
Estimate and Apportionment shall annually insert in the budget
a sum equal to so much of the deficiency on the preceding first day
of January in the product of taxes theretofore levied and deemed
by the Board to be uncollectible, as shall not have been provided
for in prior tax levies or by-the issue of Corporate Stock of The
City of New York, or by such Corporate Stock authorized by said
Board to be issued. This is accomplished by an amendment to
section 230 of the Charter which shall take effect October I, I906.
By this act we propose to repeal the section of the Charter which
authorizes and directs the Board of Aldermen to increase the tax
levy to make good a deficiency in the product of taxes, a provision
of law which is quite inadequate and requires an estimate of




I8


future conditions instead of a dealing with past and known quantities. But as that section will not be repealed until October Ist the
Board of Aldermen in August, I906, will increase the tax levy for
I906 by the usual amount added for the deficiency. At the meeting of the Board of Estimate in October they will insert in the
budget for the tax levy of I907 an amount which will provide for
all uncollectible arrears not theretofore provided for up to
January, I906. Thereafter every year the Board of Estimate and
Apportionment will provide for all deficiencies in the collection
of taxes so far as the same are uncollectible up to the first of
January preceding.
In our report we have explained exactly how we arrive at the
amount of the uncollectible arrears, and the method of financing
the City by which it has been enabled to pay its bills-in spite of the
large arrears. We have explained how it may be determined that
taxes are uncollectible, and the method of computing the City debt.
REPORT AS TO THE PROPRIETY OF A CHANGE IN THE TIME OF
COLLECTING TAXES.
Another subject submitted to the committee for consideration
is the propriety of a change in the time for collecting taxes. The
committee presents a report made by Mr. Bell upon a proposal to
change the date, but the committee concluded that it was not necessary to express an opinion upon the merits of the particular bill
discussed by Mr. Bell for the reason that after careful consideration of the whole subject the committee was convinced that it is
not desirable to change the present method of providing current
funds for the City's needs.
OTHER AMENDMENTS PROPOSED.
The committee presents two amendments to the charter, and
one to the Tax Law, which relate to details of assessment and
taxation, and which are sufficiently explained in the report.
Yours respectfully,
EDGAR J. LEVEY, Chairman.
LAWSON PURDY, Secretary.




I9


STATEMENT
SHOWING UNCOLLECTED TAX FOR THE YEARS I898 AND PRIOR,
AT OCTOBER I, I905.
Arrears of Taxes, I898 and prior:
Personal-Manhattan and Bronx.$9,323,475 99
Brooklyn...........    74I,057 49
$Io,064,533 48
Arrears of Taxes, I898 and prior:
Real Estate-Manhattan....     $1,32,608 73
Bronx............   233,204 89
Brooklyn.........   303,154 90
Queens...........   528,370 39
Richmond........    250,000 oo
2,636,338 9I
Grand  total..........................$I2,700,872  39




STATEMENT OF UNCOLLECTED TAXES.
OCTOBER I, I905.


I                                                                                                     I                                                                                          I                                                                                         I


__,.


Levy.


Collections.


Amount provided
in Tax Levies
Balance Uncollected. for Deficiency in
Product of Taxes.




Discount.


Cancellation.


Tax of I899: R. E.............
Franchises.......
Personal.........
Tax of 1900: R. E...........
Franchises......
Personal.........
Tax of IgoI: R. E...........
Franchises.......
Personal.........
Tax of I902: R. E.............
Franchises.......
Personal..........
Tax of 1903: R. E.............
Franchises.......
Personal.........
Tax of 1904: R. E............
Franchises......
Personal....
Aggregate................


$72,805,832 37
13,374,238 71
$86,18,0o71 o8
$66,788,643 92
4,969,748 58
10,780,850 04
$82,539,242 54
$70,706,974 6o
4,925,291 84
12,609,537 31
$88,241,803 75
$71,254,2I5 12
5,049,o06 47
II,925,231 48
$88,228,553 07
$64,567,381 13
3,360,543 42
9,703,863 56
$77,631,788 11
$72,715,090 97
3,837,072 69
9,516,239 76
$86,o58,403 42


$71,202,347 89
8,483,454 31
$79,685,802 20


$371,375 65
53,061 95
$424,437 60


$64,617,688 02
2,629,446 40
7,595, I87 48
$74,842,321 90
$68,518,370 53
1,479,770 43
7,026,472 46
$77,024,613 47
$69,036,816 14
I,067,156 66
6,357,956 74
$76,46I,929 54
$62,042,327 o6
499,355 33
4,888,803 75
$67,430,486 14
$67,598,533 24
599,745 25
4,802,018 24
$73,000,296 73


$369,340 02
55,938 I8
$425,278 20
$366,780 88.........
42,519 93
$409,300 8S
$388,875 36
40,053 18
$428,928 54


$225,411 09
436,370 01
$661,781 io
$818,671 78
577,482 26
438,953 16
$1,835,107 20
$603,101 90
455,070 70
828,755 83
$1,886,928 43
$309,577 84
455,842 09
913,080 22
$I,678,500 15


$5,408,050 i8
$982,944 o1
1,762,819 92
2,690,771 22
$5,436,535 24
$1,218,721 29
2,990,450 66
4,711,789 09
$8,920,961 04
$1,518,945 78
3,526,107 72
4,614,141 34
$9,659,194 84
$2,o45,o50 83
2,858,325 38
4,169,544 o8
$9,072,920 29


$I,co6,697 74
4,401,352 44


$1,689,877 8i
1,618.473 98


O


1,726,169 24
I,730 oi8 42
1,522,209 07


$365,974 96     $114,028 28..........        2,862   71
32,553 28      612,962 45
$398,528 24     $729,853 44
$445,608 14     $119,707 02.........        6,363   92
35,587 65      I34,559 34
$48I,195 79     $260,630 28
$2,567,669 i8   $7,052,800 60




$4,551,242 57
3,230,963 52
4,544,074 53
$12,326,280 62      1,687,667 20
$50,823,942 21    $9,974,415 72


I


$508,889,86I 97   $448,445,449 98


-- --- —



21


Recommendations    Concerning   the  Deficiency   Caused
by Arrears of Uncollectible Taxes.
PROPOSED BILLS.
DRAFT OF AN ACT to Authorize the Board of Estimate and Apportionment in The City of New York to Issue Corporate
Stock of the City for Arrears of Uncollectible Taxes.
SECTION I. The board of estimate and apportionment of The
City of New York shall on or before the first day of October, I906,
authorize corporate stock of The City of New York to be issued
to an amount equal to so much of the deficiency, on the first day
of January, I905, in the product of taxes theretofore levied and
deemed by the board to be uncollectible, as shall not have been
provided for in prior tax levies or by the issue of corporate stock
of The City of New York. Such corporate stock shall be authorized to be issued by the board of estimate and apportionment without the concurrence or approval of any other board or public body.
SECTION- 2. This act shall take effect immediately.
DRAFT OF AN ACT to Amend the Greater New York Charter by
Providing for the Levying of Taxes to Provide for Deficiencies in the Actual Product of Taxes Theretofore Levied.
SECTION I. Section 230 of the Greater New York Charter is
hereby amended by inserting a new subdivision to be subdivision
first; subdivisions first to ninth to be numbered second to tenth,
respectively, and the new subdivision to read as follows:
First-A sum equal to so'much of the deficiency, on the preceding first day of January, in the product of taxes theretofore
levied and deemed by the board to be uncollectible, as shall not
have been provided for in prior tax levies or by the issue of corporate stock of The City of New York, or by such corporate
stock duly authorized by said board to be issued.
SECTION 2. Section 248 of the Greater New York Charter is
hereby repealed.
SECTION 3. By this section repeal chapter 639 of the Laws of
1905, amending section I69 of the charter.
SECTION 4. This act shall take effect October first, 19o6.




22


MEMORANDUM AS TO ARREARS OF TAXES AND PROPOSED AMENDMENT.
On October I, I905, the uncollected taxes of The City of New
York for preceding years amounted to the total sum of $63,524,814.6o. Of this amount, $35,I96,206.I8 are taxes on personal
property, $I3,959,941.22 are taxes on real estate other than special
franchises, and $I4,368,667.20 are taxes on special franchises.
This is an enormous sum, and increases at the rate of more
than three million dollars a year. The condition is not due to any
fault of city officials, but is wholly the result of unwise and inadequate charter provisions. In order that the remedy which we
propose may be thoroughly understood it is necessary first to explain somewhat fully the law and practice governing the financial
management of the city, and show how and why there should be
so large an amount of taxes uncollected.
The charter requires that the estimate of city expenses for the
following year shall be made in the month of October. When
this estimate is complete and approved by the Board of Estimate
and Apportionment it is called the Budget. It cannot be increased
but may be diminished by the Board of Aldermen. When approved by the Board it must be raised by taxation. The taxable
property of the city is assessed in the autumn months, the books
are opened in January, closed at the end of March, and delivered
to the Board of Aldermen the first week in July. The Comptroller
certifies to the Board of Aldermen the amount of the Budget and
the estimated revenue from the general fund. It is thereupon
the duty of the Board to add an amount not exceeding 3 per
cent. of the sum to be raised by taxation to provide for deficiencies in the actual product of taxes levied. The Board then
determines the rate of taxation which will be necessary to raise
the amount of the Budget, including the deficiency item, less the
revenue from the general fund. The assessment rolls with the
warrants for the collection of taxes are now sent to the receiver
of taxes, and taxes become due and payable on the first Monday
of October.
The practice of the Board of Aldermen for many years has
been to provide a smaller sum for the deficiency than the 3 per
cent. allowed; whereas in fact the deficiency has been considerably
more than 3 per cent. The deficiency in.the collection of taxes
comes about in the following ways:




23


A discount is allowed for the payment of taxes before the first
of November, and this decreases the actual collection.
There are some cases every year in which assessments of real
estate and personal property are reduced by an order of the court
after procedings brought to review the action of the Tax Commissioners. When the court reduces the assessed valuation of
real estate or personal property the amount of tax lost to the
City swells the deficiency.
These two items, however, are small compared with the very
great discrepancy between the amount of the tax actually levied
upon personal property and the amount collected. This will continue to be the case so long as we have our antiquated system of
imposing taxes on all forms of personal property in the same
manner as upon real estate. In practice, through what may be no
fault of the department, many persons are assessed for personal
property who have no property, and from whom in consequence
no tax can be collected. The amount of the tax on personal property which cannot be collected has run as high as one-third of the
total amount levied. For five of the six years since consolidation
the amount of the uncollected taxes on personal property has only
once been less than four million dollars, and in two years was
more than four and a half millions.
The Amount of the Deficiency.
In an appendix to this report we present tables showing the
actual levy of taxes on real and personal property and special
franchises, the amount of the collections, discounts, cancellations,
uncollected balances, and the amount actually provided in the
various tax levies for deficiencies in the product of taxes.
From these tables it appears that the arrears of taxes for the
years prior to I899 amount to $I2,7oo,872.39. Of this amount
$2,636,338.91 is the tax upon real estate,.and most of it is collectible. A very small part of it may not be collectible because of
the peculiar conditions existing in some of the outlying boroughs
prior to consolidation. The arrears of personal taxes levied prior
to I899 amounto  o $Io,064,533.48, and probably no part of this
can ever be collected.          9
From I899 to the first of October, 1905, the total arrears of
taxes due and uncollected is $50,823,942.2I. This amount is the
uncollected balance after deducting the total discounts and che




24


total cancellations. The discounts have amounted to $2,567,669.18, and the cancellations have amounted to $7,052,800.60,
making a total sum lost to the City through discounts and cancellations of $9,620,469.78. The amount provided in the tax
levies of the years 1899 to 1904 for deficiencies in the product of
taxes amounts to $9,974,415.72. This sum exceeds the actual loss
through discounts and cancellations by the sum of $353,945.94.
This is the entire provision for the uncollectible portion of the
balance of uncollected arrears of over fifty million dollars.
The amount of the uncollected arrears from I899 is apportioned as follows:
Personal taxes.............................. $25,I31,672 70
Real estate.................................  11,323,632 31
Special franchise taxes....................... I4,368,667 20
Total.............................  $50,823,942  21
The taxes on real estate amounting to over eleven million dollars are practically all collectible, together with interest at the rate
of 7 per cent. from the time the taxes became due. Of the tax
on special franchises amounting to over fourteen millions there
will be a considerable loss on account of the taxes for the years
I900 to I902. This is occasioned by the fact that the Special
Franchise Tax Law requires the State Board of Tax Commissioners to assess special franchises at their full value while other
real estate was not assessed as the law directs. When proceedings
were brought before Judge Earle to set aside the assessments as
unconstitutional, the State Tax Commissioners testified that they
had assessed special franchises at full value, and evidence was
introduced to the effect that the real estate in The City of New
York was assessed at about two-thirds of full value. Judge Earle,
in his opinion said that "these assessments will have to be reduced
at least so much as will equalize them with the other assessments
in the same localities."
Method of Financing the City.
For over thirty years the plan of providing the City Treasury
with current funds has been through short time loans on what are
called revenue bonds issued in anticipation of the collection of the




25


taxes 'for the current year. It is not contemplated that the Citywill have any current funds on hand on the first of January, as
the taxes of the preceding year will have been used to retire the
bonds sold to provide funds for that year. When taxes are paid
in October these bonds are retired, and by the first of January
the City is obliged to borrow. The charter provides that revenue
bonds shall be issued in anticipation of the collection of taxes,
and these revenue bonds do not form part of the City debt until
they are outstanding for over five years. The debt is limited in
amount to 0o per cent. of the assessed value of real estate.
In view of this general plan one would naturally expect that
there would be now outstanding revenue bonds to the total amount
of the uncollected arrears of taxes, and that these bonds would be,
divided according to their date of issue in accordance with the
amount of taxes uncollected for each of the years for which there
are arrears outstanding. If we disregard the arrears of taxes
levied prior to consolidation and the finances of the City had been
managed as one would suppose from reading the charter, we
should have had the following condition on October first, 1905:
Total uncollected taxes for the years 1899 to 1904,
inclusive.................................. $50,823,942  21
Less the unapplied balances of the
amounts included in the tax
levies for deficiencies......... $353,945 94
Less also unexpended balances of
appropriations for the years I899
to 1904, inclusive.............. 6,523,746 79
6,877,692 73
Balance.......................... $43,946,249 48
Revenue bonds issued in anticipation of the taxes for the years
I899 to I904 should be outstanding to the amount of this balance.
The actual condition, however, is far different. The outstanding revenue bonds which were issued in anticipation of the taxes
for these years are actually as follows:
Revenue bonds of 1902........................  $2,700,000
I903........................  2,IOO,OO
1904...................   5,200,000
Total...............................  $o,o,ooo




26


-a difference of $33,946,249.48. The question now arises, where
did the City get this large sum of money by the use of which it
has. avoided the issuance of revenue bonds, and why has this
course been followed?
The funded debt of The City of New York is incurred by the
issue of what is called the corporate stock of The City of New
York. When corporate stock is authorized to be issued for the
purpose of providing funds to pay for some public improvement,
as a bridge, park or the like, and contracts are duly entered into
by the City for the performance of the work or proceedings are
instituted for the acquisition of land, the City incurs what is
called a contract liability or land liability which immediately
counts as part of the City debt. No such contract liability can
be incurred until the issue of corporate stock is authorized. In the
books of the City we have then on one side the amount of the
authorized issue of corporate stock, and on the other side the
amount of the contract or land liability. When part of that corporate stock is sld and a corresponding payment is made on
account of the liability, that part of the City's debt is altered from
a contract or land liability to an actual indebtedness evidenced
by the corporate stock issued.
At all times there are a great many contracts in course of performance for which payment is to be made by an issue of corporate stock. It is obviously impossible for the City to issue corporate stock for the amount of each separate contract liability, at
the time when payment must be made, to the amount necessary to
make the payment. In practice, therefore, in order to obtain the
best terms at the sale of corporate stock a large amount of corporate stock is sold at one time for the account of a number of different contracts. For example, a sale may be made of thirty
millions of corporate stock. If the City kept this money on hand
for the account of the different purposes for which the issue was
made until payments are made for those accounts, the City would
have great sums on hand for which it could obtain only 2 per cent.
from City depositories, while it is paying 3 per cent. or more for
the use of the money, and at'the same time is obliged to borrow
for current needs on revenue bonds at a rate of interest varying
from 212 to 5 per cent.
Instead of carrying this large sum in City depositories to the
credit of the different accounts for which the corporate stock was
issued, the money when received is deposited to the credit of a




27


general fund of the City, in which is also deposited the proceeds
of such revenue bonds as may be sold and the money received
from current tax levies, assessments, excise taxes, etc. The City
then having put its money from all these sources into one general
fund it uses this fund to retire revenue bonds and to pay current
expenses as well as to make the necessary payments on account
of the contract liabilities as they become due.
By this practice, instead of having $43,000,000 in revenue
bonds outstanding upon which interest must be paid at a rate averaging over 3Y2 per cent., and having a bank balance in excess of
the actual balance in the banks of over $33,0o0,000, upon which
the City would only obtain 2 per cent. interest, the City has had
a small balance in the bank and has borrowed at a lower rate on
its corporate stock than it could have borrowed upon short time
revenue bonds.
To express this practice in simple language it may be said that
the City borrows from its own funds provided for special contract
purposes in order to meet its current expenses. While this practice has been successfully pursued to the present time and has
been productive of a large saving to the City, it can only continue
to be pursued so long as the funds derived from the proceeds of
the sale of corporate stock and the other funds are not actually
required for their respective purposes. It has been shown that
the debt of the City is annually increasing at the rate of three
millions of dollars a year because of the failure to collect the total
amount of taxes levied. The City is not paying its way year by
year, but is borrowing from the future for current expenses. In
the process it has accumulated a very considerable indebtedness
on account of uncollectible taxes.
Having explained the conditions that exist we are now confronted with the problem of existing arrears of uncollectible taxes
and of the annual deficiency which will continue to increase unless
provision is made for the future.
Existing Deficiency Caused by Arrears of Uncollectible Taxes.
We have already shown the total amount of the arrears of
taxes, a part of which is uncollectible. The amount which is uncollectible is too large to raise by taxation in any one year, and in
order to make good the deficiency, provision must be made for
the issuance of corporate stock to the amount of the existing arrears which are uncollectible. The records of the receiver of
taxes and of the Law Department contain sufficient data to de



28


termine with almost absolute accuracy the exact amount of the
arrears that are uncollectible; but even without a thorough inspection of the records of these departments an estimate may be
made which will be sufficiently accurate for the purposes of this
report. It may be said with certainty that practically all the
arrears of personal taxes levied prior to 1899 are uncollectible, and
that all personal taxes levied from I899 to I903 which are in arrears are uncollectible. The loss on account of special franchise
taxes for the years 1900 to I902 will not exceed one-third of the
levy, and from this must be deducted the amount already canceled which is offset by deficiency items. The total amount is reduced by the balance of the amount provided for deficiencies. The
amount of uncollectible arears is therefore about as follows:
Uncollected personal taxes levied prior to I899.. $Io,064,533 48
Uncollected personal taxes levied from 1899 to
1903..................................   20,587,598 I7
One-third of the special franchise
taxes of 1990, 1901 and I902. $4,981,382 29
Less amount of cancellation...... 1,488,395 05
3,492,987 24
$34,I45,I I8 89
Less balance of amount provided for deficiencies
in  prior  tax  levies.......................  353,945  94
Total......................... $33,79I,I72  95
The Committee therefore proposes the passage of an act which
shall require the Board of Estimate and Apportionment to authorize the issue of corporate stock of The City of New York to
an amount equal to so much of the deficiency on the first day of
January, 1905, in the product of taxes theretofore levied and
deemed by the Board to be uncollectible, as shall not have been
provided for in prior tax levies or by the authorization of the
issue of corporate stock of The City of New York.
It is to be noted that the Committee does not propose to require the immediate issue of the corporate stock authorized. It
will not Ibe necessary to issue all that is authorized until the needs
of the city shall demand it. The issue may be distributed over
several years if sufficient funds are on hand to meet payments as
they fall due.




29


On the average The City of New York spends every month
more than eight million dollars for ordinary purposes, and four
or five millions on account of permanent improvements, so that
even should the Comptroller find it expedient to issue at one time
the whole amount of bonds authorized, the proceeds would pay
the city bills for only two or three months. In view of the existing deficit in the funds provided for permanent improvements
the money at the command of the Comptroller will not be excessive.
THE ANNUAL DEFICIENCY.
The existing law to provide against an accumulation of arrears
is inadequate, as has already been shown; it is contained in section 248 of the Charter, by which the- Board of Aldermen is directed to include in any ordinance imposing and levying taxes
such sum as the Board shall deem necessary, not to exceed three
per centum, to provide for deficiencies in the actual product of the
amount of taxes imposed and levied. The arrears exceed three
per cent., so that this power is insufficient; moreover, it is made
the duty of the Board to make an estimate as to the future. It is
far better to deal with known quantities than with future estimates, and by the amendment we propose all arrears will be provided for annually in the Budget.
By chapter 639 of the Laws of I905 an attempt was made to
provide for the deficiency in the collection of personal taxes, by
amending section I69 of the Charter. The amendment provides
that corporate stock of The City of New York shall be issued to
the amount of personal taxes in arrears for five years. This provision is inadequate in that it does not provide for the deficiency
caused by the uncollectible taxes on real estate. The amendment
is undesirable because it provides for a continuous increase in the
indebtedness of the City, by the amount of uncollected personal
taxes; it, moreover, fixes a standard of uncertain character. Instead of providing for taxes which are uncollectible, it provides
for all which are five years in arrears, which may or may not be
uncollectible. It is proposed, therefore, to repeal the amendment
to section I69 of the Charter, adopted in I9o5.
Section 230 sets forth the mandatory items to be included inthe annual estimate. It is proposed to amend this section by
requiring the Board of Estimate to include in its final estimate a
sum equal to so much of the deficiency, on the preceding ISt day




30


of January, in the product of taxes theretofore levied and deemed
by the Board to be uncollectible, as shall not have been provided
for in prior tax levies or by the authorization of the issue of corporate stock of The City of New York.
By the passage of the act providing for the issue of corporate
stock to supply the uncollectible deficiency in the product of taxes
outstanding January I, I905, all arrears on that date will be
funded. The proposed amendment to section 230 adheres to the
same language, so that there will be an annual clearance of all
uncollectible arrears, and an erroneous estimate of one year will
be corrected the following year.
In October, 1906, the Board of Estimate will include in the
Budget all uncollectible arrears as the same shall be on January I,
I906, and annually thereafter the amount of all uncollectible taxes
outstanding on the first of the year must be provided for in the
Budget.
Section 248, being superseded, will be repealed after the deficiency item is added to the tax levy for I906.
WHAT TAXES ARE UNCOLLECTIBLE.
The question has been considered whether it is desirable to
define just what taxes are uncollectible, or to leave this determination to the Board of Estimate, and the conclusion has been
reached that it is best to leave this administrative detail to the
Board without definite instructions. The Comptroller is a member
of the Board, and the Receiver of Taxes is a subordinate of the
Comptroller. The Receiver of Taxes has records which furnish
most of the information necessary. The additional information
required can be obtained from the Corporation Counsel, who is
required to advise the Board of Estimate or any officer of the
City.
Taxes on Real Estate.
Taxes on real estate are uncollectible when assessments are
reduced, or in the case of exempt property vacated, by judicial decision, or by the action of the tax commissioners. When such
decisions are rendered an order is served upon the receiver of
taxes and his records show the amount of the tax lost.
Taxes on Personal Property.
There is a large amount of taxes on personal property which
is uncollectible. The fact that such taxes are uncollectible can in




3I


most cases be ascertained with certainty. The facts appear in
the following ways:
First-All taxes on personal property for the collection of
which no action has been commenced within the time limited by
section 934 are outlawed and unqollectible. When the attorney
for the collection of arrears is satisfied by sufficient evidence that
the person assessed has no property liable to execution, actions
are not pressed. The records of the Bureau for the Collection of
Arrears of Personal Taxes show such cases.
Second-All cases in which the assessment has been reduced
or vacated by judicial, decision. This may happen in four ways:
When the assessment has been vacated or reduced as a result of a
review of the action of the Tax Commissioners upon a writ of
certiorari; when the assessment has been vacated because the person assessed was a non-resident; when pursuant to an offer of
judgment a part of the tax has been accepted as payment in full;
when pursuant to section 934 of the Charter or section 259a of the
Tax Law an order has been entered remitting part or all of the
tax.
Third-All cases in which the tax has been remitted or reduced by the tax commissioners after the delivery of the tax
rolls to the receiver of taxes.
Fourth-Taxes for the collection of which actions have been
brought, judgments obtained, executions issued and returned unsatisfied. These cases offer about the only element of uncertainty,
for a judgment is good for twenty years, and although worthless
at present, it may sometime have a value. At the same time a
chance of anything ever being collected on such judgments is very
remote.
It will be observed that all the facts necessary to determine
whether taxes on personal property are collectible or not are
within the knowledge of the Corporation Counsel and Receiver of
Taxes. 




32


Method of Computing the City Debt
In order that the financial methods of the City may be better
understood in connection with this report we present the following summary of the manner of computing the debt of the City
for the purpose of determining its borrowing capacity or margin
for incurring further indebtedness. The borrowing capacity is
arrived at as follows:
From the 10 per cent. of the assessed valuation of real estate
for purposes of taxation there is deducted:
Ist. The net funded debt.
2nd. The liability incurred by the City on account of contracts
entered into, in excess of the credit balances in the
funds or accounts, applicable to such contracts.
3rd. The liability incurred by the City for lands acquired in
excess of the credit balances in the funds applicable
thereto.
4th. The liability of the City for judgments against the corporation.
5th. Revenue bonds issued in any year for account of taxes
levied in prior years.
Net Funded Debt.
The gross funded debt includes all stocks and bonds except
revenue bonds issued in anticipation of taxes. The net funded
debt is arrived at by subtracting from the gross funded debt the
amount of the various county debts and also the amount of the
gross funded debt held by the Commissioners of the Sinking Fund
for investment for account of the various sinking funds.
Contract Liability.
The liability on contracts is arrived at by deducting from the
estimated cost of the several contracts, the payments made on
account and the balance to the credit of the fund or account provided for the liquidation of each contract liability. The balance
then remaining is treated as indebtedness on account of contracts.
Land Liability.
The liability for lands acquired includes all property, the title
to which has vested in the City, but which has not been paid for.




33'


The cost is estimated where actual figures are not obtainable and
the estimate is usually based upon tax valuations furnished at the'
time when the proceeding to acquire the property is authorized by
the Board of Estimate and Apportionment. From such estimated
cost, or actual cost where it is known, there are deducted the balances standing to the credit of the accounts or funds ultimately
chargeable with the obligation. If a fund or account is chargeable with contract liability, as well as land liability, the balance to
the credit of the fund is first applied on account of the contract
liability and the surplus, if any, applied in reduction of the land
liability. The balances thus arrived at are treated as liability for
lands acquired.
Liability for Judgments.
The estimated amount of $2,000,000 is usually carried as indebtedness on account of judgments, this being considered a very
liberal estimate.
Revenue Bonds.
Revenue bonds issued in anticipation of the collection of taxes
for years prior to the years of issue are treated as debt. The Constitution provides:
"This section shall not be construed to prevent the issuing of
certificates of indebtedness or revenue bonds issued in anticipation
of the collection of taxes for amounts actually contained or to be
contained in the taxes for the year when such certificates or revenue bonds are issued and payable out of such taxes."




34


Report as to the Propriety of a Change in the Time of
Collecting Taxes.
Your Committee presents a report made by Mr. Bell upon the
bill introduced in the Legislature of I905, by which it was sought
to advance the date for the payment of taxes in order to obviate
the necessity for borrowing money in anticipation of the collection
of taxes. It is not necessary for the Committee to express an
opinion upon the merits of this particular bill, for the reason that
after careful consideration of the whole subject your Committee
is convinced that it is not desirable to change the present method
of providing current funds for the City's needs. Briefly described, the present plan is this: The City starts the fiscal year
on the first of January with practically no money, and receives no
income until the first of October, when taxes are payable. During this time the City is authorized to borrow on short time revenue bonds to meet current expenses, these bonds being issued in
anticipation of the collection of the taxes for the current year.
These bonds are not a charge against the City's debt limit. Under
ordinary circumstances the City pays from 252 to 4 per cent. interest on these short time loans, though in exceptional times of
tight money the City has to pay a higher rate.
Those who object to this method of financing the City contend
that it is wasteful and costly for the City to live on borrowed
money for its current needs, because of the amount of interest
that has to be paid, which is a charge upon the taxpayers. It is
moreover often assumed that this condition is the result of carelessness and extravagance in past years, and not of any carefully
planned system. The fact is, however, that this method was
adopted after due consideration for what your Committee believes
to be good and sufficient reasons. Under the present method
there is not at any time in the City Treasury a sum of money in
excess of the balance which the City should have on hand, whereas
under any plan which would obviate the necessity for borrowing
there would be large sums in the City Treasury far in excess of its
necessities. Upon such large sums the City could not obtain a
high rate of interest. Ordinarily it receives 2 per cent. upon its
deposits in city banks and trust companies. While the City has
been fortunate in having men of thorough integrity and great
ability at the head of the Finance Department, the Committee




35
does not deem that it is wise to count too confidently upon there
never being an exception to that condition, and put upon the
Comptroller and Chamberlain the burden of caring for larger
sums of money at any one time than is necessary. Indeed, the
Comptroller and Chamberlain would have difficulty in properly
placing fifty millions of dollars or more which they might have
on hand in case the City were relieved of the necessity of borrowing for current needs. It is clear that the burden of caring for
so large a sumn would be onerous, and the temptation to grant
favors by the disposition of deposits would be severe.
The Committee has fairly faced the only argument advanced,
which is that if the City were not obliged to borrow, the sum now
paid as interest would be saved to taxpayers. This argument
appears to be without merit. The only source from which the
City can obtain current moneys is the payment of taxes. If taxpayers provide a sum sufficiently large to obviate the necessity
for borrowing, the taxpayers lose the use of the money so advanced, which presumably in any state of the money market is
worth more to taxpayers than the interest which the City could
obtain for deposits in banks and trust companies. Thus under
ordinary circumstances the City pays for loans 3 per cent. or 32
per cent. and obtains 2 per cent. upon its deposits. Under such
conditions the money is certainly worth more to the taxpayers, as
a rule, than the 3 per cent. or 32 per cent. which the City is
obliged to pay. If, on the other hand, the conditions of the money
market are such that the City is obliged to pay the highest rate
of interest, under these conditions again the money is worth more
to the taxpayers, for such use as they can make of it, than the
sum the City has to pay in interest.
These considerations and perhaps others were undoubtedly in
the minds of those who devised the system under which The City
of New York has been financed for thirty years and more. Without regard to the merit of any particular plan which may be advanced for obviating the necessity of borrowing in anticipation of
the collection of taxes, the Committee believes that the present
plan is the best which can be devised under all the circumstances
as they now exist.




36


Report of Mr. Bell Upon the Bill to Advance the Date
for Payment of Taxes.
G. O. No. 32.           SENATE BILL No. 118,329. INT. 103.
AN ACT to Amend the Greater New York Charter, as Amended
by Chapter 466 of the Laws of I90I, and Subsequent
Amendments Thereto, Relative to Levying Taxes and the
Collection Thereof.
OBJECTIONS.
This bill seeks, through amendments to twenty-seven sections
of chapter 466 of the Laws of go90 (Greater New York Charter),
to so change the law relating to assessments and taxation that
taxes now due and payable on the first Monday in October of each
year may be paid on the first Monday in January of the same
year, thus advancing the collection of taxes nine months-the object sought by this advancement being to do away with the present
necessity of issuing short term bonds in anticipation of the collection of the tax revenue.
If the object could be attained by this bill the estimated saving
in interest would be about $I,500,ooo each year.
The plan of the bill, however, is so radically defective that it
ought not to become a law.
The plan of the bill proceeds upon the theory that the only way
to advance the payment of taxes nine months is to arbitrarily do
away with the field work, revision, hearings and other details hitherto and under existing law deemed essential to a just and legal
assessment.
To secure this arbitrary assessment the duplicate of the I906
roll is to be " used as the basis for determining the amolnt of tax
to be levied on real and personal estate of the several boroughs
for the year I907 (section 892a)."
The books containing these duplicate assessments are to be
open for public inspection, examination and correction from the
second Monday in January to the first day of April, I9o6. On
the last-named day the books "shall be closed, to enable the
Board of Taxes and Assessments to prepare assessment rolls of
the several boroughs for delivery to the Board of Aldermen"
(section 892).




37


During the months of April and May the Commissioners may
act upon applications, take testimony, examine applicants for the
reduction of assessments, provided such applications were filed
prior to the thirty-first day of March Dreceding (section 895, New
York Charter).
Section 2 of the new bill provides:
"Nothing in this act contained shall be deemed or construed as repealing or amending any of the sections of the
Greater New York Charter, as amended by chapter 466
of the Laws of goI, in so far as they in any way relate to
the making of the budget, and also the annual record of
assessed valuations of the real and personal estate of the
several boroughs on which the taxes for the year 1905 and
i0o6 are to be determined, nor is it to affect in any way the
levying or collection of the taxes for said years I905 and
I906, but the said budget and annual records for said years
shall be prepared and the levying and collection of the
taxes for said years shall proceed in the manner now provided by law and as if the act had not been passed."
As the act is to take effect on the first day of June, I905, it
is clear that the reservation in section 2, above quoted, applies
only to the assessments and taxes for the years I905 and I906.
It would appear equally clear that the only specific reservation
of the old law affecting the duplicate roll for 19o7 is that provided for in the new section 892a, as follows:
Both of said records (1906-I907) shall be subject vo
the provisions contained in section 892 of this act, except
that the said records shall remain open for public inspection, examination and correction from the second Monday
in January until the first day of April in said year, I906.
The second or duplicate record shall be used as the basis
for determining the amount of tax to be levied on real and
personal estate of the several boroughs for the year I907."
Section 2 provides that:
"The annual record of assessed valuations for the taxes
to be levied for the year I907 shall be subject to the same
changes and corrections as the annual record of assessed
valuations for the taxes to be levied for the year I906;




38


such corrections and changes shall be made within the
same period, at the same time and in the same manner oneach of said records; provided, however, that if it shall be
found necessary, by reason -of changes in valuations of
real and personal property subsequent to the preparation
of said annual record, to make additional changes or corrections, that such additional changes or corrections may
be made at any time prior to the first of September, I906,
but no increase in valuations by reason of said changes
shall be made, except upon notice given to the individual
or corporation affected by such increase, at least ten days
before the fifteenth day of August of said year."
From this it may be fairly construed that the duplicate rolls
for I907 are open for public inspection, examination and correction from the second Monday of January until the first day of
April, I906, as provided in amended section 892a of the new bill,
and that under section 2 of the act parties assessed thereon may
be heard by the Commissioners during April and May upon
applications for reduction of assessments upon either real or
personal property filed in their offices on or before the thirty-first
day of March, I906.
The proviso in section 2-that changes and corrections may
be made in the rolls of I907 at any time prior to the first day of
September, 1906, if " found necessary by reason of changes in
valuations of real and personal property subsequent to the preparation of said annual record," can hardly be construed as
authorizing the addition of new names or new entries upon the
rolls for I907, after the first day of April, or any hearing whatever, to those assessed on said rolls, except to those whose assessments are to be increased. Taxpayers in this class are entitled
to notice, and, consequently, may be heard on such notice at any
time prior to September I, I906. The vast majority of the property-owners assessed on the I907 rolls, for no better reason than
that they were liable on the rolls for I906, have no opportunity
to be heard under this bill. Their real estate in I907 may be less
in value than in I906, because of the destruction of the improvements thereon or for other reasons. Their personal property
liable in I906 may have been lost, sold or converted into nontaxable property during that year, yet under this bill they have
no opportunity to establish the facts, as no public inspection or




39


examination of the rolls for 90o7 after March 31, I906, is provided for, either through personal notice (except in increase
cases) or by publication in the newspapers or the City Record,
as now required by law.
This deprivation of the right of property-owners to be heard
on their assessments before they ripen into a-tax is a violation of
a fundamental right guaranteed by the State Constitution.
The authorities. relied upon to support this conclusion are
numerous. Some of the' leading ones are included in and commented upon in the case of Stuart vs. Palmer, 74 N. Y., I83. In
that case the Court says:
"The Legislature can no more arbitrarily impose an
assessment for which property may be taken and sold than
it can render a judgment against a person without a hearing. It is a rule founded on the first principles of natural
justice, older than written constitutions, that a citizen
shall not be deprived of his life, liberty or property without an opportunity to be heard in defense of his rights,
and the constitutional provision that no person shall be
deprived of these 'without due process of law' has its
foundation in this rule. The provision is the most important guaranty of personal rights to be found in the Federal
or State Constitution. It is a limitation upon arbitrary
power and is a guaranty against arbitrary legislation.
No citizen shall arbitrarily be deprived of his life, liberty
or property. This the Legislature can not do or authorize
to be done. 'Due process of law' is not confined to
judicial proceedings, but extends to every case which may
deprive a citizen of life, liberty or property, whether the
proceedings be judicial, administrative or executive in its
nature (Weimer vs. Bruienbury, 30 Mich., 20I). This
great guaranty is always and everywhere present to protect the citizen against arbitrary interference with these
sacred rights."
This arbitrary feature of the bill, growing out of the duplicate
roll plan, which necessarily creates a tax liability for 1907 during
the year Io96, and before the tax for I906 is due and payable, is
so unjust, that no plea of expediency can justify its adoption, and
its presence as the basic principle in the McCarren bill should be
fatal to its enactment.




40


The objections to the bill may be summarized as follows:
I. The duplicate roll plan is open to serious objections. No
provision is made for the public inspection, examination and correction of the rolls of I907, except at the time when the books of
annual record are open for public inspection, examination and
correction of the assessments for I906. As all property-owners
outside of New York pave an opportunity to be heard on assessments against them for the year I907, failure to grant this right
in the pending bill is an unjust discrimination against the property-owners of Greater New York.
2. Changing the period for field work from September, October, November and December to January, February, March and
April is objectionable. It is transferring important outdoor work
from the best to the worst months (except April) in the year.
January, February and March are usually cold, wintry months.
With snow on the ground it would be difficult to trace boundary
lines or identify stakes or monuments, while the low temperature
wouild materially interfere with the work of recording data in
the books carried by the deputies. The necessary work could not
be properly done in these months.
3. Changing the "grievance" period from the second Monday of January to April I in each year —to May I to July I-is
unwise. Taken in connection with the period for hearings (April
and May), on applications for reductions, filed prior to the closing of the books on April I, and the change proposed in this
bill, confining such work to July and August, we shall have the
hottest months of the year for the most important work of the
Department, making necessary the presence of the taxpayer and
those representing his interests at a time when, usually, they are
out of the city for needed recreation and health.
4. By advancing the time for paying taxes on the plan proposed, the loss from the rolls for I907 would be —loss of the
natural increment of values due to growth and improvements for
I906-at least $0oo,oo0,0oo.
Loss from new estates, new residents and newly-organized
corporations for the same year, $Ioo,ooo,ooo.
Loss of the Special Franchise for I907, estimated at $375,000,000.
Estimated total loss of assessments to the tax rolls of I907,
$575,oo0,0o0, or, at present rates, a loss in taxes of $8,702,I65.




41


5. Amended section 9oo of the new bill makes it obligatory
on the part of the Comptroller "to prepare and submit to the
Board of Aldermen, at least two weeks before its annual meeting
in each and every year, for the purpose of imposing the annual
taxes, a'statement setting forth the amounts by law authorized to
be raised by tax." He is required to give "an estimate of the
probable amount of receipts into the City Treasury during Lhe
fiscal year next succeeded from all the sources of revenue of
the general funds, including surplus revenue from the sinking
funds of the Mayor, Aldermen and Commonalty of The' City of
New York, other than the surplus revenues of any such sinking
funds for the payment of interest, on the City debt of the municipal corporation known as The Mayor, Aldermen and Commonalty of The City of New York, or the like debts of the municipal and public corporations by this act consolidated as aforesaid, and the said Board of Aldermen is hereby authorized and
directed to deduct the amount of such estimated receipt from the
aggregate amount of all the various sums which, by law, they are
required to order and cause to be raised by tax for the purposes aforesaid, and to cause to be raised by tax only the balance
of such aggregate amount after making such deductions."
No such obligation is imposed upon the Comptroller in the
new bill for the tax year of I907. As the annual meeting of the
Board of Aldermen would be the first Monday of July, I906, and
the report required from the Comptroller under section 9oo refers
to said annual meeting and tax for I906, and under the new bill
would refer to the annual meeting of the Board ofAldermen
October I, I907, relating to the tax for I908, it would appear
that no provision has been made in the new bill for this important
-statement from the Comptroller to the Board of Aldermen at
the meeting September 15, I906, authorized by the new bill, for
the purpose of fixing the tax rates on the duplicate assessment
rolls. for I907.
6. Section 2 of the new bill required the Board of'Taxes and
Assessments to certify to the correctness of the rolls of I907.
"The rolls, so certified, must, on the I5th day of September,
1906, be delivered by' the Board of Taxes and Assessments to the
Board of Aldermen, which shall meet at noon on that day at the
-City Hall, or usual place of meeting, for the purpose of receiving the same and for the purpose of performing such other duties
in relation thereto as are prescribed by law."
*.*....*  * *




42


As the only duties "prescribed by law" appear to relate to
the annual meeting of the Board of Aldermen to be held on the
first Monday in July, I9o6, for the tax year of I906, and, under
the new-bill, the first day of October, 1907, for the year of I908,
it nqay be open to question whether the failure in section 2 of the
new bill to provide for the Comptroller's statement required under
section goo to be submitted to the Board of Aldermen "at least
two weeks before its annual meeting in each and every year for
the purpose of imposing the annual taxes," and the further failure to specifically refer to the sections imposing certain duties to
be performed by the Board of Aldermen at their annual meeting, or to reiterate the powers therein conferred, do not leave
the Board of Aldermen without power to fix the tax rate for
the assessments on the duplicate roll for I907, and to perform
other important duties relating to said assessments at their meeting, to be held, as provided in section 2 of the new bill, on the
fifteenth day of September, I906.
7. Section 907 requires the Board of Taxes and Assessments
to furnish the Supervisor of the City Record with a copy of the
Annual Record of the assessed valuation of real estate within
three weeks after the delivery of the assessment rolls to the
Board of Aldermen. Under section 1527 (New York Charter)
this copy is to be published in the City Record within ninety days
after the delivery of said copy to the Supervisor. This would require the publication of the assessment rolls of I9o6 during the
last week of October, I906, or two weeks after the copy of the
duplicate roll for I907 has been furnished to the Supervisor of
the City Record under the same law. As this publication for each
year will cost the City from $4o,ooo to $50,000, it would appear
a waste of time and money to publish the assessment rolls for
I007, practically covering the same data as the rolls for I906 and
published within two months after the publication of the rolls for
I906.
8. Under this bill the tax for I906 becomes "due and payable" on the first Monday of October, I906. The tax for I907
" may be paid " January I, I907, three months after the time
when the I906 tax is due and payable. This will impose a hardship upon the average taxpayer and will force many to borrow
money for prompt payment of tax or compel them to defer payment until the tax becomes a lien and interest at 7 per cent. per
annum begins to run.:":  *  *:..:
*  ~ e e. ee.  *  ~




43


9. Under this bill a rebate of 3 per cent. per annum is allowed
on payments made between the Ist of January, I9o7, and December I, I907. Those who borrow money to pay their taxes
must pay 5 or 6 per cent. interest. The rebate allowed is no inducement to those who are forced to borrow or to those who
can profitably use their money. Thus, failure to collect the taxes
in the early months of the year would defeat the object of the
bill and compel the issue of short-term bonds.
10. Beginning the work of assessments at the first of the year
instead of the last, makes it impossible to include in the rolls
the accretions of the year, due to natural growth, improvements,
etc., estimated at $Ioo,ooo,ooo; new estates; corporations organized during the year; the personal property of new residents,
etc., estimated at $Ioo,ooo,ooO. Special franchise assessments estimated at $375,ooo,ooo-a total loss in assessments on the rolls
for T907 of $575,000,000, or a tax loss at 1.51 of $8,702,I65.
I. Under existing law the tax becomes a lien on the first
Monday in October, about 82 months after the opening of the
books of Annual Record for public inspection, etc. Under the
new bill the tax becomes a lien October I of the year following
the preparation of the rolls, or 17 months after the opening of
the annual record for public inspection, etc.
12. Under existing law interest on unpaid taxes runs from
January I, or three months and a half after the tax rolls are
delivered to the Receiver of Taxes. Under the new bill interest
on unpaid taxes runs from October i in the year following the
delivery of the tax rolls to the Receiver of Taxes, or a period
of nine months after the delivery of the rolls to the Receiver.
The accompanying statement shows in comparative form the
essential features of the law now in force and the changes therein
under the proposed amendments.:,:,.......-.




SENATE BILL NO. 118,329.
Relative to Levying Taxes and the Collection Thereof.


CHARACTER OF WORK.


UNDER EXISTING LAWS.


1


UNDER THE PROPOSED LAW.


I. Field Work................. 
2. Books open for inspection and correction...
3. Hearings-on applications filed........
4. Final closing of books and making up
roll.............................
5. Certification of rolls to  Board of
Alderm en.......................
6. Extension of tax on return from
Board of Aldermen...............
7. Copy of rolls to Supervisor of City
Record..........................
8. Delivery of rolls to Receiver of Taxes.
9. Taxes become due and payable......
IO. Taxes  becomea  lien................
II. Time for rebate and rate allowed.... 
12. One per cent. penalty.................
I3. Interest begins on arrears-7 per cent. t
14. Taxes may be paid without interest)
or  penalty.......................


ISt Tuesday in September to 2d Monday
in   January..........................
2d Monday in January to April I..........
April  I  to  June  I.........................
June I to ist Monday in July............
ISt  M onday  in  July.......................
From  about the I5th of August to the
I5th  of  September....................
Three weeks from Ist Monday in July....
September  I.............................
ist Monday of October-(I5 days after)
filing with Receiver of Taxes.........
Ist Monday of October-date of filing 
with Receiver of Taxes..............
October and November-rate 6 per cent.
per  annum.........................
December I to January I.................
January  i-(three months after filing 
with Reciever of Taxes).............
From ist Monday in October to December  I  (two  months)..................




I


ist Monday in January to May I.
ist day of May to July i.
July I to September i.
September I to October I.
ISt day of October,
From about the I5th of November to December i.
Three weeks from October I.
December I.
May be paid ist Monday of January (30
days after filing with Receiver of Taxes).
ist Monday of October, or ten months after
the rolls have been filed with Receiver of
Taxes, or seventeen months after the
books are opened for inspection, etc.
From January i to December I-rate 3 per
cent. per annum.
No penalty.
December I dating from October — (nine
months after filing with Receiver of
Taxes).
From January I to December I (eleven
months).


I




-— c'
--




45


Amendment in Relation to Omitted Property.
Under existing law real and personal property not appearing
on the assessment rolls on the second Monday of January-the
date when the books of annual record are opened for public inspection, examination and correction-cannot be included in the
aggregate of assessed valuations subject to taxation.
As the tax liability depends upon the ownership of taxable
property on a certain date, it appears unjust that its omission
from the rolls on that date, through clerical oversight or otherwise, should place it beyond the power of the taxing authorities,
even though its existence may have been brought to their knowledge before the closing of the books. As this is manifestly unjust
to the general taxpayer, the Commission recommend the following proposed amendment to the Charter:
AN ACT to amend The Greater New York Charter relative
to the power of the Department of Taxes and Assessments to add certain property and names to the
assessment rolls.
The People of the State of New York, represented in Senate
and Assembly, do enact as follows:
SECTION I. Chapter four hundred and sixty-six, title one of
chapter seventeen, laws of nienteen hundred and one, is hereby
amended by inserting therein a new section, to be section eight
hundred and ninety-four a thereof and to read as follows:
SECTION 894a. So long as the books of annual record
of the assessed valuation of real and personal estate of the
several boroughs remain open for public inspection, examination and correction, the board of taxes and assessments,
after giving at least ten days prior personal notice to the
party in interest, may add to the rolls of assessment of
such annual record any real estate, or the name of the
owner of any personal estate, and also the assessed valuation of any such real or personal estate that may have been
omitted from such rolls on the day of the opening of such
books.
SECTION 2. This act shall take effect imm'ediately.




46


Amendment in Relation to Applications for Remission or
Reduction of Taxes.
The following amendment of section 897, New York Charter,
is recommended. Its purpose is to correct the section so as more
clearly to express its intent and to place a reasonable limitation
on the time within which applications for remission or reduction
of taxes may be made to the Board of Taxes and Assessments:
AN ACT to amend The Greater New York Charter relative
to the power of the Department of Taxes and Assessments to remit or reduce a tax.
The People of the State of New York, represented in
Senate and Assembly, do enact as follows:
SECTION I. Section eight hundred and ninety-seven of
The Greater New York Charter, as amended by chapter
one hundred and ninety-two of the laws of nineteen hundred and two, is hereby amended to read as follows:
SECTION 897. At any time within one year after the delivery
of the books to the receiver of taxes for the collection of any tax
upon real or personal estate if, in the opinion of the corporation
counsel lawful cause shall have been shown, the board of taxes
and assessments by the.vote of a majority of all the commissioners, may remit or may reduce any such tax which by such
board shall be found to be erroneous or excessive; but no such
tax shall be so remitted or reduced except upon satisfactory proof
that application for relief within the period prescribed by other
laws for the correction of assessments has 'been prevented by illness or by absence from the city. Nothing herein contained is
intended to affect, or shall affect, any provision of section 934 of
The Greater New York Charter or of section 259a of the tax law.
SECTION 2. This act shall take effect immediately.




Amendment in Relation to the Refunding      by the State
of Uncollected Direct Taxes.
AN ACT to-amend the Tax Law relating to the cancellation
and reduction of assessments and the remission of
taxes.
The People of the State of New York, represented in Senate
and Assembly, do enact as follozs:
SECTION I. Chapter nine hundred and eight of the laws of
eighteen hundred and ninety-six, entitled "An act in relation to
taxation, constituting chapter twenty-four of the General Laws,"
is hereby amended by inserting therein a new section, to be section.one hundred and ten thereof, and to read:


SECTION I o. Assessments Canceled or Reduced. In every
case where an assessment included in the equalized valuation of
real and personal property, as fixed by the state board of equalization, shall have been canceled or reduced, or the tax thereon
shall have been duly remitted, by final order of the court, or
under any provision of law, the state comptroller, on application
of the treasurer of the county wherein such assessment shall have
been made, or if made in the City of New York, on the application
of the comptroller of said city, and on satisfactory proof of such
cancellation, reduction or remission, shall cancel, if unpaid, and
if paid,. shall refund, the state tax imposed and levied upon such
canceled or reduced assessment, or included in such remitted
tax, provided that within two years after such final cancellation
or reduction, or such final remission, application for relief under
the provisions of this section shall have been filed with the state
comptroller.
SECTION 2. This act shall take effect immediately.




REMARKS..SECTION  IO. The purpose of this amendment is to give
authority to the State Comptroller to cancel, if unpaid, and. to
refund, if paid, any State tax imposed upon assessments that have
been legally set aside by final action of the courts, or canceled
or reduced by other legal authority, provided such assessments




48.
were included in the equalized assessed valuations upon which the
State tax was imposed.
The imposition of a tax implies that something exists capable
of being taxed. If there is nothing to tax, a tax erroneously
imposed should not stand. If the State is convinced that the
basis of the tax has been destroyed by the courts or other legal
authority, the tax itself should be canceled, if unpaid, or refunded,
if paid.
The section gives the City substantially what the City and
State give the individual under existing laws-relief from a tax
erroneously imposed.




ADVISORY COMMISSION
ON


TAXATION


AND FINANCE


COMMITTEE ON
TAXATION AND REVENUE
REPORT
OF
MR. PURDY


TH?  ON  -ON
THE PERSONAL PROPERTY TAX


JUNE 6, 1905




i
r
i
r




5I


Report of Lawson Purdy on the Personal Property Tax,
Committee on Taxation and Revenue:
GENTLEMEN-In accordance with your request I submit the
following report upon two questions. First: Is it desirable to
strengthen the-provisions of the law for the collection of taxes
upon the personal property of non-residents, and to subject to
taxation additional personal property of non-residents? Second:
Should the provisions with reference to the deduction of debts
from personal assets be so changed that debts may only be de-ducted from credits?
The literature upon the subject of the general property tax
as applied to the taxation of personal property is so voluminous
that it seems unnecessary to add to it by any lengthy discussion
of the subject as an original contribution. Tax Commissions
have been appointed in many of the States to consider questions
of this character, and numerous books and pamphlets have been
written by students of the subject, which have added greatly to
our general knowledge. The brief report which follows is made
up almost entirely from quotations from these various treatises
and reports. In presenting evidence with regard to the expediency of making any change in the law with reference-to the
deduction of debts, I have selected those States in which it is not
permitted to deduct debts from personal assets other than credits.
The general property tax as applied to the taxation of personal property is so thoroughly discredited that any attempt to
make it more effective can only serve to delay its inevitable
downfall. The greatest difficulty in securing the repeal of any
law imposing a tax is to be found in the amount of revenue
which the tax produces. The smaller the revenue the easier it
is to repeal the law. It is plain that our law might be changed
so as to produce a larger revenue for a time, but in the light of
all experience it seems that this would only increase the injustice
of the law and render its repeal more difficult.
HISTORY OF THE GENERAL PROPERTY TAX.
* "Historically, the property tax was once well-nigh universal.
Far from being an original idea which the American instinctively
adopted, it is found in all early societies whose economic con* The General Property Tax, pp. 60 and 6I, Edwin R. A. Seligman, 1890. \ Also
in his Essays in Taxation.




52


ditions were similar to those of the American colonies. It was
the first crude attempt to attain a semblance of equity, and'it at
first roughly responded to the demands of democratic justice.
In a community mainly agricultural, the property tax was not
unsuited to the social conditions. But as soon as commercial
and industrial considerations came to the foreground in national
or municipal life, the property tax decayed, became a shadow of
its former self and ultimately turned into a tax on real property,
while professing to be a tax on all property. The disparity
between facts and appearance, between practice and theory, everywhere became so evident and engendered such misery that the
property tax was gradually relegated to a subordinate position
in the fiscal system and was at last completely abolished. All
attempts to stem the current and to prolong the tax by a more
stringent administration had. no effect but that of injurious reaction on the morale of the community. America is to-day the
only great nation deaf to the warnings of history. But it is fast
nearing the stage when it, too, will have Ito submit to the inevitable."
Mr. David A. Wells thus sums up the experience of other
countries:
*" Origin and History of the General Property Tax-The
idea that in order to tax equitably it is necessary to assess everything capable of resulting in the obtaining of revenue is not
original with the American people. Its inception dates back to
the dawn of civilization, and its development may be regarded as
in the nature of an economic evolution. In the incipient stages of
society, as already pointed out, property consisted exclusively of
things tangible and visible —lands, buildings, cattle, slaves, agricultural products, household effects and implements-and what
was exacted by rulers or chiefs of their subjects was arbitrary
proportions of such kinds of property or of personal service, and
was not in any proper sense taxation, but tribute. For thousands
of years there were no credits or material evidences of indebtedness, as there are none at the present time among barbarians or
half-civilized people; for a knowledge of letters, of the art of
writing, and a somewhat durable and portable material to write
upon were essential prerequisites for their existence, the earliest
evidence of the recognition of anything like a mortgage being the
inscription on certain clay tablets excavated from the ruins of
* Theory and Practice of Taxation, pp. 432-437, David A. Wells, Igoo.




53


the ancient' cities of Babylon and' Assyria;, which were evidently
the highest results of long and slowly developing civilization.
In fact, in the early stages of society there was no important form
of capital other than landed property and the instrumentalities,
including slaves, for its cultivation, and so far as the system' for
obtaining revenue for the rulers of state merited the name of
taxation, it was practically a.' land' tax.
"As civilization advanced, slavery gradually broke down;
trade or traffic between individuals or adjacent communities extended and became commerce; free labor appeared; capital developed and multiplied the forms of visible, tangible property.
Then the system of obtaining revenue began to have the characteristics of a general property tax; and as the coincidence of great
value with small bulk in some forms of tangible, visible property favored concealment, some methods of obtaining revenue
from property other than mere inspection became necessary, and
were obtained by the Romans in the latter days of their empire
by endowing their assessors and taxgatherers (as before shown)
with the power to administer torture to unwilling taxpayers, a
method that was followed and perpetuated until within a very
recent period by the rulers of most Asiatic countries; and in later
days, when credits came into existence and extensive use, and
titles to property and evideices of indebtedness were regarded
as property, although intangible and invisible, a method of discovering and assessing the same, as approximate to actual torture
as a higher civilization would sanction, was everywhere adopted.
*       *       *       *e.   *  *,          *
"After the dissolution of the Roman Empire and the subsequent reconstruction, as it were, of government and society in
Europe during the early feudal period, and when land was practically the only form of wealth, the payments exacted for the
support of the governing powerS-kings, barons, knights, etc.were essentially and almost exclusively in the nature of land
taxes; and the terms 'danegeld,' a charge on lands at so much
per hide, or an area of about one hundred acres; 'scutage,' a
charge on tenants in lieu of military service;' carucage,' a charge
on ' plough lands '; tallaage' (from the. French tailler, to cut off),
a charge on the tenants. of royal manors, and the like were designations of the different forms of such assessments at different
periods. As civilieation advanced and was accompanied, as at a
more primitive period, with an increase in the forms of personal




54


property, a combination of taxes on land and movables, or a gen —
eral property tax system, developed and was adopted by all the
nations of western Europe with all the despotic adjuncts which
seemed necessary to make its enforcement successful. The ultimate result of such a system was what might have been anticipated. From a very early period it occasioned great popular dissatisfaction. In Milan, Italy, as early as I208, it was enforced
with such severity 'that the assessment book was known as the
libro del dolore.' In Florence it became so honeycombed with
abuses and the load of taxation fell with such crushing force on
the small owners of property that imminent popular revolution
and disorder compelled its essential modification. As wealth increased, evasions of the tax increased in a greater proportion
in every community, leaving the burden of the system, as now.in the United States, on that class of the population-mainly
agricultural-that are least able to bear it. Sir Robert Cecil
stated in I592 that there were not five men in London assessed
on their goods at two hundred pounds (one thousand dollars);
and Sir Walter Raleigh stated in I60I that 'the poor man' (in
England) 'pays as much as the rich.' In Florence in I495 only
fifty-two persons paid the tax on trade capital, although the
amount of such capital must have been immense. Marshal Vauban, of France, who wrote on taxation about I700, stated that
the taille personelle was assessed only on the poorest classes.
The result has been that as the difficulty of assessing visible
personal property and the impossibility of reaching invisible and
intangible personalty became apparent, the tax was gradually
modified, and finally abolished in all European countries, except,
possibly, Switzerland and Holland, where its nature has very
little of its original and typical character. One of the first acts
of the French National Assembly in I789 was to abolish it en\ tirely. [In England] a provision for taxing personal property
under a nominal land tax continued to exist on the statute book
until 1833, when, through constant exemptions and systematic
evasions, the annual revenue accruing from the same had run
down to the sum of eight hundred and twenty-three pounds
(four thousand one hundred and fifteen dollars). It is also
interesting to note that the people of Europe have been so long
exempted from a general property tax that their leading writers
on economic or fiscal subjects rarely discuss it or even seem to
have any knowledge of its characteristics or historical experience."




55


" The Use and Value of Oaths as an Adjunct of Taxation.Consideration is properly asked in this connection to the use and
value of oaths, an increase in the number and stringency of which
is often regarded as essential to effective and equal taxation. It
is the all but unanimous opinion of officials who of late have
had extensive experience in the administration of both the national
and State revenue laws that oaths, as a matter of restraint or
as a guarantee of truth in respect to official statements, have in a
great measure ceased to be effectual; or, in other words, that
perjury, direct or constructive, has become so common as to almost cease to occasion notice. In fact, there has come to be a feeling in the community that an oath in respect to matters in which
the Government is a party is a mere matter of form, of mechanical procedure, and that its violation, especially with a mental
reservation, and when the interest of other individuals is not
specifically affected, does not in itself constitute a crime. The
fact that the assessors of almost every State every year make
oath that they have valued all property at its actual value, when
they know they have not, constitutes one proof of the truth of
this assertion. The everyday entry of goods at the custom-house
at undervaluation constitutes another; the enormous frauds committed in recent years under the internal revenue laws of the
United States, which in the case of distilled spirits entailed a loss
in a single year of over $I3o,ooo,ooo, and in which the taking of
false oaths was at every step an essential feature, constitutes a
third; while of individual examples, which every assessor of experience can detail, the record would be almost interminable.
"During the past few years the low tore of commercial
morality in the United States has been a fact generally recognized
and much commented upon; but it has not, that we are aware,
been made a subject of inquiry by those to whom the guardianship of public morals is particularly intrusted. How far the existing system of laws relating to taxation-national and Stateare justly chargeable with the results to which reference has been
made, or how much in the division of responsibility is to be set
down to the account of those who violate the law, and how much
to those who, forewarned of the weakness of human nature, deliberately make laws which especially lead men into temptation,
are yet unsettled questions.
"A point of great interest and importance in this connection,
though often overlooked, is that even if all the States of the




56


Federal Union should entirely exempt personal property within
their territory and jurisdiction from taxation, it would, nevertheless, owing to the dual nature of the Government of the United
States, be subject to a large measure of heavy and disproportionate taxation. Thus, the expenditure of the Federal Government, which represents taxation, was in I896, including the cost
of revenue collection, in excess of $445,000,000, not one cent of
which was derived from taxes on real estate. The aggregate of
annual taxation by States, counties, cities, municipalities, and the
District of Columbia for the same year, is estimated by reputable authorities to have been about $400,000,000, of which at
least one-fifth was assessed or was collected from personal property. If real estate paid all the State taxes, personal property,
therefore, would still be paying all the United States Government taxes, or a large excess of its equitable share of any or all
national taxation. A claim that any personal property owner is
justified in protecting himself against such extortion in any and
every legal way has much, therefore, to be said in its favor.
When such protection cannot be effected legally, he has only to
leave the State for others that are not extortionate oppressors
of capital. But who cannot perceive on reflection that personal
property (capital) must be largely used by its owners and at fair
rates at their residence; and that the home of such capital will
show the benefit in increased local business, increased population
and increased value of real estate by its use?  Why, then, so
much overrighteous talk of personal property owners dodging
taxation?
"Logical and ingenious as have been the arguments in opposition to the legal exemption of personal property from taxation,
the citation and consideration of the undisputed experience of all
countries, people and ages are all that is necessary to refute and
disprove them. There was a time when nearly all men believed
and taught that the world was flat, and when the few lisped to
the contrary, exposed themselves to a charge of religious heresy
and punishment. But a comparatively short navigation experience effectually put an end to all controversy on this subject; and
it is doubtless only a question of time when personal property
will be exempt from governmental taxation, because no system
has ever been devised, or is likely to be, which will enable a State
to tax it with any approach to uniformity and equity."




57
EXPERIENCE OF AMERICAN STATES.
OHIO.
It has been claimed by some that the administrative features
of the law in certain States are not sufficiently thorough and
severe, and for that reason the system has broken down, and
not because the system is wrong in itself. This reproach cannot
be laid against the law in Ohio. The Constitution of Ohio provides as follows: "Section 2. Laws shall be passed taxing by a
uniform rule all moneys, credits, investments ir bonds, stocks,
joint-stock companies or otherwise; and also all real and personal
property according to it~ true value in money."
The statutes of Ohio require that blanks containing lists of
every conceivable kind of personal property shall be sent to every
person over twenty-one years of age, who must answer every
question relating to the various sorts of property which he owns
or are in his keeping, and he must do this under oath and under
pain of heavy penalties. In order that the inquisitorial nature
of the law may be fully understood, I quote sections 2736 and
2737 of the Ohio statutes:
Sec. 2736. Each person required to list property shall, annually, upon receiving a blank for that purpose from the assessor,
or within ten days thereafter, make out and deliver to the assessor
a statement, verified by his oath, of all the personal property,
moneys, credits, investments in bonds, stocks, joint-stock companies, annuities or otherwise, in his possession or under his control on the day preceding the second Monday of April of that
year, which he is required to list for taxation, either as owner
or holder thereof, or as parent, husband, guardian, trustee, executor, administrator, receiver, accounting officer, partner, agent,
factor or otherwise."
" Sec. 2737. Such statement shall truly and distinctly set forth,
first, the number of, horses, and the value thereof; second, the,number of neat cattle, and the value thereof; third, the number
of mules and asses, and the value thereof; fourth, the number
of sheep, and the value thereof; fifth, the number of hogs, and
the value thereof; sixth, the number of pleasure carriages (of
whatever kind), and the value thereof; seventh, the total value
of all articles of personal property, not including in the preceding
of succeeding classes; eighth, the number of watches, and the
value thereof'; ninth, the number of pianofortes, and the value




58


thereof; tenth, the average value of the goods and merchandise
which such person is required to list as a merchant; eleventh,
the value of the property which such a person is required to list
as a banker, broker or stock jobber; twelfth, the average value
of the materials and manufactured articles'which such person is
required to list as a manufacturer; thirteenth, moneys on hand
or on deposit subject to order; fourteenth, the amount of credits
as hereinbefore defined; fifteenth, the amount of all moneys invested in bonds, stocks, joint-stock companies, annuities or otherwise; sixteenth, the monthly average amount or value, for the
time he held or controlled the same, within the preceding year,
of all moneys, credits or other effects, within that time, invested
in, or converted into, bonds or other securities of the United
States, or of his State, not taxed, to the extent he may hold or
control such bonds or securities on said day preceding the second
Monday of April, and any indebtedness created in the purchase
of such bonds or securities shall not be deducted from the credits
under the fourteenth item of this section; but the person making
such statement may exhibit to the assessor the property covered
by the first nine items of this section, and allow the assessor to
fix the value thereof; and in such case the oath of the person
making the statement shall be in that regard only that he has
fully exhibited the property covered ih said nine items."
It is also provided that any person required to list property
who shall claim that there is no taxable property within his
control which he owns or which he has on account of others,
shall be required to make oath to that effect. Persons may be
summoned, questioned under oath; and if any person fails to
appear, or, appearing, refuses to testify, "he shall be subject to
like proceedings and penalties for contempt as a witness in actions
pending in the probate court. If a person refuses to list or swear
his property to the assessor, the auditor shall add 50% to the
amount returned or ascertained, and the amount thus increased
shall be the basis of taxation."
In addition to these provisions of the statutes there is what
is called a Tax Inquisitor Law, which gives the County Commissioners authority to make a contract with persons who may
give information which will result in personal property being
placed on the assessment roll. In Hamilton and Cuyahoga counties such informers may be paid 25%0 of the amount collected,
and in the rest of the State 20% of the amount collected. Debts




59
may be deducted       from   credits, but otherwise there is no         exemption because of indebtedness.
In   I893   a  Tax   Commission      was appointed      by   Governor
McKinley-two Democrats and two Republicans-to investigate
the whole subject of taxation.          In  its report the Commission
said:   "We have in Ohio the most efficient and minute scheme
of bringing upon the duplicate all of this class of property which
has been devised in any        State."   After describing the system,
the Commission presents numerous illustrations all designed to
show that the amount of personal property assessed has rather
decreased than increased. In one table it presents the moneys
and stocks and bonds returned for taxation in the different city
counties of Ohio for the years I88I and I892-that is, before
and after the passage of the Tax Inquisitor Law. This table
shows that in almost every case less money was assessed in I892
than in I88I, and less stocks and bonds, or a very small increased
amount, in spite of the fact that the various cities were increasing at a rapid rate in population and wealth. In the footnote*
I present this table as made by the Commission of 1893 with
the corresponding figures for I903. In Cincinnati there is actually less money and less in stocks and bohds assessed in 1903
Than in I881.
Summing up the whole matter the Commission says: "The
system\ as it is actually administered results in debauching the
moral sense. It is a school of perjury. It sends large amounts
of property    into hiding.     It drives capital in     large quantities
from the State. Worst of all, it imposes unjust burdens upon
various classes in the community; upon the farmer in the country,
all of whose property is taxed because it is tangible; upon the
man   who is scrupulously       honest, and    upon   the guardian     and
STOCKS
MONEY.      AND BONDS.
* Hamilton County,. i88................  $2,217,868  $2,135,878
Hamilton County, I892................  1,585,375    2,256,223
Hamilton County, 903................   1,I93,077     1,399,515
Cuyahoga County, i88................  I,402,322     i,836,654
Cuyahoga County, I892................,800,593     2,085,001
Cuyahoga County, 903................  2,385,016     1,823,240
Lucas  County, 188....................  174,946       5I,935
Lucas County, 1892....................   253,087      176,644
Lucas County, 1903....................  558,804      218,360
Franklin County, I88.................   1,513,965     594,897
Franklin County, I892.................,094,448     897,080
Franklin County, 1903.................  1,324,590     408,082
Montgomery County, i88..............   I,,643,958     610,835
Montgomery County, 1892..............  1,354,593      485,254
Montgomery County, 93............,702,891      257,233
State-at-large, I88i....................  40,642,949  8,637,850
State-at-large,  1892....................  38,417,478  10,556,756
State-at-large,  1903....................  61,492,870  9,856,355




60


executor and trustee, whose accounts are rmattos  f ' lic
record." 
For a number of years Ohio has endeavored to amend the
Constitution so as to make a reasonable system of taxation possible. So far these amendments have failed because it is necessary to obtain a majority of all the votes cast at an election to
pass an amendment to the Constitution. In I903 an amendment
was adopted by the Legislature and submitted to the people.
By this amendment the clause for the equal taxation of all property was stricken:out and the following language substituted:
"The General Assembly shall provide for the raising of all state
revenue for all state and local purposes in such manner as it
shall deem proper. The subjects of taxation for state and local
purposes shall be classified, and the taxation shall be uniform
on all subjects of the same class, and shall ibe just to the subject
taxed."
This amendment was prepared by the Ohio State Board of
Commerce and was indorsed by the Cincinnati and Cleveland
Chambers of Commerce and by 21 other organizations throughout the State. The Republican platform of '903 declared:
"We favor removing the limitations which prevent a more
just system of taxation, so that property can be adequately classified for taxation purposes, and invite the most careful consideration of the amendment for that purpose to be voted upon at the
election next November."
The Democratic party, in their platform, declared as follows:
" Taxation: We heartily indorse 'the constitutional amendment now pending before the people, to be voted upon at the
coming election."
The vote upon the amendment was 326,622 in favor and 43,562
opposed. The amendment failed because it did not receive a
constitutional majority of all the votes cast at the election. The
Ohio State Board of Commerce declares that this amendment will
be submitted to the next Legislature, and calls upon the people
of the State to give it hearty support.
ILLINOIS.
In the State of Illinois the statutes require personal property
to be listed yearly according to the quantity owned on the ISt of
May. Persons listing are required to make statement under
oath and to deliver to the assessor an itemized schedule of the




number, amounts, quantity and quality of all taxable personal
property in their possession or under their control. When any
person refuses to make and verify the schedule required, it is
the assessor's duty to list the property of such person according to his best judgment, and to add a penalty of 50 per cent.
to the valuation; the person refusing being subject also to a fine
of $200, as for a misdemeanor.
'By 1897 this system was a complete wreck in Chicago and
was little better in the remainder of the State. Personal property
in Chicago amounted to only I3.5 per cent. of the total taxable
valuation of all property, and in the remainder of the State it
amounted to only I7.7 per cent. Cook County (containing the
City of Chicago) in, that year had one-third of the total real
estate value of the State and only one-sixty-third in value of
watches and clocks, one-ninth as -much money,' one-twenty-second
as much value in carriages and wagons, and one-fifty-fifth as
much of credits.
Recently all attempts to obey the letter of the law was abandoned in Chicago, and for the tax upon personal property there
has been substituted what is practically a gross revenue tax upon
business. Professor Commons has described this extra-legal system in the Review of Reviews.* It is a striking testimony to
the impossibility of enforcing the general property tax in a large
city and to the practical nature of the American people, who
in this case have managed to work some sort of rough justice
while entirely disregarding the letter of the law.
The relation between the assessed value of the various items
of personal property classified in Cook County and in the remainder of the State is an object lesson to farmers just as it was
in I897.
MISSOURI CITIES.
Missouri is blessed by the same kind of a listing law as that
of Ohio and Illinois. There are only four large cities in the
State, and the iniquitous effect of personal property taxation is
clearly shown by a comparison between the city counties and the
remainder of the State, or between the City of St. Louis and one
of the rural counties (I899). In the four city counties personal
property amounts to less than 14' per cent. of the total assessed
value of real and personal property, while in the remainder of
*February, 1903.




62


the State it amounts to 28 per cent. In St. Louis personal property amounts to 12 per cent., and in the rural county of Camden
it amounts to 30 per cent. of the total. Camden County is an
exceedingly good illustration of the way the taxation of personal
property affects the farmers. The assessed value of the property
in the county is $I,773,076. Of this amount 30 per cent. is personal property, and nearly two-thirds of this personal property
by value consists of live stock; that is, over one-sixth of the entire
taxable value of Camden County is live stock. Under a severe
listing system it is absolutely impossible for farmers to avoid
paying taxes on their live stock, and the result is that farmers,
as a class, pay vastly more in taxes than they ought to pay. The
effect of this upon the cities is indirect, but none the less extremely harmful. The farming industry is discouraged, and
country boys are driven to the cities, where their competition reduces the wages of those who are city born.
WEST VIRGINIA.
In West Virginia there are no large cities, and consequently
personal property pays a large share of the taxes, averaging for
the whole State over 28 per cent. A New York assemblyman
once said that the personal property tax worked beautifully in
West Virginia, because there is a severe listing system there, and
he said that this proved that all the State of New York or any
other State needed was to imitate the system of West Virginia.
This theory might sound well to one unacquainted with the facts,
but, as always, the facts in West Virginia give the lie to any
theory of universal taxation.
In Ohio County town lots are more than double the value of
farm lands, and personal property pays 25 per cent. of the taxes;
while in Harrison County, in which farm lands are six times the
value of town lots, personal property pays 36 per cent. of the
taxes. In West Virginia a record is kept of the various items
of personal property. In Ohio County, which had more than
double the real estate value of Harrison County, watches and
clocks are assessed at $1,550, while in Harrison County they are
assessed at $15,425, or ten times as much. The 27,000 inhabitants
of Harrison County have 2,514 watches and clocks (exclusive
of those in stock in stores or factories), while the 48,000 inhabitants of Ohio County get along with 34 (according to the assessors). These figures are from, the Auditor's report for I902,




63


and there is no evidence of any improvement since the report of
the commission in 1884, which said: " Things have come to such
a condition in West Virginia that, as regards paying taxes on
this class of property, it is almost as voluntary and is considered
pretty much in the same light as donations to a neighboring
church or Sunday school."
A special commission on taxation reported in 19o2. In their
report they advocated the abolition of taxes on intangible property. They said that strong arguments had been presented to
them for the entire exemption from taxation of improvements
on land, and they recommended that power be given to the municipalities of the State to exempt intangible property, manufacturing plants or all personal property, also to exempt improvements on land in whole or in part.
MASSACHUSETTS.
A commission appointed to inquire into the expediency of
revising the tax laws of the State, in their report, issued in 1897,
says: "The taxation of personal property in the form of securities and investments is thus a failure. It is incomplete, uncertain, not proportional to the means as between individuals, grossly
unequal in its effects in different parts of the State. The experience of Massachusetts in this regard is the same as that of the
other States in the Union. Everywhere, without exception, the
testimony is that this part of the system of the general property
tax is unequal, unsuccessful, often demoralizing to tax officers,
always irritating to taxpayers.
"The experience of Massachusetts is the more striking because here the difficulty does not lie mainly in the administration
of the tax laws. The assessors are usually honest, competent,
zealous. We have heard much of grave abuses, of almost corrupt laxity, in other States, but in this Commonwealth, notwithstandirg occasional defections (some of which we have
just referred to), the standard of public duty continues to be high,
and the cause of failure is not to be found mainly in official dereliction. It lies in the system itself."
A special commission appointed by the Mayor of Boston
reported in April, I89I, and said that it would be greatly to the
benefit of Boston to abolish personal taxes altogether. On page
24 of their report they said: "In Philadelphia personal property
is not doubly taxed; in New York it is seldom doubly taxed;




64


in Boston the most strenuous efforts are made to collect a double
tax upon it. Boston and Massachusetts are both avoided like
a house guarded by a savage dog. It is true that one may not
be bitten, but it is pleasanter to go where the dog is not so fierce.
"Our system is a scarecrow, and a most efficient one.
"Both capital and men are free in this country; they go where
they please.
" Enoch Ensley, of Tennessee, lays down this axiom: 'Never
tax anything that would 'be of value to your State that could and
would run away, or that could or would come to you.'
"Untold millions of industrial capital has been warned away
from Massachusetts and driven out of it by our oppressive and
unreasonable laws, and many a millionaire has feared to come
here or left here for the same reason.
" We all know that the value of real estate depends upon the
capital employed on it. The more capital there is the more demand for labor. We should seek to attract capital. We should
not continue to warn it off and drive it out."
A FAILURE IN NEW JERSEY.
New Jersey testifies to the same effect. A commission was
appointed in that State by Governor Griggs to investigate the
subject of taxation and reported in I897. The commission says:
" It is now literally true in New Jersey, as in other States, as
has been well said by another, that the only ones who now pay
honest taxes on personal property are the estates of decedents,
widows and orphans, idiots and lunatics. *  *  * The reports
of our State Board of Taxation for 1893, I894 and 1895 speak
of these things and decry them, and like complaints have come
to us from many sources." 
Then follows a complete table of the counties of the State,
with the assessed value of real and personal property and the
percentage of taxes paid by each class of property. In speaking
of this table the commission said: "It is submitted, this table
speaks for itself-is a significant indictment of our present tax
laws-and reveals evils and abuses in New Jersey taxation that,
together with the foregoing, call for due and early remedies."
MINNESOTA.
Minnesota has the same constitutional provision with reference to taxation that is found in the Ohio Constitution.' In I902
a tax commission made a report, in which they said:*  "So
* Report Minnesota Tax Commission, pp. 6 and 7, 1902.




65
universally is the evasion of the law in the assessment of personal
property practiced and so notorious is the fact that much the
greater volume of it is unassessed, that its evasion is often regarded a virtue rather than a vice. In few, if any, States is
more than 25 per centum of the personal property liable to taxation listed for assessment.
"It necessarily results that, in the enforcement of the law
with respect to such property, numerous instances of gross injustice occur. So far as it is reached at all it belongs chiefly to
banks, the estates of decedents, insolvents, minors, persons of
small means and the comparatively few who conscientiously list
their property.
"It has unquestionably given rise to widespread immorality.
Men of unquestioned business integrity not only find little difficulty in listing their property far below its real value, but also
in making oath to lists which they know to be false.
"It has long been the policy of this State, as well as many
other States, to tax mortgages and other forms of credit. Long
experience has demonstrated that such a law can at best be but
imperfectly enforced.  Students of taxation, with scarcely an
exception, denounce it as fallacious in principle and a fruitful
source of immorality."
In I902 the Legislature adopted an amendment to the Constitution, but failed to take the advice of their Tax Comriission,
and made a long, complicated amendment, giving additional
power to the Legislature in minor matters, instead of abolishing
all restrictions upon the power of the Legislature. This amendment was defeated by the people. This year, I905, the Legislature has adopted a simple amendment which practically gives
all power to the Legislature. The amendment was passed by
a Republican Legislature and signed by a Democratic Governor.
There is every prospect of its acceptance by the people.
KENTUCKY.
In I903 Kentucky adopted a constitutional amendment
authorizing cities and towns to substitute for the general property tax on personal property, income and license taxes, and in
I904 a law was passed carrying out the provisions of the amendment.




66


KANSAS.
The necessity for amendment is appreciated in Kansas, as is
seen by the Governor's message to the Legislature of I903. Governor Bailey said:  For many years it has been generally conceded that our present tax law is insufficient for present conditions, crude and inequitable in its operation. Framed thirty-four
years ago, when Kansas was a frontier State, and all its property
visible and easy of assessment, it is now imperfect and wholly
inadequate to meet the changed conditions of society."
CALIFORNIA.
Governor Pardee, of California, in his message to the Legislature in I903, calls attention to the inequitable working of the
California law, a law very similar to that of Minnesota. The
Governor said: " The amount of personal property assessed in
California is actually less by several millions than it was thirty
years ago. As long ago as 1872 the assessors found nearly
$220,000,000 worth of personal property. A few years later the
assessment had shrunk to a little more than half of that sum.
and though there has since been a slow increase, it amounts for
the current year to only $200,000o,00."
TEXAS.
Texas has a similar restrictive Constitution, and Governor
Sayres, in his message in 1903, said: " It is strictly true that the
amount of property escaping taxation steadily increases year by
year, and that when rendition is made it is so rated as to hardly
reach one-third of its true market value."
ONTARIO.
In Canada more progress has been made in improving methods
of local taxation than throughout the United States; but until
recently the general property tax was in common use. It has
lately been abolished in the City of Toronto; largely as a result
of the work of the Ontario Assessment Commission, which reported in I902. In their report they said (page 15): "The conclusion would seem to be that in Ontario, as everywhere else, the
direct taxation of personal property generally fails to reach the
new kinds of property or wealth which modern civilization has
produced. The more comprehensive general property tax which




/


67
prevails in most of the States of the American Union fails in spite
of the most stringent provisions for the discovery of personal
property. The various attempts to compel its enforcement by
stricter inquiries and greater penalties have only brought a train
of moral evils upon the community, without reaching the property intended to be taxed. As Professor Ely has said of it: 'The
more you perfect it the worse you make it.' In its application
to personal property it has been pronounced to be unequal, capricious in its incidence, replete with incongruities, and its deficiencies of principle are aggravated and exacerbated by its nonenforcement.
"From another entirely different point of view the General
Property Tax fails in its intended effect. When taxes are imposed on different classes of persons in proportion to their ability
to pay, measured by their wealth, it is 'with the object that those
persons upon whom the tax is laid shall really bear it. If they
can shift it to others they are really not taxed. Experience would
seem to show that when merchants, lenders of money, insurance
companies, and many others are taxed on their capitalized property, the only effect is to raise the price of goods, the rate of
interest, premiums, etc., so that the tax really falls upon others,
the persons who deal with them."
MARYLAND.
As a member of the Tax Commission of the State of Maryland, Professor Richard T. Ely made a supplementary report in
I888. He says that there is great dissatisfaction with the tax
conditions and proceeds:*  " This dissatisfaction has increased
without interruption up to the present time, and every year renders our existing methods of assessing property and of taxing
it more intolerable. The endeavors to improve upon actual
methods have been frequent and are daily increasing in frequency,
but they usually prove fruitless or render a bad matter worse, because those who make them have failed to go to the root of the
evil, which is the system itself. The truth is the existing system
is so radically bad, that the more you improve it the worse it becomes. This lies in the nature of things, and nothing any Legislature can do can alter this condition of things. Experience and
reason alike teach this, and in my opinion place it beyond controversy for all those who have eyes to see what is passing about
them every day of their lives.
* Supplementary report on Taxation, pp. Ioo, Iox and 104, Richard T. Ely. Report Maryland Tax Commission to the General Assembly, x888.




68


"The Testimony of Experience.-I have first to remark that
the one uniform tax on all property as an exclusive source of
revenue, or the chief source-the main feature in direct taxation
-never worked well in any modern community or State in the
entire civilized world, though it has been tried thousands of times,
and although all the mental resources of able men have been
employed to make it work well. I have read diligently the literature of finance to find an example, but in vain, and lest this should
not be sufficiently trustworthy, I hav.e made it my business; in
my capacity as Tax Commissioner, to visit typical States and
cities and to make inquiries in person, of citizens as well as officials entrusted with the administration of the laws. I have visited
Charleston, South Carolina; Savannah, Atlanta and Augusta,
Georgia; Columbus, Ohio; Madison, Wisconsin; 'Toronto, Montreal and Quebec, Canada; and the result has been abundantly
to confirm all that I have said about the impracticability of the
one uniform tax on real and personal property."
THEORY OF THE GENERAL PROPERTY TAX.
The theory of the General Property Tax requires the equal
taxation of all property by the same rule. Out of the attempt
to put this theory in practice has grown a further theory that in
order to be equal taxation must be equally imposed on all property. Experience shows that the practice antedated the theory.
To carry out this theory all property must be assessed and taxed
at its true value, and it assumes that the pressure of taxation
shall be equal upon all forms of property just as the pressure of
the air is equal upon all tangible objects.
If the theory ever could work anywhere, it could only work
in a community absolutely isolated from all the rest of the world.
Under conditions as they actually exist a few comparisons between different kinds of property will be sufficient to show the
impossibility of obtaining the conditions under which alone the
theory could work with any degree of perfection.  One who
invests in real estate in any city pays a price based upon existing
conditions, and in effect buys an annual income; for example,
he pays the sum of $Io,ooo for property which will yield $500
a year. If the property should yield only $400 he would pay no
more than $8,ooo for it. He buys with reference to known local
conditions. On the other hand, if one buys railroad bonds he
must pay a price fixed by world markets, and if he is so fortunate




/


69
as to secure safe bonds that pay 5 per cent., $Io,ooo will buy an:
income of $500 in the absence of any taxation. If the bonds are
taxed 22 per cent., his income is but $250, instead of the-sum
'of $500, which he would get from an investment in real estate.
If all retail merchants in a city are taxed equally the tax will'
be added to the price at which they sell their goods, and they
will be able to make the usual profit upon capital invested in such
business. A manufacturer who makes articles for export can
only sell in competition with manufacturers in other States and
countries, and taxes levied on him in excess of taxes upon a similar business elsewhere reduce his profits, and may reduce them
to such an extent as to force him to remove to a more favorable
place.
If money is invested in a mortgage in any State in which
mortgages are taxable (except California, Oregon and, after July
Ist, New York), the investment is not based upon the equal
taxation of all mortgages in that State, but is made in competition with money sent from outside the State for investment there.
Instances showing the -impossibility of treating all alike by
a general property tax imposed equally on all property might be
multiplied indefinitely. These examples suffice to show the utter
lack of uniformity produced by a so-called "equal tax.'1 The
theory has been abandoned and a modern theory takes its place,
which is that property must be classified according to its nature,
and taxed or exempted from taxation in accordance with justice,
expediency and practicability. This theory has received in effect
the indorsement of one of our most thoughtful bodies. In the
case of Pacific Express Co. vs. Seibert (142 U. S., 35I), the
United States Supreme Court said:
"This Court has repeatedly laid down the doctrine that
diversity of taxation, both in respect to the amount imposed and
the various species of property selected either for bearing its
burdens or for being exempt from them, is not inconsistent with
a perfect uniformity and equality of taxation in the proper sense
of those terms; and that a system which imposes the same tax
upon every species of property, irrespective of its nature, condition or class, will be destructive of the principle of uniformity
and equality in taxation and of a just adaptation of property to
its burdens."




70


WHAT SHALL WE DO IN THE CITY OF NEW YORK.
The evidence presented could be multiplied many fold, but it
seems ample to demonstrate that every effort should be put forth
to get rid of the general property tax, and that any attempt to
patch it up will only make a bad matter worse and render the
task more difficult. It cannot be doubted that in the City of
New York the public mind is ready for great changes, and that
if we had the power we would speedily effect a vast improvement.
If we should propose almost anything to take the place of the
tax on personal property it is certain we should array a larger
body of opinion against our proposal than in favor of it. The
next step is to secure the power to change.
In suggesting that we should secure the power to change
we are not proposing anything new, but a remedy which has
been tried with success elsewhere, and h.as been recommended
here on many occasions and in several forms. It was recommended by our great Tax Commissioner, George H. Andrews,
in a memorial to the Legislature in 1874. In the course of his
address to the Assembly Committee on Ways and Means Mr.
Andrews said: 'The effect of the present laws for assessing
personal property is disastrous to the owners of real estate, inasmuch as many of our best citizens remove to the States already
enumerated to avoid the operation of our tax laws. The real
estate of the State needs for its development and prosperity residents, capital and business.  These are the elements which,
coursing through the veins of the community, give it life and
health. Without these real estate must droop and languish, but
with these trade must flourish, mechanics find employment, stores
and tenements be fully occupied, the farmer find a ready market
for his produce, and the sunshine of prosperity gladden every
heart and lighten every burden.
"Under the operation of the present laws real estate must
continue to bear more and more of the burden of taxation, and
also suffer heavily because those laws, instead of attracting, scare
away residents, capital and business."
In his message to the Board of Aldermen in I888 Mayor
Hewitt recommended that the City should have power to abolish
personal taxes, and said: "The abolition of personal taxes in
this city would attract to it the capital of the whole world. We
are now the centre of exchanges on the Western Continent, but




71
in a few years we should be the clearing house for the commerce
of the globe. * * * Any proposition to impose taxation
upon what people or corporations owe, instead of what they own,
is absolutely unsound, and it is difficult to understand by what
process of reasoning this policy is advocated. According to the
conclusions of the best financial authorities actual property should
alone be taxed. Evidences of debt should never be taxed, because, as a rule, they only represent property which has already
been taxed. No sounder system of taxation for local or State
purposes can be devised than that which practically puts the tax
upon tangible and visible property, and upon public franchises
which have an actual cash value, as shown by their earning
power."
In I9OI the New York Chamber of Commerce endorsed a
bill designed to give The City of New York the power to make
changes in its system of taxation, by doing two things. First:
It provides that the proportion of revenue The City of New York
shall pay to the State and that the other counties of the State
shall pay to the State, shall be based upon the amount of revenue
derived locally. This does away with the necessity for uniformity throughout the State and makes possible a grant of power to
the local authorities to make changes in the local system. The
bill further contains a section conferring this grant of power:
"Sec. 4a. Other property may be exempted from taxation,
or the assessment upon the same reduced, as provided in this section, but such exemption or reduction of assessment shall have
uniform operation throughout the county or city in which it is
made, and shall not be made on the ground of ownership. Within
any county such property shall be exempt from taxation or the
assessment upon the same reduced in such manner as the
board of supervisors of such county shall from time to time prescribe. Within any incorporated city, extending over the whole
of any one county or over more than one county, such property
shall be exempt from taxation, or the assessment upon the same
reduced in such manner, as the board of aldermen of such city
shall from time to time prescribe. Nothing coritained in any
special act, or the act incorporating any city or village, shall
affect the validity or operation of any such exemption or reductibn of assessment. The provisions of this section shall not affect
section four nor articles nine, ten, fourteen and fifteen of this
chapter, nor any other general law of the state.",




72
The bill is printed in full as an appendix to this report. It
has been endorsed by the Chamber of Commerce of the State
of New York, the State Commerce Convention, Board of Trade
and Transportation, Merchants' Association, West End Association, United Real Estate Owners' Associations, Business Men's
Association of Cohoes, and other associations of business men,
the Central Federated Union, the Building Trades Council and
many other labor organizations.
It will be seen that provision is made not only for the exemption of property from taxation altogether, but for a reduction
of the rate of assessment if that shall be deemed desirable. It
might be that instead of abolishing the tax on some forms of
property entirely, it would be deemed wise to reduce the rate, and
if the experience of Pennsylvania and Connecticut is worth anything, it is demonstrated that a smaller tax on certain forms of
personal property will produce a considerably larger revenue than
a larger tax. Again, the main objection to the abolition of the
tax upon personal property is that the rate would be increased
upon real estate, and thus tend to check improvements and make
the building of homes for the people more costly. The power
to reduce the assessment on any form of property would permit
a reduction of the rate of assessment upon dwellings and other
improvements. This would entirely counteract any tendency to
check the erection of buildings, and indeed would encourage their
erection.
So long as a tax on land does not increase faster than the
value of the land increases, it is not a burden upon the owner.
Professor Ely says:*
" When the tax on the value of land is liable to comparatively
slight variation, and is something which can be calculated upon
as a fixed and unalterable fact, it partakes of the nature of a
charge upon the land, and to this extent it may be said to amount
simply to partial public ownership. A farmer owns, let us say,
one hundred acres of ground purchased for $Io,oOO, but a mortgage for $5,000 rests on it because he was able to pay only onehalf of the purchase money. He feels the burden of taxation
and groans under it, yet he should reflect that he would be no
better off if his land had never been taxed, for in that case he
would have been obliged to pay so much more for it, and instead
* Taxation in American states and cities, Richard T. Ely, pp. 246, 247 and 248,
1888.




73


of being $5,000 in debt, he would owe, perhaps, $7,000. I recently purchased a house, and in deciding how much I was willing to pay, I took into consideration the taxes. If the house
had been exempt from taxation, I would have been asked more
for it, and would have been willing to give proportionately more.
How, then, can I say that I am really bearing any burden at all?
I simply pay the public annually for its claim on my property,
and if this claim should be released, it would be equivalent to a
present to me. Of course, if the rate of taxation is raised, it
amounts to this, that the claim on my property is raised and the
value of the part owned by the public increases. The more invariable and permanent taxes are, the larger the extent to which
the above principle can be applied. * * *
" Apart from this, land is visible, easily valued, and permanent
in its location, and these qualities render it specially suitable for
taxation. The following reasons have also been given for a tax
on real estate, more particularly on land: Land derives an increased value from public security and from public works, and
taxes are expended chiefly for these two purposes.' This is so
true with reference to public improvements that many of our
growing cities have become embarrassed by expenditure made
at the solicitation of land owners, particularly on occasion of
' booms,' and not, as popularly imagined, by the moneyless rabble.
An instance recently occurred in Buffalo, where large expenditures were forced upon the people by real estate owners, and
against the protest of at least some of the workingmen. A second
reason is that the tax may be considered as a return to the community for the rights which it has surrendered in what was once
common property.
"All assessors should be by law especially directed to assess
to the last dollar of its true value all real estate held for speculative purposes. There is a common and iniquitous practice, which
I have observed everywhere in my investigations, of undervaluing land held for a rise, and not used at all, or used only for some
unnatural purpose, as when city lots are utilized as cow pastures.
Such land is occasionally actually valued as farm land. Thus
men, without a stroke of work, and even while obstructing the
natural growth of cities, see their property steadily increase in
value, and this is solely due to the industry and thrift of their
fellows."




74


SUMMARY.
In view of the experience of foreign countries and those
American States which have employed the most thorough and
stringent means of taxing personal property, it is plain that the
system is wrong in principle and should be abolished; that any
plan for enforcing the law more efficiently by repealing the provision allowing the deduction of debts from personal assets, by
subjecting additional property of non-residents to taxation, or
by requiring sworn statements from taxpayers, will increase the
injustice now done to individuals and work against the interest
of real estate owners by driving away persons and property
which alone give value to city real estate. By increasing the
amount collected for a time it will render the abolition of the
tax more difficult.
Personal property amounts to I3%    of.all the property
assessed in The City of New York, but over one-third of the
personal taxes are not collected, so that in fact personal property,
assessed for the general property tax, only pays about 8%  of
the taxes. It would be greatly to the advantage of all the people
of the city to abolish the tax at once and entirely. In view of
the relation of the City to the State this is impossible, and I
therefore recommend to the Commission for their approval the
annexed bill for the Apportionment of State Taxes and for Local
Option in Taxation.
LAWSON PURDY.




I                                                                                                                                                   I


75
Appendix.
AN ACT to amend the Tax Law by providing for the apportionment of State Taxes and for local option in taxation.
The People of the State of New York, represented in Senate
andAssembly, do enact as follows:
SECTION I. The Tax Law is hereby amended by adding thereto, after Section 4, the following section:
~ 4a. Other property may be exempted from taxation, or the
assessment upon the same reduced, as provided in this section,
but such exemption or reduction of assessment shall have uniform operation throughout the county or city in which it is made,
and shall not be made on the ground of ownership. Within any
county such property shall be exempt from taxation, or the
assessment upon the same reduced in such manner, as the board
of supervisors of such county shall from time to time prescribe.
Within any incorporated city, extending over the whole of any
one county or over more than one county, such property shall
be exempt from taxation, or the assessment upon the same
reduced in such manner, as the board of aldermen of such city
shall from  time to time prescribe.  Nothing contained in any
special act, or the act incorporating any city or village, shall
affect the validity or operation of any such exemption or reduction of assessment. The provisions of this section shall not affect
section four nor articles nine, ten, fourteen and fifteen of this
chapter, nor any other general law of the State.*
SECTION 2- Section 171 of the Tax Law is hereby amended
by adding thereto the following:
Ninth.   Obtain annually from   the financial officer or other
officer or person charged with the custody and disbursement of
any funds of each tax district of the state a report of the amount
of gross revenue of each tax district for the preceding calendar
year and the sources of such revenue; and for this purpose such
local officer of each tax district, at the expense of such district,
shall furnish such information in such form as may be required
by the state board of tax commissioners. Neglect or refusal
* Section four, of this Chapter, provides that certain property shall be exempt
from taxation. Articles nine, ten, fourteen, and fifteen deal with the taxation, for
State purposes, of corporations; transfers of property by will, by the intestate laws
of the State or in expectation of death; the tax on sales of stock; and on mortgages.




76


to file a true and correct report in the office of the state board
of tax commissioners at the time and in the form required by
the board is a misdemeanor, the making and filing of a report
containing a willful misstatement is a felony.
Tenth. Classify and file, according to tax districts, the reports
of gross revenue which they obtain from local officers.
Eleventh. Examine the reports of gross revenue filed with
them; and tabulate the results of such examination, so as to show
summarily, and in separate tables, for each tax district, for each
county and for all the counties of the State, and for each calendar
year, (I) the gross revenue, (2) the sources of such revenue,
(3) any other results which they think it for the public interest
to exhibit. They shall present a report of the results of such
examination to the state board of apportionment at its meeting
on the first Tuesday in September.
"Tax district," as used in this section and in section '73 of'
this chapter, means a political subdivision of the state, having a
board of assessors, or an assessor or officer, authorized to assess
property therein for taxation for state, county, city, village,
school, highway, or any other purpose whatever, or having an
officer or officers authorized to sign warrants for the collection of
taxes.
" Gross revenue," as used in this section, and in section I73 of
this chapter, means the total sum of money received by any tax
district for public purposes, and the value, at the rate of commutation allowed by law, of work performed for the tax district
without compensation under a requirement of law. But it does
not include assessments for local improvements, money borrowed,
money received as interest on any obligation of the tax district
owned by said district or held in trust for it by any board or
officer, or so much of the revenue from sales to private users of
water, gas, electricity, or other industrial service as represents
the cost thereof.
For the purpose of this section, and of section 173 of this
chapter, the city of New York shall be deemed to be one county.
SECTION 3. Section I73, of the Tax Law, is hereby amended
so as to read as follows:
~ I73. State board of [equalization] apportionment powers
and duties.
The commissioners of the land office and the three commissioners of taxes shall constitute the state board of [equalization]




77
apportionment. The state board of [equalization] apportionment
shall meet in the city of Albany on the first Tuesday in September
in-each year [for the purpose of examining and revising the valuations of real and personal property of the several counties as
returned to the board of tax commissioners, and shall fix the
aggregate amount of assessment for each county, upon which the
controller shall compute the state tax. Such board may increase
or diminish the aggregate valuations of real property in any county
by adding or deducting suchI sum as in its opinion may be just and
necessary to produce a just relation between the valuations of real
property in the state. But it shall, in no instance, reduce the
aggregate valuations of all the counties below the aggregate valuations thereof as so returned] and, at such meeting, shall ascertain
and determine the percentage of state tax each county shall pay,
by dividing the sum of the gross revenue, for the preceding calendar year, of each county including all the tax districts within
the county, by the sum of the gross revenue of all the tax districts
of the state for the same year. The comptroller shall immediately
ascertain from this [assessment] determination of the percentage
of state tax which each county shall pay, a copy of which shall
be transmitted to him, the [proportion] amount of state tax each
county shall pay, and mail a statement of the amount to the county
clerk and to the chairman and clerk of the board of supervisors
of each county.
SECTION 4. This act shall take effect October first, I906.
EXPLANATION.-Matter underscored          is new; matter
in brackets [ ] is old law to be omitted.




/




ADVISORY COMMISSION
ON
TAXATION AND FINANCE
REPORT
OF
COMMITTEE ON TAXATION


/


AND REVENUE
ON
PERSONAL PROPERTY


TAXATION


DECEMBER, 1906




I~~~~~~~~~~~~~~~~~~~~~~~~~~
I~~~~~~~~~~~~~~~~~~B




8i
Report on Personal Property Taxation.
HON. GEORGE B. MCCLELLAN,
Mayor of The City of New York,
City Hall, New York:
DEAR SIR-At an early day a special tax commission will
report to the Legislature and its recommendations may be of
vital importance to The City of New York. As the greatest city
of the United States, New York has the most complex and delicate commercial and financial organization. It is moreover in
very close touch with other States to which persons and property
can easily withdraw if tax burdens are unwisely imposed. Under
these circumstances the people of New York are all deeply concerned in the taxation of movable property.
The personal property tax is a farce. It falls inequitably upon
the comparatively few who are caught. The burden it imposes
upon production is out of all proportion to the revenue it produces. Year after year state and local assessing boards have denounced it as impracticable in its workings and unjust in its results. These recommendations have for the most part passed unheeded or have led to ineffectual attempts to bolster up the law.,It is time the situation was faced squarely, and the tax in its
present form abolished.
Manufacturers and merchants should have at least as much
relief as has been given financiers. The state has made flat taxes
for banks and trust companies and for mortgages, lower in rate
than the taxes to which such property was formerly liable. What
is even more important, these taxes fall upon each class with
certainty and without discrimination. It is generally admitted
that the annual tax on mortgages of one-half of one per'cent. was
a check to building and an undue burden upon improvers. What
then must be the effect on trade of taxes upon commerce and
manufactures, which are one and a half per cent. in this city, and
in other cities of the state still greater?
The City of New York is fast becoming the greatest city of
the world in population and in wealth. But this is in spite of foolish tax laws and not because of wise ones. Its growth has been
due largely to its location, and its supremacy is financial rather
than industrial. Its industries and its trade should be relieved
from the handicap now laid upon them, and the commercial




82
growth of the city should keep pace with its development on other
lines. The manufacturers who go to other states should be encouraged to come and to stay' in the city, or at least in the State
of New York.
Millions of dollars are being spent upon improved transportation facilities, so that our fast. increasing population can find
proper homes. While we are justly proud of the city's growth,
still we must remember that it is one-sided. The increase is
largely of clerical and office help, working in Manhattan and seeking homes in the other boroughs. If the same kind of growth
continues, it is inevitable that a great many more workers will
seek homes in New Jersey. If we had our fair quota of mechanics and factory hands we would double and treble the value of
our lands, and the increase in population would be more evenly
distributed, for such workers would reside near their employment and within the state. The area within our own city limits
could contain many times our present population, and give room
to many times its present industries. While it is true that land
on Manhattan-Island is too valuable to be used for most kinds of
heavy manufacturing, there is plenty of low-priced land available
elsewhere within the city limits. With Long Island connected by
rail with the main land and with improved facilities for freightage by water, there is no reason but taxation why Queens County
should not become as thriving a manufacturing centre as Newark.
The State of New Jersey in its Industrial Directory, setcing
forth the advantages offered to manufacturers, assures them that
"Everywhere throughout the state the policy pursued in taxing
manufacturing plants is, very wisely, a most liberal one. The
value placed on such property by assessors is often no greater
than 25 per cent. and seldom above 33 per cent. of its true cost."
This year the policy of assessing real estate at full value in New
Jersey has reduced the ratio of personal property assessed to the
total assessment, from I6 per cent. to IO per cent. As a result of
this large exemption to manufacturing industries the railroad
lines from Jersey City to Trenton and Paterson are becoming a
continuous row of factories. The seven counties adjacent to New
York have increased I6 per cent. in population in the last five
years.
In that period the capital invested in manufactures in New
Jersey has increased 50 per cent., and the value of the annual
products 40 per cent.; while in The City of New York the in



83
vested capital increased only 22 per cent. and the products only
30 per cent.
Pennsylvania, that has never taxed the goods or other personal property of manufacturers, is increasing its capital and
products faster than New York, especially in the districts outside
the larger cities. A very large proportion of industries in The
City of New York are so small as to escape taxation, and it is
the aggregate value of their products that makes this the greatest manufacturing city of the United States.
If the personal property tax has- not been so great a handicap upon merchants as upon manufacturers, this is because the
merchants have more readily evaded it. If it could be thoroughly
enforced our merchants would have to increase prices and so
lose a large part of their trade, or their profits would be decreased
so that many of them would be driven elsewhere. But to the
extent to which it is enforced the tax upon merchandise hinders
commerce. It falls most heavily upon the most conscientious,
and thus penalizes the type of merchant upon whom must rest
the reputation of the city for business integrity. We recognize
the folly of those European cities which by octroi duties upon
merchandise increase the cost of living to their inhabitants, but
we still endure a system of taxation, which, though more indirect,
just as surely increases the cost of goods to the consumer.
So far as the personal property tax attempts to reach intangible forms of wealth, its administration is so comical as to have
become a by-word. In practice it has come to be merely a requisition by the board of assessors upon leading citizens for such
donations as assessors think should. be made, and is-paid as assessed, or reduced, according as the citizen agrees with the estimate. of the assessor. Such a method of collecting revenue would
be a serious menace to democratic institutions were it not so generally recognized as a howling farce.
But it is not a farce to those who are fully assessed. These
are chiefly the widows and orphans who are caught when their
property is listed in the probate court, and the small investors who
are not skillful enough to make non-taxable investments. The
tax of I2 per cent. is equivalent to an income tax of 25 per cent.
on a 6 per cent. investment. A general income tax of IO per
cent. would create a revolution-yet we take a quarter of their income or more from the most helpless class in the community.




84


The attempt to assess all forms of property by one method
and tax them at one rate is unsuited to modern conditions. It was
long ago abandoned in Europe and has been modified in this
State. The city should have the power to make further alterations and to classify property for taxation, subject only to the, restriction that taxes shall be uniform upon all property of the same
class. The modifications that it may be necessary and wise to
make need not now be discussed. The essential matter is that we
recognize the inequalities of the present system and obtain the
legal authority to change it.
Whatever may be the economic merits or defects of the State
system of special taxes, there is no longer need for the State to
dictate to any community the method of raising its local revenues.
The abolition of the direct State tax upon real arid personal property removes the only practical, objection to home rule in taxation.
Your Commission respectfully represents that this question is
of immediate importance to the City and presents for your consideration the desirability of bringing the matter to the attention
of the Governor and State Legislature.




ADVISORY COMMISSION
ON
TAXATION AND FINANCE


REPORT
ON
THE CITY DEBT IN ITS RELATION TO THE CONSTITUTIONAL LIMIT OF INDEBTEDNESS, CONTAINING A PROPOSED AMENDMENT
TO SECTION 10 OF ARTICLE VIII OF
THE STATE CONSTITUTION


APRIL, 1907




i r
r




87


Hon. GEORGE B. MCCLELLAN, Mayor:
SIR-Among the questions referred by you to this Commission
was that of the relation of the City debt to the constitutional limitation on municipal indebtedness. Section Io of article' VIII. of
the State Constitution, so far as it relates to municipal indebtedness, reads as follows:
"No county or city shall be allowed to become indebted
for any purpose or in any manner to an amount which, including existing indebtedness, shall exceed ten per centum
of the assessed valuation of the real estate of such county
or city subject to taxation, as it appeared by the assessmentrolls of said county or city on the last assessment for State
or county taxes prior to the incurring of such indebtedness; and all indebtedness in excess of such limitation, except such as may now exist, shall be absolutely void, except
as herein otherwise provided. No county or city whose
present indebtedness exceeds ten per centum of the assessed valuation of its real estate subject to taxation, shall
be allowed to become indebted in any further amount until
such indebtedness shall be reduced within such limit. This
section shall not be construed to prevent the issuing of certificates of indebtedness or revenue bonds issued in anticipation of the collection of taxes for amounts actually contained, or to be contained, in the taxes for the year when
such certificates or revenue bonds are issued and payable
out of such taxes.
"Nor shall this section be construed to prevent the issue
of bonds to provide for the supply of water; but the term
of the bonds issued to provide the supply of water shall not
exceed twenty years, and a sinking fund shall be created on
the issuing of the said bonds for their redemption, by raising annually a sum which will produce an amount equal to
the sum of the principal and interest of said bonds at their
maturity. All certificates of indebtedness or revenue bonds
issued in anticipation of the collection of taxes, which are
not retired within five years after their date of issue, and
bonds issued to provide for the supply of water, and any
debt hereafter incurred by any-portion or part of a city, if
there shall be any such debt, shall be included in ascertaining the power of the city to become otherwise indebted;




88


except that debts incurred by The City of New York after
the first day of January, nineteen hundred and four, to provide for the supply of water, shall not be so included.
Whenever the boundaries of any city are the same as those
of a county, or when any city shall include within its
boundaries more than one county, the power of any county
wholly included within such city to become indebted shall
cease, but the debt of the county, heretofore existing, shall
not, for the purposes of this section, be reckoned as a part
of the city debt."
Prior to consolidation this limitation worked no inconvenience
in the financing of the City's public works. In fact, it may be
said that prior to I898 no Comptroller ever concerned himself with
this constitutional provision; for the margin between the City's
net debt and the constitutional limit thereof was generally believed
to be so large that it was hardly regarded as possessing more than
an academic interest, until the litigation preceding the building of
the Manhattan-Bronx subway and the debt burdens of consolidation combined to make its problems really vital and urgent of solution. Since I898, however, the financial officers of the City have
continually been forced to appropriate and to administer with constant. attention to this provision of the constitution. There have
been times when City improvements have had to be postponed
until by legislation or by increased real estate assessments the City
was placed in a position legally to incur further indebtedness.
An example of such relief by legislation may be found in chapter
630 of the Laws of I900.
The Charter Revision Commission of I9oo recommended to
the Legislature that the Constitution be amended by providing
that debts incurred by The City of New York after the first day
of January, nineteen hundred and four, to provide for the supply
of water, should not be included in ascertaining the power of the
City to become otherwise indebted, and this amendment to the
Constitution was approved by vote of the people in November,
1905. It was believed at the time this exception was made that it
was not only necessary, because of the large expenditures (now
estimated at $I6I,ooo,ooo) required to furnish the City with an
additional and adequate water supply, but that it could also be
made safely from the financial point of view because experience
has shown that the ownership and operation of water works has
been a source of net income rather than of expense.




89
The vast increase both in area and population of The City of
New York during the last ten years has brought with it most important problems (especially those relating to transportation), the
necessity for solving which becomes more insistent every year.
No such solution is possible without the expenditure of large
amounts of money on capital account as well as by way of current
expenditure.
The determination of the question, how to make possible the
necessary capital expenditure within the limitation prescribed by
our constitution, is one of the most important subjects which has
been submitted io this Commission for its consideration. For it
is claimed that notwithstanding the recent amendment of the Constitution relating to water bonds issued since 1904, the present
constitutional provision is not broad enough or elastic enough to
give the City that free hand in dealing with the problems before it
which is necessary to their proper solution. In order to approach
this question intelligently it is necessary to ascertain, first, what,
under the present law, will be the margin between the City debt
and the constitutional limit thereof for the next few years; and,
secondly, what indebtedness the City will probably-be obliged to
incur during the same period.
FIRST-Present Margin of Debt-incurring Capacity.
The following is a summary of the City debt as stated by the
Department of Finance as of January I, 1907:
Net funded debt falling within the terms of the
constitutional limitation................. $437,771,239 72
Net contract indebtedness..................... 57,346,337 36
Indebtedness for lands acquired...............  17,09,785 I5
Indebtedness for judgments (estimated)........  2,000,000 oo
Revenue bonds..............................  30,295,000 oo
Total indebtedness.............. $544,522,362 23
Io per cent. of assessed valuation of real estate... 573,848,724 50
Balance........................ $29,326,362 27
Proceeds of bond sales unapportioned...........  1,816,856 46
Margin available January I, 907............... $31,143,218 73
The foregoing statement requires some comment.




90
The item of revenue bonds in the above statement, aggregating $30,295,ooo, represents bond issues of $20,I55,000 in 1905 and
I906 in anticipation of the collection of taxes of the years I902,
I903 and I904 and issues of $IO,I40,000 in I906 in anticipation of.the collection of taxes of the year I905. Some of these bonds have
been redeemed since January I; more will be redeemed in the near
future; but under the City's financial methods such redemption
can only take place at the expense of special and trust accounts.
While the amount of such revenue bonds outstanding January I,
1907, was exceptionally large, it still falls short of the estimated
amount of uncollectible taxes-$36,ooo,oo —for which the Board
of Estimate and Apportionment have authorized the issue of corporate stock under the provisions of chapter 208, Laws of I906.
Sooner or later these latter bonds must be issued, and when issued,
this item of liability (of capital account to current revenue) will
appear for the first time in the City's debt statement. It follows,
therefore, that while the above statement of the City's debt comes
nearer to representing the City's true condition of indebtedness
than any similar statement previously issued, nevertheless (as we
are now endeavoring to deal with future conditions) it would be
better to go still further, and, on the principle of assuming that to
be done which will have to be done, make the further deduction of
$5,705,000 from the foregoing margin-this figure representing
the difference between the aggregate of the Revenue Bonds of the
years I902 and 1905, inclusive, outstanding January I, I907, and
the amount of Corporate Stock authorized to be issued by the
Board of Estimate and Apportionment to make good the deficiency in the City Treasury, caused by arrears of uncollectible
taxes. Making this deduction gives us an assumed margin of indebtedness on January I, I907, of $25,438,218.73.
The liability given in the above statement as accruing for lands
acquired for public purposes and not yet paid for is almost en-'
tirely estimated. The obligations accrue.when the City becomes
vested with the title to the property, which may occur before payments are actually made for the same. The original estimate of
the liability is based on tax valuations and thereafter, as the condemnation proceedings progress, information is obtained from the
Law Department as to the values appraised by the experts in the
proceedings. The actual obligation for the property is not determined until the awards are reported. It is the experience of the
City's financial officers that the preliminary estimates of liability




9I
covered in the debt statement are invariably below the actual cost.
On the other hand, it may be said that the debt statements prepared by the Comptroller's Office include certain contract and land
liabilities for water purposes which are not now required to be included in estimating the City's debt margin, which liabilities probably aggregate not less than five millions of dollars. This factor
of understatement of the City's debt-incurring capacity may therefore be treated as an approximately equal offset to the general
underestimate of liability for lands taken in condemnation proceedings-the net result of which would be to leave practically
undisturbed the figure of debt margin above given, i. e., $25,438,218.73.
SECOND-Factors Enlarging the City's Future Debt-incurring
Capacity
(a) The City's debt-incurring capacity is enlarged each year
by ten per cent. of the increase, if any, of the assessed valuation
of real estate. Ten per cent. of the increases of the assessed valuation of the past three years has been as follows:
1904........................  $26,399,295 30
1905..........................  20,595,852  20
1906.........................   5I,698,494  40
Average for three years.......... $32,897,880 63
It is estimated that the increase in real estate assessments for
I907 will be about $500,000,000, ten per cent. of which would be
$50,000,000. It is to be borne in mind, however, that the real
estate assessments in this City have of recent years been constantly
approaching more and more nearly the theoretical limit of one
hundred per cent., or full valuation; also, that the past few years
have been years of great prosperity and enhancing values of real
estate.
It does not seem to your Commission that in estimating such
increases in future years a higher average than thirty million dollars should be assumed for this item. This is, of course, merely
a matter of opinion and can be nothing more. It is scarcely conceivable, however, that even under the stress of necessity the Department of Taxes and Assessments could in the next five years
maintain an annual increase in real estate assessments as great as
those of I906 and I907.




92


(b) Another source of increase is that produced by -the redemption of debt from annual taxation directly and from local assessments. This will amount in the years 1907-1911, inclusive, to
about $5,500,000, or an average of $i,Ioo,ooo annually.
(c) The margin of indebtedness is also increased by reason
of the increase in the Sinking Funds of the City. These funds are
available for redemption of debt falling due, and when not so applied may be used for investment in issues of Corporate Stock.
Either transaction adds to the City's debt-incurring power. The
average yearly increase in the Sinking Funds during the past three
years would appear to be about eleven million, three hundred and
fifty thousand dollars, and for the immediate future may be reckoned at an amount not exceeding twelve million dollars per annum.
If we add this to the increase in tax valuations, and the annual
average of $I,I00,000 derived from direct redemption of debt
from taxation and assessments, we have an average annual increase in the available margin of indebtedness of $43,I00,000. In
five years this would amount to $215,500,0o0, which, added to the
present margin, would make a debt-incurring capacity during the
next five years of $240,938,218.73.
THIRD-Probable Future Indebtedness to be Incurred
Some light may be thrown on this subject by examining the
actual bond issues during the past five years, which have been as
follows:
1902.........................  $29,6oi,958  I9
1903.......................  43,022,919  42
1904........................  81,825,742 87
I905.........................  41,210,934  23
1906.........................  57,052,174  58
Total........... $252,713,729 29
Deducting water bonds......... 25,026,I00 00
$227,687,629 29 
Yearly  average............................. $45,537,525  86
It has not been the custom of the City to issue bonds immediately after their authorization by the Board of Estimate and




93


Apportionment. They are issued only from time to time, as
money is required for actual disbursement on account of public
improvements. Long before the actual issuing of the bonds,
therefore, contracts may have been entered into and certified to
by the Comptroller which have created present indebtedness within the purview of the Constitution. It follows, therefore, that a
more reliable criterion than the foregoing statement will be obtained by considering the estimated amount of new debt (not
merely funded debt, but all constitutional "indebtedness ") incurred during each of the past five years (excluding debt for
water purposes incurred since January I, 1904), as shown in part
by the communication of the Comptroller to the Board of Estimate and Apportionment, dated December 6, 1904, which appears
to be as follows:
1902.........................  $32,364,980  05
I903........................  52,792,I39  75
I904.........................  49,339,924  95
1905........................  62,920,260  63
1906.........................  69,  72,912  99
Total........... $266,590,218 37
Average................................... $53,3I8,043 67
The bond issues of the immediate future cannot be regarded
as wholly subject to the discretionary control of the Board of Estimate and Apportionment. The welfare of the City imperatively
demands that certain classes.of improvements shall within certain
limits be carried on-among which may be mentioned the acquisition of new school sites and the erection of new school houses;
opening, paving and repaving streets; constructing sewers, etc.
For other purposes, such as parks and public buildings, a determination to economize might succeed in materially curtailing the
extent of future bond issues, and in view of the present difficulty
of selling City bonds, it is fairly a subject for consideration
whether a certain retrenchment in municipal expenditure in line
with the proposed economies of general corporate management
throughout the country resulting from  the present strain on
credits and borrowings, will-not soon enforce itself as a result of
natural financial laws. In dealing with such uncertain factors as
these, it may be said that one man's guess is as good as another's.




94'


But we know of no better starting point in dealing with this subject than to treat future developments as likely to proceed upon
the same lines as indicated by past experience. It should be remembered also that the City is already committed to the carrying
out and completion of many improvements costing a vast sum of
money, which could not now be abandoned or unduly delayed, no
matter how great might be the desire to retrench. For example,
it is not likely that the expenditures necessary to complete the new
bridges over the East River and the approaches necessary therefor will fall far short of the expenditure already incurred for
these purposes. The City is practically committed to a large future expenditure for the new Bellevue Hospital. The expensive
site and building for the new Court House on Union Square,
which is at least a possibility, may cost twenty milions or more.
Among other contemplated projects may be mentioned the Sea
Side Park at Rockaway, the Brooklyn Bridge terminal, a new
municipal building for Brooklyn, the Riverside drive extension
and the Hudson Memorial Bridge; the cost involved in removing
the New York Central tracks from Eleventh avenue and the very
large proposed expenditures by the Dock Department, for which
a requisition for the issue of twenty-nine million dollars of bonds
has already been made. When these are considered in connection with such regularly recurring annual expenditures from bond
sales as those required for new school sites and school houses,
opening, paving, repaving and sewering streets, small parks, police
and fire sites and station houses and other municipal buildings, it
will be seen that unless a high degree of conservatism is exercised,
the indebtedness which is likely to be incurred in the near future
will scarcely fall short of that incurred in the last five years, or
$266,590,218.37. This would amount to about twenty-five million
dollars more than permitted by our estimate of the debt-incurring
capacity accruing to the City within that period-it being borne
in mind, however, that this estimate of future indebtedness allows
for a liability for rapid transit purposes equal to that incurred
during the past five years.
If for the sake of argument the annual increase of assessed
valuations of real estate be assumed to be three hundred and fifty
millions, instead of three hundred millions, for each of the next
five years, the result would be a theoretical ability to,carry out
such a programme of public improvements by entirely exhausting
the debt margin; if the annual increase be assumed to be $400,



95


ooo,ooo, there would be a surplus of $25,0oo,00o, and on the basis
of an annual increase of $500,000,000 there would be a surplus of
$75,o00o,o0.
To review the situation, therefore, it would seem that one of
three alternatives must be accepted: Either (i) the City must
enter into a period of enforced economy in the way of capital expenditure, reaching even so far as the complete abandonment of
such public improvements as are not to be regarded as absolutely
essential; and a severe retrenchment in regard to even such important needs as school houses and street improvements; or (2)
assessed valuations must be forced upwards to a degree which
your Commission can but regard as unnatural and likely to result
in hardship and injustice; or (3) provision should be made for an
amendment to the Constitution increasing the City's power to
incur debt.
Your Commission has approached this last alternative with
great reluctance. We are fully aware of the enormous increase
which has taken place in the last ten years in the City's funded
debt, and we do not seek to minimize the ever increasing cost at
which the City has utilized its credit-a cost which has increased
sixty per cent. in less than twenty years-i. e., from the two and
one-half per cent. bonds'sold above par in I889, to the four per
cent. bonds of to-day, which are barely salable at the same price.
But on. principle, and looking solely to the reasons which led
to the insertion in our State Constitution (as well as in those of
many other States) of the provision limiting municipal indebtedness, we can find no objection to such an amendment as we intend to suggest.
The chief purpose of this constitutional provision is to prevent
cities from imposing too great a burden of debt upon their taxpayers, present and future. What constitutes the burden of debt?
Solely the interest charge, and in the case of anticipated debt
liquidation, a certain small additional charge for amortization.
Now, if a public improvement be self-supporting or profitable,
there is no burden upon the taxpayers, and the necessity for this
constitutional restriction falls. The danger to be avoided, in the
judgment of your Commission, is the possibility of a public work,
in its inception profitable, becoming subsequently unprofitableand this not so much by natural causes as by legislation enacted in
deference to a supposed public demand.




t


96
Take, for example, the existence of a subway municipally
owned and operated-something which might be a realizable fact
under such an amendment to the Constitution. Such a project
might be operated profitably by the City on the basis of a fivecent fare; but if, in deference to public agitation, the Legislature
should require the City to operate such a road on a three-cent fare
or a two-cent fare, or for no fare at all, the " burden of debt"
would instantly reassert itself and with crushing force.
While favoring the principle of the exemption of debts incurred for self-sustaining public enterprises, we emphatically condemn any further measure of relief from the salutary safeguards
of the Constitution, which does not carry with it an equivalent
protection for the taxpayers. No further progress along the lines
of the constitutional amendment of I905 seems either desirable or
safe.
Your Commission, therefore, has deemed it the part of wisdom
to prepare a conservative plan for a proposed constitutional
amendment which, while exempting from the terms of the constitutional limitation bonds issued for self-supporting enterprises,
would at the same time provide a nearly automatic scheme by
which, should such an enterprise ever become non-supporting, the
bonds issued to defray its cost would immediately be counted in
estimating the City's indebtedness.
The expression of this idea in a form suitable for incorporation
in the Constitution has proved to be a matter of some difficulty.
In our opinion it is necessary that some tribunal should be named
which should determine periodically what debts incurred by the
City should not in a given time be included in determining the
City's indebtedness, because of the fact that the undertakings for
which they were incurred were self-supporting.
We believe that the Appellate Division of the Supreme Court
is the proper tribunal, because that body has satisfactorily discharged a similar function in regard to the determination of transportation routes imposed upon it by the State Constitution.
It will be noticed that care has been taken in framing the proposed amendment, to give all persons interested, including the representatives of both the City and the State and the public generally, the right to appear before the Appellate Division and oppose
or support any proposition for the exclusion of bonds in the ascertainment of the City's debt-incurring power. This suggestion has
been made for two reasons: First, to insure publicity; secondly,




97
in the hope that because of the enlightening discussion incident to
the public hearings the Appellate Division would in the course of
time work out a consistent theory as to net revenue above expenses much more satisfactory than any that could be outlined in
advance, which was based more or less on a priori grounds.
In conclusion we find that the adoption of this amendment and
its application by the courts would add to the margin of permissible indebtedness about one hundred and forty million dollars,
representing the exclusion of bonds outstanding for the following
purposes and in the following amounts:
For subways............................... $45,ooo,o000 oo
For  docks..................................  56,ooo,ooo  oo
For water purposes prior to 904.............. 39,000,000 oo
Total.........................$140,000,0ooo  00
Following is the constitutional amendment proposed:
Amend section Io of article 8 of the Constitution of the State
of New York as the same was amended by popular vote in November, I905, by inserting after the words:
"except that debts incurred by the City of New York after
the first day of January, nineteen hundred and four, to provide for the supply of water, shall not be so included,"
the words following:
"and except further that debts heretofore or hereafter incurred by the said city for the acquisition of property or
for the construction of railroads, docks or other improvements which shall be owned by the said city, shall not be
so included if it shall appear by the ascertainment and determination hereinafter provided that the said city is receiving current net income from such property or improvement
in excess of the interest payable by the said city upon
the total debt incurred for the acquisition of such property
or the making of such improvement. The appellate division of the supreme court in the first department shall,
from time to time, upon the application of the board of
estimate and apportionment or other chief financial board
of the said city, ascertain and by order determine the existing




98


debt or debts incurred by it for such acquisition of property or the making of such improvement and which shall
not be so included, provided that such ascertainment and
determination shall be upon notice to the governor and at-torney general of the state and to the mayor of the said
city and upon other reasonable public notice to be prescribed by the court, and that the attorney general, either
upon his own motion or upon the direction of the governor, and the mayor of the said city, and any resident of
the said city who shall be the owner of real estate therein,
duly assessed for taxation, shall be entitled to appear and
to be heard in the proceeding for such ascertainment and
determination, and provided further that any such ascertainment and determination shall be valid and effectual
only for such period as shall be prescribed therein not exceeding five years from and after the making thereof, but
shall not prevent the making of any new ascertainment and
determination whether during or after such period."
Attention is called to the fact that, owing to the constitutional
provision requiring amendments to be approved by two successive,legislatures not having the same senate, before being submitted
to vote of the people, the earliest date at which this proposed
amendment could be made effective would be I9IO.
Dated April 2, I907.
Respectfully submitted,
E. J. LEVEY,
Chairman.
LAWSON PURDY,
Secretary.




ADVISORY COMMISSION
ON
TAXATION AND FINANCE
REPORT
ON
THE SYSTEM OF ACCOUNTS AND STATISTICS OF
THE CITY OF NEW YORK


JUNE, 1907


I.       ':0
Is, I: " 6.
11,.I 




~ I            I    '    ".  (,... -




IOI


Report on the System of Accounts and Statistics of the
City of New York.
Hon. GEORGE B. MCCLELLAN, Mayor:
SIR-Accepting as a principle, that the purpose of accounts
and statistics is to obtain an intelligent basis for control over the
business of the City, it follows that the nature of its accounts
and statistics should be such as will make this control effective.
Under the Charter of New York there are essentially two forms
of control to be exercised, viz: (I) Financial, and (2) Executive or Operative.
For the purpose of exercising financial control the corporate
machinery provided consists of (I) an office or division, under the
direction of the Comptroller, for the exercise of accounting control, and for the issue of corporate bonds; (2) The City Treasury,
the chief officer of which is the City Chamberlain; (3) Commissioners for the Selection and Approval of Depositories of the
funds of the City; (4) Commissioners of the Sinking Funds; (5)
the Board of Estimate and Apportionment. To the end of providing the Finance Department with the information necessary to
financial control, there has also been installed in the City a thorough system of appropriation and fund accounts which are under
the direction of its official head-the Comptroller.
With devices for exercising executive or operative control over
its affairs, the City is not so well provided. The controlling accounts of the Department of Finance, as well as its departmental
accounts, belong essentially to the first category. There has been
in the City a general lack of accounting devices for obtaining accurate information by means of which the properties and liabilities
and the income and expenses of the City may be intelligently administered. To this time, but little attention has been given to
municipal cost keeping and to the financial and operative aspects
of property administration.
DEFECTS IN THE PRESENT SYSTEM OF ACCOUNTS AND STATISTICS.
More concretely the defects in the present system.of accounts
and statistics of the City of New York may be stated as follows:
I. Although the City is the owner of many tracts and parcels
of real estate no adequate record has been kept of this property;




102


at the time that our committee made its examination, the City did
not have a complete record as to the location, description, character of title, cost, or present condition of the real estate owned by
the Corporation; there was not even a system of maps'or charts
which completely showed the location of such properties. Without a complete account of real estate there is no assurance to be,
given and only incomplete information to be had as to whether it
is paying the taxes and assessments, which it should pay on its
own properties. This also gives opportunity for those in subordinate administrative relation through secret contracts and
other methods, to utilize city properties for political favors and
for private income, as well as holds out an inducement to employees to continue other practices which, if known, would be
publicly condemned.
2. There being no complete system of controlling accounts
over assets, resources of the City in the form of revenues receivable were carried on collateral or memorandum records. There
had not been an accounting for the arrears of taxes and assessments which constituted assets of the various municipalities consolidated with the City of New York in the year I898. It thus
appears that not only was a considerable amount of the revenues
of the city in danger of being lost through neglect, but there was
also a constant temptation placed in the hands of clerks to deal
with those who were obligated'to the City for the payment of assessments and arrears.
3. The same was-true of assets in the form of stocks of material on hand and personal property with which the officers and
the agents of the City were chargeable. In the several departments examined, the records of store or stock yard entries were
not under direct accounting control; these records therefore might
be arbitrarily brought into adjustment at periods of inventory
taking, or might not be adjusted at all, without the fact being discovered except after a long and expensive examination and report.
4. The system of controlling accounts not being complete over
current and contingent liabilities, many of the records showing
the indebtedness of the City were essentially in the nature of
memorandum accounts. Without an adequate system of central
control over such records, the completeness and accuracy of accounts of indebtedness may be determined only by occasional and
collateral investigation. These books or collateral records, in




I03
many instances, have no direct relation to the general or detailed
appropriation accounts under the control of the Department of
Finance. As a result of this lack of records, both the city and
those contracting with it, are at the mercy of uncontrolled subordinates in the Civil Service; bills presented to the several departments for approval after the delivery of goods may be withheld for months, while others, for consideration, may be forwarded out of their regular turn. Without collusion or even
knowledge on his part, the Comptroller may be placed in the attitude of contributing to a wholesale levy of tribute on those who
have business relations with the City.
5. The Department of Finance had no regular controlling accounting device for determining the accuracy of other departmental records showing revenues accrued to the City, whether
these revenues be in the form of licenses, rates, fees, rentals of
properties, or other income applicable to the expenses of a particular period. Generally speaking, the departmental records of
revenues accrued were carried as collateral memoranda and not as
an essential detail of general accounts. As a result uncollected
water rates, rentals, etc., might go for years uncollected, or if collected, the amounts received by the officers or agents of the City
might not be brought to the attention of the Comptroller through
trial balances regularly taken off from subsidiary books and as
supporting details to the general records kept by the Comptroller.
6. The same was true of expenses incurred by the several offices and departments, the essential accounts under control being
those of appropriation and funds. Departmental expense and
books of records showing departmental cost, which were kept for
the information of those in positions of administrative responsibility, were not regularly proved to the books of the Comptroller.
Even in the Departments themselves, control over the accuracy
of expense and of stock records, where such record is kept, was
incomplete.
7. There being no regular controlling accounting method of
obtaining accurate data with respect to income and expenses, little
effort was made to co-ordinate income and expenses within the
Water Department and the Department of Docks and Ferries,
which are presumably operated on a cemmercial basis, and there
was no regular accounting device for bringing the general revenues of the City for a particular year into comparison with expenses of the same period, the comparative results available being




104


those of cash received and cash disbursed. The Mayor and other
administrative officers, when desiring information with respect to
the cost of any particular branch of municipal activity, are able
to obtain this information only after a special examination has
been made, the accuracy of the results of which may not be
readily proved-an examination entailing delay that often defeats
the very purpose of the inquiry. Moreover, the time of the staffs
of the commissioners of accounts, and of the Bureau of Statistics
of the Comptroller's office is largely occupied with special examinations to obtain information that should come currently and
regularly through departmental accounts and reports, thus diverting the energies of two branches of the municipal service away
from the work on which they would be more effectively employed
in aid of the administration of the city's affairs.
8. The lack of controlling accounts over expenses of departments has caused the City to operate on a false basis. Many
millions of dollars of the proceeds of bond issues have been used
to meet the current expenses of the City which should have been
included and covered into the annual tax levies, for meeting current expenses, and many millions of dollars of the bonded debt of
the City are represented by such expenditures for which no property or thing of value remains the proceeds having been used for
current salaries and wages and for current supplies which have
disappeared, without this fact coming to public attention. It is
only fair to state, however, that this unfortunate result is in part
due to specific statutory enactment.
9. There being no method of controlled cost keeping, independent of appropriation accounts (certain large items of departmental expenses not being charged against department appropriations) the City may not even closely approximate the cost of operating its several branches or divisions of service. For example,
the cost of printing and stationery, the cost of certain items of
Furniture and Fixtures, the cost of heat, light and power, the cost
to the City for office space used by a department when occupying
buildings belonging to the City, etc., etc., have not appeared as a
part of the departmental budget receiving supplies or the benefit
of such use, for the reason that these supplies or costs have been
met by independent appropriations made to cover them.
Io. By reason of the City having no regularly controlled accounting method of obtaining departmental expenses and by reason of the practice of making independent appropriations for such




I05


items of expenditures as above indicated, central administrative
and accounting control over such branches of the service as the
City Record and the Borough Presidents' offices has been largely
lost. The cost of printing and stationery being charged against
appropriations to the City Record, the cost of such items as furniture and heat and light being charged against other appropriations not included in the departmental budgets where such supplies are used, not only do the departmental estimates give a false
report of expenses but the accounting officers have no regular
means of checking the accuracy of the accounts of divisions furnishing these supplies. That is, since the accounts and reports
from departments using the materials and supplies furnished may
not be used as a check on the stock accounts from which the materials were sent, regular administrative control over such
branches of the municipal service as the City Record and Borough Presidents' offices are to a large extent impaired, a special
and comprehensive examination being necessary to acquire the information needed as a basis for executive or other controlling
judgment.
i I. By a system of accounting, such as that employed by the
City of New York, which charges against department appropriations the goods and supplies directly when purchased, administrative and accounting control is lost or is in a large measure impaired when such goods or material are first carried into stock.
For example, in the Department of Bellevue and Allied Hospitals, in the Health Department, and in a number of other departments, most of the supplies purchased go directly to storerooms, little information being obtainable from the invoice itself
as to where the supplies will be used. In Bellevue these are first
delivered to a general store, then, on requisition, they are sent to
the stores of the several hospitals included in the Department,
from which in turn they are sent to the several wards or messes
or to other branches of the services where they are finally consumed. The lack of an accurate cost accounting in many instances, opens the way to the diversion of supplies to private uses
without discovery. Another result of this defect in records and
reports is that those in positions of central control have no regular
accounting method to accurately determine whether contractors
are fairly dealing with the City through the several departments.
12. The necessity for detailed information with respect to expenses, distinct from charges against appropriations, as a guide




Io6


to administration in the departments, has given rise to the development of a large number of uncontrolled statistical records
which are designed to lend themselves to departmental uses. In
each of the departments concerning which definite investigation
was made, the volume of work carried on is as great, in some instances far greater, than would be necessary to keep a complete
system of controlled records of income and expenses with collateral operative statistics in any detail that might be desired. The
effect of the lack of such controlled accounts and of the exercise
of control over those departmental records is that all of the income and expense and stock records of the department are in the
nature of uncontrolled statistical data. These statistical data not
only suffer from inaccuracy, but have no basis or method of coordination such as would be provided if the administrative financial data required were made a part of the system of controlled accounts from the details of which regular trial balances would be
made as a necessary means of supporting a general record or account.
13. Another serious defect in the present system is that the income and expenses could not be regularly audited except at an expense far greater than should be incurred in proving the accuracy
of departmental records. As a result, departmental records are
not at the present time regularly audited; in fact, the records of
some of the departments have not been audited for years. To
properly audit the departmental books of the City of New York
as at present kept would make necessary the employment of a
much larger staff than is at present engaged in the office of Commissioner of Accounts and in the office of Comptroller even
though these offices were not encumbered with unnecessary work.
With a system of complete accounting control over departmental
accounts of income and expenses, as well as appropriations, it may
be said that assuming an efficiency equal to that obtainable in private business the number of examiners of accounts now employed
in the office'of Commissioner of Accounts would be adequate.
Priva'te corporations doing a business involving as many transactions as does the business of the City of New York and having
departments much more diversified, with branches and activities
scattered over a Continent, some of which even have international
business relations and departments, maintain not only complete
and regular audits of each office and branch from one to three
-times a year, but also, in addition, avail themselves of annual lnde



I                                                                                                                                                               I                -             -
I


107
pendent audits by public accountants at a cost far less than is at
present incurred by the Municipality. On the other hand private corporations and municipalities having a much smaller volume of business when not under a centralized accounting control,
over income and expenses as well as properties and liabilities, have
found it impossible to make regular audits except at enormous expense; in such instances either no adequate audit has been made
or the cost of examination has been so large as to compel the companies and municipalities making them to introduce a system of
accounting control over departments and branch offices. It is a
matter of multiplied experience that central control over income
and expenses, as well as over funds and other proprietary accounts, is not only essential to careful management, but necessary
to bring the cost of audit and inspection within reasonable limits;
and further, that corporations, both public and private, cannot afford to be without such control.
CONSTRUCTIVE SUGGESTIONS AS TO METHODS OF ACCOUNTING.
The accounting requirements of a municipality differ from
those of an ordinary business corporation principally in this-that
in addition to the information concerning Income and Expenses
and Assets and Liabilities required for intelligent management,
the City obtains control over its finances through a budget. Appropriation accounts are therefore necessary as a means of knowing the amount of funds available for the various purposes or for
the various offices and Departments; to which authority has been
given to spend. In the past, it has been for this latter purpose
only that the general controlling accounts of the City have been
kept by the Department of Finance-income and expense, current asset and liability and property accounts having been deemed
unessential or only an incident or as memoranda to the appropriation and Fund accounts. As a means of meeting the demands of
the Executive, and of the people, for accurate information-as a
means of enabling Department Heads to obtain the data necessary
for economic and efficient administration and to the protection of
municipal properties and the good faith of employees, the system
of direct accounting control over the affairs of the City should be
extended in such manner as to include Departmental records.
This may be done by installing a uniform system of departmental
accounting and by the installing in the office of Comptroller a system of controlling accounts over departmental income and ex



io8
penses and over current as well as the capital assets and liabilities
of the City. The detailed income and expense accounts (kept in
the several departments subject to this general control) would enable them not only to report the general operative results but also
regularly to lay before departmental and operative heads statements of income and expenses in such detail as is required. The
following form of Summary or General Report of the Water Systems is suggested not as a final draft of recommendation, but
rather to indicate the general financial and operative relations
which should.be reported from the departmental income and expense accounts and the general character of physical and operative
statistics necessary to administrative direction and control:




lo9
GENERAL SUMMARY OF INCOME AND EXPENSES OF THE WATER
SYSTEMS OF THE CITY OF NEW YORK FOR THE MONTH
ENDED          I90.


Total for
the month


Total for
months of
the current year


Total for
months
of the
past year


Increases
or
decreases


INCOME
I. Water Rates:
(a) Regular..................
(6)  Meter....................
Total Water Rates..........
I. P ermits:
(a)  Land...................
(b)  Marine.................
Total Permits..............
III. Miscellaneous................
Total Miscellaneous........
Total of all Income from
Water.................
EXPENSES
Administration:
(a)  General.................
(b) Borough................
Total Administration........
II. Collection and Storage:
(a) Operation and Maintenance.
I. Watersheds...........
2. Aqueducts and   Reservoirs................
3. Pumping stations.......
4. Other.................
Total Collection and Storage.
IIT. Distribution:
(a) Operation...............
I. Revenue Collection..
2. Patrol and Inspection
(b) Maintenance............
i. Pipe Yards..........
2. District Repairs and
Replacements.....
Total Distribution..........






II0




Total for  Total for
Total for months of months of Increases
the month   the cur-   of the       or
decreases
rent year  past year
IV. General   Property  Expenses,
Etc.:
(a) Taxes..................
(b) Insurance..............
(c) Interest on Bonds........
(d) Depreciation...........
I. Of Production and
Storage Plants....
2. Of Distributing
Plants...........
(e).......................
(f)......................
Total General Property Expenses, Etc...............
Total of all Expenses for
Water.................
Excess of Income over Expenses....
Excess of Expenses over Income...
Cash Receipts:
I. Collections on account of Previous Period................
(a) Water Rates:
(I) Regular............
(2) Meter..............
(3).
(3)...................
(b) Permits:
(i) Land..............
(2) Marine.............
(c) Miscellaneous........
2. Collections on account of Current Period................
(a) Water Rates:
(I) Regular...........
(2) Meter..............
(3)...................
(b) Permits:
(I)  Land..............
(2) Marine...........
(c) Miscellaneous.........
Total Cash Collections......
Excess of Cash Collections over Income Accrued.................
Excess of Income Accrued over Cash
Collections.....................




III.                    -


=




Total for  Total for
Total for months of   months   Increases
'the month  the cur-   of the      or
rent year  past year  decreases
Uncollected Accounts Receivable:
I. At Beginning of Period.......
(a) More than I month and
less than 3 overdue...
(b) More than 3 months and
and less than I year
overdue...........
2. Accrued during Period.......
Total......................
3. Collected during Period.......
4. Balance at end of Period......
Liability for Accounts Paid in Advance......................
Excess of Accounts Received over
Liability for Accounts Paid in Advance.........................
Cost of Plants:
I. Cost of Plants less Depreciation
and Losses at beginning of
Period.....................
2. Cost of Construction during
Period.....................
(a) Supervision and Inspection................
I. Of Extensions........
2. Of High Pressure systems................
(6) Outlays for Plants during Period..........
(I) For Extensions......
(I) For High Pressure...
3. Depreciation and Losses during
Period.....................
4. Cost of Plants Less Depreciation
at the end of the Period...
Operative Statistics:
Number Gallons Received in City
Reservoirs...................
Number Gallons Discharged from
City Reservoirs..............
Wastage at Reservoirs (Gal.).....
t" <     '    (Per ct.)..




112




Total for Total for 
Total for months of  months   ncreases
the month the cur-   of the      or
decreases
rent year  past year decreases
Number Gallons delivered:
Regular Service................
Meter Service..................
Wastage from Mains, Pipes (Gal.)
Wastage from M. P. (Per ct.)...
Cost of Production'per I,ooo Gallons Produced............
Cost of Distribution per I,ooo Gallons Delivered...............
Total Cost of i,ooo Gallons Delivered......................
Percentage of Total Cost:
For Administration..........
For Distribution..............
For General Property Expenses,
Etc.......................
Average Meter Rates per i,ooo
Average Regular Rates per 1,ooo
Gallons....................
While the Commission has gone to considerable length into
this and other Departments, the exact details are not for us to
recommend.     These should be worked out in conference with the
Comptroller and the several parties in interest -after an exhaustive
study of every phase of each branch of activity.      If, upon such
inquiry, it should be found that any of the items suggested should
be changed to better adapt a form to administration and accounting use, such alterations or changes may be made without impairing the principle of publicity suggested.
For the information of the several heads of the Water Systems, as well as for the information of the Head of the Department, the Income and Expense, as well as the collateral physical
and operative statistics of each separately operated systems,
should be regularly reported in detail from the accounts and subsidiary records.   Assuming that the detailed 'account, as well as
the detailed reports of the several Boroughs or systems may have
a common classification, the detailed reports from the Borough accounting offices where the Income and Expense Ledgers are kept
may be used as journal entries for the accounts of the central office of the Department, thus enabling the Chief Bookkeeper of the
Departments to render a report in detail, for each of the systems,




II3
or a consolidated report for them all in a form desired within a
few days after the closing of each calendar month. For example:
The expenses of each administrative office may be classified to
show (i) Salaries and Wages;.(2) Office Expense; (3) Miscellaneous Administrative Expenses with details under each classification something as follows:
(i) Salaries and Wages
Commissioner, Superintendent or Head
Assistants
Clerks
Stenographers
(2) Office Expenses
Rent
Heat and Light
Printing and Stationery
Postage
Office Furniture and Fittings
Telephone, Telegraph and Commercial Messenger..............
~.............
(3) Miscellaneous Expenses
Transportation 
Carriage and Horse Hire 
Automobile Expenses 
A common classification may also be established for laboratories, pumping stations, filtering plants and each of the operative
divisions of the several systems, thus. supplying for each system
a common basis for reporting in detail items of expense and which
may finally be grouped.and summarized in a general report. Upon
such classification., detailed expense accounts may be established
in each of the Borough Offices over which an accounting control
may be exercised by the central accounting office of the Department, and which in turn may be controlled from the offices of
Mayor and Comptroller. By the installation of properly tlassified
expense accounts in each of the departments, and general expense


*




II4


accounts over each of the departments in the office of Comptroller,
a complete expense accounting may be made effective and information will come regularly to those in administrative relation
necessary to judgment in the direction and control of the City's
business.
THE ADVANTAGES OF ACCOUNTS WHICH SHOW EXPENSES AS DISTINCT AND SEPARATE FROM APPROPRIATIONS.
Objection has been raised to the keeping of expense accounts
as distinct from and independent of appropriation accounts. Those
who have criticised the introduction of this class of accounts affirm that there is no need for distinct accounts to show expenses.
As opposed to this view, however, it is to be noted that in a system containing budgetary accounts only, no place is found for any
item of expense which does not represent a charge against an appropriation. In such a system no place may be found for such
classes of expenses, as printing and stationery, heat and light,
furniture and fixtures obtained from other departments, for an
apportionment of salaries and wages, depreciation, etc., etc. Printing and stationery being furnished to the several departments by
the City Record, the purchases of stationery supplies must be
entered against appropriations for the support of the City Record,
and although a register may be kept which contains information
as to requisitions for printing and stationery made by a Department, there is no provision in the controlled departmental accounts
for exercising direct supervision and audit over this class of expenses incurred. The same is true of office furniture and fittings
which are purchased by the Borough Presidents and of the cost of
providing the Department with office space, etc. Neither is there
any provision made for the proper accounting for the use of a
large part of the supplies which are purchased by the Departments
themselves and taken into stock before being distributed. These
are charged to Appropriations of the Department when purchased. When operating on a basis of appropriation accounting
only, the fact that no accounting device may be introduced which
will indicate the disposition of these supplies to the various
branches of the Department where used over which control may
be exercised, suggests one of the many reasons why the Department should have expense accounts that are independent and distinct from appropriation accounts.




II5


A department of Municipal activity should have an accounting
means of determining the cost of operation as, accurately and as
promptly as would be if its authority to spend did not come
through appropriations. The expense incurred by a Department
for supplies is not reflected by the amount purchased and taken
into stock. For example: The Water Department of the City of
New York might purchase many thousands of dollars' worth of
pipe, materials and plumbing supplies during any month of the
year, while only a small portion of this stock may be used during
the period reported on. From an operative point of view the officers and the public wish to know what is the relation of the cost
of operation to the Income or other provision made for meeting
the cost and whether the several systems of Water Supply are
being economically managed. When construction and repairs are
the objects of expenditure, as well as in cases of the consumption
of consumable goods, the labor and materials actually used is the
only basis for judgment as to economy. To throw into the expense accounts purchases for stock, destroys all comparisons and
subverts judgment, both with respect to operative results and with
respect to efficiency and economy of service. In determining questions of expense, account should be taken of the wear and waste
to the plant even though no provision be made for repairs and replacements. The introduction of distinct accounts which will reflect expenses as separate and apart from the provision made for
the payment of claims against the City on account of purchases,
would accomplish this result. Without such accounts this information would not be available.
ADMINISTRATIVE ADVANTAGE OF ACCOUNTS AND REPORTS OF
PROPERTIES AND CAPITAL OUTLAYS.
Under a system which makes provision for budgetary accounts.
only, there are no centrally controlled accounts showing the operations, the cost, and present condition of properties. This is
true for the same reason that there are no accounts giving true expenses. When an expenditure is made, it is written against an
appropriation. The result is to show the balance of appropriations unexpended and in the contra-entry may be shown the total
or aggregate of appropriations for a specified purpose. These accounts are proper and necessary to financial control, but they give
little or no true information with respect to operating results or




II6
proprietary condition. For purposes of illustration, let us assume that there are certain Department properties to be administered in the form of office buildings. That we may know whether
the buildings are economically managed and kept in regular repair, an account and report should be made on each property to
show some such relations as the following:




II7
SUMMARY OF EXPENSES OF REAL ESTATE
Description of Properties
Total of
All
Buildings                 Hall of
City Hall    Records
General Administration:
Salaries-Wages..................
Clerks, etc........................
Superintendents..................
Office Expenses................
Total Cost of Administration...
Operation:
Salaries-Wages..................
Elevator Men...................
Engineers, Oilers and Helpers.....
Electrician......................
Janitors, Porters, Cleaners, etc....
Special Officers and Watchmen....
Other Wages- Operations.........
Supplies..........................
Fuel, Oil and Waste..............
Electrical Supplies..........
Janitors' Supplies................
Heat, and Light Purchased.......
Other Supplies-Operations.......
Total Cost of Operations.......
Maintenance:
Repairs and Replacements..........
Buildings and Grounds............
Elevators........................
Engines and Boilers, etc.........
Electrical Machinery............
Other Repairs and Replacements..
Depreciation.....................
Total Cost of Maintenance.......
General Property Expenses:
Taxes..........................
Insurance..................
Grotund Rents...................
Other Property Expenses..........
Total General Property Expenses
Total Expenses.....................




A proper classification of accounts needed for reporting on
the proprietary relations of buildings of the character above indicated might be:




Ii8


Cost.     Depreciation.
Sites and Grounds..................
Buildings Structures..............
Elevators.........................
Power & Heating Plants...........
Electrical Equipment..............
Fittings & Fixtures.................
The object of any classification of property accounts adopted
is: to show, with respect to each building, the character and
original cost of improvements, additions and betterments; to enable the Board of Estimate and Apportionment, as well as the
operative heads, to make provision for maintenance based on engineering experience; and to determine whether the provisions for
repairs and replacements are adequate or if not the measure of depreciation or inadequacy of provision for wear and waste-that is
the amount of expenditures that had been deferred during a cur'
rent period for which provision must be made in subsequent
budgets. As a means of determining whether the buildings have
been adequately maintained, there may be set up a reserve for depreciation (based on engineering experience) which reserve
would be regularly charged to expenses. When repairs are
made the reserves may be debited and the audited vouchers for
stock accounts credited with such an accounting, the credit balance of the reserve account will show the amount of the depreciation; a debit balance would be in the nature of prepaid expenses
or betterments.
As a means of obtaining a true account and report on the
operations of the buildings, it would be necessary to have both
property and expense accounts-the same property and expense
accounts as if no consideration were to be given to the method
or means of obtaining funds. A clear line of distinction, therefore, should be drawn between the supplies and materials used
and supplies and materials in stock; between repairs and replacements actually made and depreciation; between additions and betterments to property and expenses of operation and maintenance;
between the taxes, insurance and rents of other expense charges
to the current period and the expenditure of amounts for periods
past or future, although the payment for taxes, insurance, rents,
etc., were made during the current period and were chargeable
against current appropriations. Such relations may be currently




II9


and accurately shown only by having the property accounts and
expense accounts and by keeping these accounts entirely distinct
from the appropriation accounts. The budgetary accounts and
the property and expense accounts are essentially different in purpose and one class or character of accounts may not be successfully used for the purpose of giving the data intended to be shown
through the other.
ADMINISTRATIVE ADVANTAGE OF OPERATIVE STATISTICS.
When Income and Expense accounts distinct from Appropriation accounts are kept, all of the operative financial results are
brought under direct accounting control and may be obtained
from the regular footings and balances shown on the books. The
physical and operative statistics which may not be stated in terms
of dollars and cents, however, are not and may not be regularly
retained through the accounts. These statistics must be kept in
separate statistical records and should be so co-ordinated with the
accounts that each may be used to supplement the other in giving
the information needed for determining any factor or result of
management required.
DETAILED SUGGESTIONS AS TO ACCOUNTING AND REPORTING.
We have not attempted in this report to do more than suggest
general principles of accounting and reporting, which may be applied to the financial as well as the operative management of a
City, believing that if the principles herein suggested be approved
by the City Administration further investigation should be undertaken with a view of receiving a detailed plan of accounting control for permanent adoption.
DIFFICULTIES TO BE ENCOUNTERED IN THE REVISION OF THE
PRESENT SYSTEM.
While under the law the Comptroller of the City of New
York is authorized to introduce and enforce upon the departments
any form of accounting which he may direct, the difficulties to be
encountered by him in any effort which he may make to reorganize the accounts of the City should not be passed without
notice. In the first place the departmental accounts of the City
of Greater New York are, in a large measure, made up of those




120


which have been taken over from a number of dissimilar municipalities and brought together by consolidation. Each of these
municipalities has had its own administrative methods and departmental practices. Moreover, the corporation of Greater New
York is dependent for the details of administration on a clerical
staff which is not subject to direct control by the central officers
of the City. The present method of appointment and removal of
the clerical staff not only deprives the Comptroller of powers to
enforce, but even the heads of the departments themselves have in
numerous instances found themselves unable through discipline or
otherwise to establish a policy of sufficient independence to enable them to direct and accomplish results which have been
deemed essential to economic and efficient management.
Another fact to be recognized is that the Comptroller is essentially a political and financial officer. He is elected to a position of responsibility with little or no knowledge of the business
over which he is to exercise controlling judgment and with accounting methods in vogue that do not provide the information
needed in the performance of his duties. Being the chief financial
officer of the City, little of his time or attention may be given to
matters of accounting or to the reorganization of the system. As
an officer he finds himself in a position of legal responsibility for
the acts and methods of hundreds of officials and non-official subordinates, who, in groups and departments, are transacting the
business of the City along lines of inherited custom. Not having the appointment of the accounting heads of other departments, within his control, and the members of the. staff not being
directly subject to discipline, the institution as it has developed
moves with a momentum and possesses an inertia so great at
times to annul his authority. To organize the accounts on a new
basis, to successfully devise, install and supervise a system of
control over income and expenses, as well as over appropriation
and proprietary accounts, would require the undivided attention
and unlimited power of a Comptroller through his entire period
of incumbency. Being engrossed in the financial affairs of his
office, he must necessarily depend upon the advice of others.
RECOMMENDATION WITH RESPECT TO THE OFFICES OF COMPTROLLER AND COMMISSIONERS OF ACCOUNTS.
In our opinion, a change both in accounting methods and in
organization is necessary to effective administrative control. In




I21


effecting such change two distinct lines of development are possible:
(i) The hands of the Comptroller may be further strengthened, by not only permitting him, when it may be considered desirable, to call to his assistance independent professional advice
in devising and installing improved methods, but also by giving
him a freer hand in the removal of departmental accounting. heads
and chief assistants, -when, in his judgment, such heads or assistants may prove inefficient, thus enabling him to impress upon
the several 'departments of the City such reform as may'be properly approved for the purpose of instituting a more rigid control
and of efficiently administering- a thorough system of executive
and operative accounts.' The advantage of the plan above suggested would be that accounting control would be centralized and
there might be the greatest economy and uniformity in the administration of the system.
-Complementary to such a disposition of accounting control
there should also be a change made in the scope and purpose of
the office of Commissioners of Accounts. Although in the past
this office has been used principally as a statistical bureau and incidentally as an auditing bureau, -as a complement to a system of
controlled accounts it has in it the possibility of becoming one of
the most important divisions of city government. Instead of encumbering the staff of this office with the making of perfunctory
reports on questions of current administration the information
with respect to which. should come regularly from the departments, the office of Commissioners should be principally occupied (a) with auditing the accounts and reports of departments,
and (b) as a court of expert. inquiry for the information of the
Mayor with respect to administration, i. e., as an inquisitorial
branch of the executive for the determination of facts that could
not ordinarily be reached by an auditor without such powers as
are possessed by the Commissioners of Accounts while sitting as
a special court with authority to subpoena witnesses, and to require the production of books and other evidence necessary to the
determination of facts not found on the face of the records.
Being provided with an adequate system of departmental accounts
under the Comptroller and being thus armed with an independent
bureau of departmental audit under the Commissioner of Accounts, with all of the powers of the Legislature to inquire into
every transaction in which the city may be interested, there is no




122


reason why the Mayor may not fully perform the duties imposed
by the charter, viz.: " to keep himself informed of the doings of
" the several departments;" " to be vigilant and active in caus" ing the ordinances of the City and laws of the State to be exe"cuted and enforced;" " and generally to perform all such duties
"as may be prescribed for him."
(2) A second suggestion involves a somewhat more radical
change in Charter provisions. The Comptroller is to-day much
encumbered with political and legislative duties. Originally, when
New York was a City less than one-fifth its present size, the
Comptroller was little more than the City's chief bookkeeper and
auditing officer. To-day, he is the chief officer of financial control. As a member of the Board of Estimate and Apportionment, Sinking Fund Commission, etc., and as a memoer ex-officio
of other boards, these functions together with his other dutieslargely legislative-have tended to overshadow his original accounting functions. Vested, by statute, with power to dictate the
form of accounting in other departments, in practice, for many
years past the Comptroller has found little or no time to give such
matters his attention, and the heterogeneous and incongruous
methods of accounting inherited from the past have gone on unaltered. On the other hand, the Mayor, charged by law with the
duty of keeping himself advised as to all matters of administration, has been helpless to an astonishing degree. The Commissioners of Accounts, who should have been the means of enlightening him, through digests of monthly and annual reports made
by the departments, have, as already stated, been largely occupied
with the making of special examination which have taken much
time and labor and which would have been unnecessary under a
proper system; of accounting control. They have, it is true, furnished him with such information as he received, but this has been
fragmentary and so far in arrears of the transactions reported on
as to make them of little value for administrative purposes.
In I906 the Legislature established in the Comptroller's Office, a Bureau of Statistics-another blind striving to obtain facts
through special investigation which should come regularly from
departmental accounts in the form of well digested monthly and
annual reports. The City is in the attitude of having two bureaus for the assembling and reporting of statistics without having the regular accounting machinery for supplying currently the
information necessary for making such bureaus effective.




123


For the purpose of maintaining effective financial control, all
bills and claims against the City should, as now, be approved by
the Comptroller; he should remain in control of the City's budgetary and financial accounts, and he should be left free to pursue those most important legislative duties which have been imposed upon him. To this end the office of Comptroller may be
entirely relieved from all responsibility for the administrative
accounts, i. e., control over the department records essential to
executive efficiency and administrative economy may be transferred to the office of Commissioners of Accounts. As the Mayor
is made responsible for administrative results, so he may 'then
have in his hands, the means of acquiring knowledge of administrative defects and, through his power of removal, may then enforce remedies as faults are made known. Were this second
principle adopted as the theory of reorganization of the accounting methods, the Commissioners of Accounts should then be
vested with the power to devise and install bookkeeping methods
and systems in all departments of the City Government, excepting in the office of the Comptroller and should be given power to
remove departmental accounting heads.
Another advantage of having the accounts and statistics which
look toward executive or operative control (as distinguished
from fund and appropriation accounts) devised, installed and supervised by the Commissioners of Accounts, would be that the
Commissioners are appointed by and responsible to the Mayor.
The Comptroller is by law the principal officer of financial control and his administrative responsibilities under'the Charter have
been mainly of this character. As such officer, it has been incumbent on him to devise and install a system of controlling financial accounting; but having no responsibility for the economy
or efficiency of departments, and being independent of the Mayor,
there has been no provision in the Charter making it his duty to
devise, install or control executive and operative accounts. The
interests of the Comptroller having been centered in financial control, "the forms for keeping and rendering the accounts," have
been principally for his information only. As a result, the Mayor
as Chairman of the Board of Estimate and Apportionment, has
been subordinate in elicited intelligence to the Comptroller; as
the chief executive of Departments, he has been dependent for
current information on one who has no official interest in, or responsibility for, departmental results; he has been compelled to


a




I24


administer his office with no adequate method for assembling
operative administrative data. 
In any case, it is our opinion that the Charter should be so
amended as to render accounting control consistent with efficient
administration. In other words, given an adequate system of accounts, the Mayor would seem to have ample power to protect
the interests of the City. Being constituted by law "a magistrate," as well as "the chief executive officer of the city," and
having at will the power to appoint and remove Commissioners
of Accounts who have the fullest authority, not only to audit departmental accounts, but also to sit as a court of inquiry, there
would seem to be in the hands of the Mayor the means not only
of protecting.the City against spoilation through contracts, but
also to establish the incompetency or infidelity of those in the
Civil Service who in the past have enjoyed immunity from discipline.




ADVISORY


COMMISSION


ON


TAXATION AND FINANCE
REPORT
OF
COMMITTEE ON TAXATION


AND REVENUE
ON


COLLECTION OF ARREARS OF REAL
TAXES AND ASSESSMENTS


ESTATE


DECEMBER, 1907




i




127


The   Collection of Arrears' of Real Estate Taxes and
Assessments.
INTRODUCTION.
Long experience in the Finance Department convinced Mr.
Joseph Haag, when Chief Bookkeeper, that the method for the
collection of arrears of taxes and assessments was hopelessly inadequate. In I902 he presented to the Comptroller an outline of
what he regarded as a satisfactory method. No steps were taken
to work out this plain detail until a year and a half ago, when
Mr. Haag presented the plan to Mr. Purdy, Chairman of the
Committee on Taxation and Revenue of the Mayor's Advisory
Commission. Mr. Purdy then prepared a rough draft of a bill
amending Title 5 of Chapter XVII. of the Charter, which was
printed and submitted to the Commrrittee on Taxation andRevenue. The plan was so far approved by the Committee in principle that it seemed desirable to perfectthe bill. The bill as prepared by Mr. Purdy was submitted to Mr. Walter Lindner, Solicitor of the Title Guarantee and Trust Company, and he became so much interested in the plan that he was kind enough to
volunteer to aid the Committee. Mr. Lindner has now carefully
revised the bill, inserting the provisions necessary to make it
thoroughly workable, having in view the necessity for such perfection of detail as will result in the City being able to insure a
perfectly good title to the purchaser of real property when ultimately sold for taxes.
Mr. Lindner has had in mind also the necessity for making
the tax liens provided for in the bill an attractive investment.
The Committee has also had the benefit of the advice and assistance of Mr. Edward L. Heydecker, the Editor of the General
Laws of New York, now a member of the Committee.
THE PRESENT METHOD.
The present method of enforcing the payment of arrears of
real estate taxes, assessments and water rents is contained in Title
5 of Chapter-XVII. of the Charter and was taken, almost without
change, from the Charter of the old City of New York, called
The Consolidation Act. The plan in substantially its present form,
has been in force for many years. Briefly described it is as follows:




128


Taxes, assessments and water rents are liens upon the land assessed and are preferred in payment to all other charges. When
taxes or assessments are unpaid for three years and water rents
for four years it is lawful for the Collector of Assessments and
Arrears, under the direction of the Comptroller, to advertise for
sale a lease of the property for the lowest term of years at which
any person shall offer to take the same in consideration of advancing the arrears, with interest at the rate of seven per cent., to the
time of sale. The purchaser of such leases receives a certificate
of sale describing the property, the term of the lease, the amount
of arrears, interest, etc., advanced in payment for the lease and
the time when the purchaser will be entitled to the lease of the
property. If there are no bids for a lease of any property offered for sale, the City of New York may bid it in for the City.
If no one interested in the property pays the amount mentioned in the certificate of sale within two years from the date of
the certificate, with interest at the rate of fourteen per cent., the
Comptroller shall execute to the purchaser a lease of the property
for the term of years for which it has been sold. The lease cannot be executed and delivered until six months after due publication of a notice that unless the property be redeemed by a certain
day, the lease will be conveyed to the purchaser.
OBJECTIONS TO THE SALE OF LEASES.
The experience of the old City of New York with this method
of enforcing payment of arrears has been that a very small percentage of the property put up for sale has been bid for by individuals, the bulk of the property being bid in by the representatives of the City, and the amount realized from actual sales is
inconsiderable. As the sole object of the sale is to realize the
amount due the City, the whole object of the plan is defeated.
Because of the small number of bidders, the leases are very
long and the risk to the owners of property correspondingly great
if the lease should be upheld. Leases are sold for one thousand
years. This is equivalent to the sale of the fee. Under such circumstances, the owner of the property would receive nothing, his
property would be totally lost because he had failed or neglected
to pay the City within the time required by law a small percentage of its value. In view of this great danger to owners of property the Courts have been exceedingly vigilant to detect flaws in
the procedure so that it is commonly believed that a valid lease




I29


sold for arrears is almost unknown. With the value of the leases
so utterly discredited, it is no wonder there are few bidders and
that when leases are sold the term of years is abnormally long.
So poor has been the result of these sales of leases that there
have been only six such sales in the last thirty-two years. The
objections may be summarized as follows: The expense and the
danger to property owners is excessive and unreasonable. The
City is unable by the sale of leases to collect its revenue when it
requires it.
Some persons have suggested that the City of New York
should adopt the remedy existing in the former City of Brooklyn
by the sale at auction of the fee of the property. Although this
method was effective in enforcing the payment of arrears, it is objectionable because too severe on property owners whose property may be sacrificed and because it is difficult to convey good
title by a sale for taxes. Titles are often clouded and purchasers
being obliged to take the risk of a bad title do not bid the full
value of the property.
The following plan, it is deemed, would be effective in collecting arrears promptly and at the same time would impose no unconscionable penalties on property owners and in many cases
would, in fact, reduce the amount of interest they may now be required to pay.
THE REMEDY.
To be satisfactory any method of collecting arrears of real
estate taxes, assessments and water rents must combine two
qualities:
The remedy must be effective and enable the City to collect
arrears promptly.
The remedy must cause property owners the least possible inconvenience and risk.
The proposed remedy is deemed to meet these conditions. It
is briefly described as follows:
As soon as taxes, assessments and water rents are laid, a lien
attaches to the property in favor of the City, which is prior to
any and all other liens. When taxes or assessments are three
years in arrears, or water rents four years, the lien of all arrears
which shall have accrued up to the day of the first advertisement
of sale, will be sold at auction to the person who shall bid the




130


lowest rate of interest not exceeding twelve per cent. Upon payment of the purchase money a conveyance of the " tax lien," payable in three years, will be executed by the City to the purchaser.
The City will guarantee the validity of the lien so that the
only risk taken by the purchaser will be the sufficient value of the
property affected by the lien and the possible trouble of collection.
"Transfers of tax liens " will be registered in the office of
the Collector of Assessments and Arrears and will be recordable
in the office of the Register. The procedure for collection will be
the same as for the collection of a mortgage.
A " transfer of tax lien " will provide that the whole of the
principal sum which the " transfer of tax lien " is given to secure
shall become due at the option of the owner thereof after default
in the payment of interest for thirty days or after default in the
payment of any subsequently accruing tax, assessment or water
rent for six months. This provision will very nearly insure the
continuous future payment of taxes and assessments, subsequent
to the sale of a " tax lien," as the owner of the property must pay
or suffer the foreclosure of the " tax lien."
Any person having an interest in property affected by a " tax
lien " may discharge the same before maturity on giving thirty
days' notice to the holder of the transfer thereof upon payment
of the principal with interest to a date three months subsequent
to the date of payment named in the notice.
"Tax liens " will be exempt from taxation and will be made
legal investments for Savings Banks in case they do not exceed
half the assessed value of the property affected.
ADVANTAGES.
"Tax liens " will be a thoroughly safe investment, being absolutely the first liens on city real estate. "Tax liens " for large
sums should sell readily at a low rate of interest and even " tax
liens" for small sums should be a proAtable investment and sell
easily at some rate less than the maximum. It is probable that
some persons and corporations will undertake the purchase of
" tax liens " as a business, perhaps issuing debenture bonds thereby secured.
If " tax liens " are readily salable the City will no longer be
kept out of the use of its proper income. The trouble and expense of collection will be shifted from the City to private parties.




I3I


As the proceedings for foreclosure will be judicial full justice
will be done to delinquent owners and the courts will be careful
to sustain the validity of their own acts.
From the standpoint of the taxpayer, the proposed plan has
the great advantage that, when a tax is over three years in arrears all taxes and assessments then due can be postponed for
three years more upon payment of interest and subsequent taxes.
Moreover, the taxpayer, if a resident, will always get personal
notice, and will generally get personal notice even if a non-resident, when any action is brought which might result in the sale
of the property.
DESCRIPTION OF THE BILL.
The Bill amends Chapter XVII. of the New York Charter.
SECTION I of the Bill amends the caption of Chapter XVII.,
by inserting the words, "tax liens on " so that Title 5 shall read:
"Sales of tax liens on lands for taxes, assessments and water
rents."
SECTION 2 of the Bill amends Charter Section 9o9, changing
the definition of water rents, by making it more specific.
SECTION 3 amends Charter Section 920, as amended by Chapter 303 of the Laws of I907, by inserting the words " the tax
lien."
SECTION 4 amends Charter Section 964 by inserting the words
"the tax lien."
SECTION 5 of the Bill amends the caption of Title 5 so as to
conform to the caption of -the Chapter.
SECTION 6 amends Charter Section IOI7 by more carefully defining "water rents." This section determines the time when
taxes, assessments and water rents become liens.
Charter Sections Io18 and IoI9 remain unchanged. They relate to the publication of notice of the confirmation of assessments, and the charging of interest, if assessments are unpaid
after sixty days.
SECTION 7. Charter Section Io20 provides the rate of interest to be charged on all arrears of taxes and assessments. The
section is amended to conform to the sale of the tax lien instead
of a lease.




132
SECTION 8 amends Charter Section Io2I, by providing for
sale of the tax lien for arrears of assessments, and provides for
apportionment by the Board of Assessors when parcels are divided.
SECTIONS 9 and Io make slight verbal changes in Charter Sections 1023 and I024, otherwise I022 I1023, 1023a and I024 remain unchanged. They relate to water rents; the return of arrears to the Collector by the Receiver of Taxes; notifying taxpayers of assessments and provision for the inclusion of water
rents in the assessment rolls.
SECTION II amends Charter Section 1025. This section provides for the record of arrears on the assessment rolls and remains
substantially unchanged.
SECTION 12 amends Charter Section Io26. This section provides for notices of arrears to be printed on tax bills and is
amended to conform to the new remedy, so that warning of the
sale of a " tax lien " shall be given instead of notice of the sale
of. the lease.
SECTION 13 amends Charter Section 1027. This section now
provides the procedure for the sale of leases and is amended so
as to provide for the sale of " tax liens."  Such piocedure is substantially unchanged. It provides that when taxes or assessments are unpaid for three years or water rents for four years,
the Collector of Assessments and Arrears shall advertise " tax
liens " for sale for a term of three years to the person who bids
the lowest rate of interest, not exceeding twelve per cent. The
Collector shall give to the purchaser of " tax liens " a " transfer of
tax lien," describing the property encumbered by the lien; the
sum to be paid; the amount advanced and the rate of interest.
All the provisions for advertising such sales are preserved unchanged.
SECTION 14. Charter Section 1028 is repealed. It provided
for the advertisement of contiguous lots as one parcel, which
would endanger the accuracy of the procedure.
SECTION 15. Charter Section 1029 is renumbered so as to be
1028, and is unchanged in substance. It provides that the Comptroller may postpone sales.
SECTION I6. Charter Section 1030 is renumbered so as to
be Section I029. It provides that the Collector of Assessments
and Arrears shall conduct the sales and is amended so as to pro



I33


vide for a deposit or payment on account by the purchaser at the
time of sale upon terms and conditions prescribed by the Comptroller. "Transfers of Tax liens ' shall be delivered to the purchaser, without charge, upon payment of the amount due.
"Transfers of Tax liens " not paid for within thirty days may be
canceled and the deposit forfeited, and a resale made.
SECTION 17. Charter Sections Io3I to I049, both inclusive,
are repealed. All these Sections relate solely to the procedure to
be followed in case of the sale of leases and have no bearing
upon the sale of "tax liens."
SECTION I8 enacts a new section to be numbered 1o30, defining "transfer of tax lien " and describing its nature and incidents. "Transfers of Tax liens " shall be executed by or in behalf of the Collector of Assessments and Arrears.
SECTION 19 enacts a new section to be numbered Io3I. It
provides for a public record of sales of " Tax liens " to be kept by
the Collector of Assessments and Arrears. A "transfer of tax
lien" and a duly acknowledged assignment thereof shall be
deemed conveyances under the Real Property Law and may be
recorded as such. Failure to record does not invalidate the lien.
The various records may be read in evidence.
SECTION 20 enacts a new section to be numbered 1032. This
section defines the rights of purchasers of tax liens:
SECTION 21 enacts a new section to be numbered 1033, providing for the discharge of the tax lien when paid.
SECTION 22 enacts a new section to be numbered 1034, providing for the exemption from taxation of tax liens.
SECTIONS 23, 24, 25, 26, 27, 28 and 29 enact new sections to be
numbered IO35, Io36, 1037, 1038, 1039, IO40 and 104I, providing
the procedure for foreclosure of tax liens.
SECTION 30 adds a new section to be Section 1042. It provides for the procedure when no bid for a " tax lien " is received.
In this case the Comptroller and Corporation Counsel shall investigate the facts and reduce the amount to a sum for which, in
their judgment, a " tax lien " bearing twelve per cent. interest can
be sold. They shall file a certificate in writing setting forth the
amount so determined, with their reasons. Such " tax lien" shall
then be advertised for sale to the person who shall bid the highest
amount of money in excess of the amount fixed by the Comptroller and Corporation Counsel. If still no bid is received, the




I34


Comptroller and Corporation Counsel shall reconsider their determination and proceed as before. This section is added in order
that some collection may be made by the City and title cleared in
cases where the arrears equal or exceed the value of the property.
SECTIONS 31 and 32 enact new sections to be numbered 1043
and io44, providing for the reimbursement of the owner of a
"transfer of tax lien " in case the tax lien shall be vacated or cancelled in whole or in part.
SECTION 33 enacts a new section to be numbered 1045. It
provides that owners of property may question the validity of tax
liens on their property; that such shall be referred to the Corporation Counsel, who may direct the surrender of a transfer of
tax lien and the refunding of the amount paid therefor.
SECTION 34 enacts a new section to be numbered Io46. It
provides that the Corporation Counsel shall be notified of any
proceeding adverse to the validity of a tax lien and may intervene in such proceeding.
SECTION 35 enacts a new section to be numbered 1047. It provides for reimbursement of the holder of a transfer of lien which
is invalid in whole or in part, and directs the resale of so much
of the tax lien as remains valid.
SECTION 36. Charter Section o150 is renumbered so as to be
Section Io48. It provides for the delivery of a duplicate in case
the "transfer of tax lien" is lost, and is otherwise without
change of substance, except that the provision for registration is
omitted here and inserted in Section 103I.
SECTION 37. Charter Section Io51 is renumbered so as to be
Io49. It provides that bills for the arrears of taxes and assessments shall be furnished when requested. It also provides that
the certificate of the Collector, countersigned by the Comptroller,
shall free the property from all liens except the lien of " transfers
of tax liens " duly sold. The section is unchanged except in so
far as was necessary to conform the procedure to the method of
collection by the sale of " tax liens " instead of leases.
SECTION 38. Charter Section Io52 is renumbered so as to be
Io50. It provides that fees for searches shall be included in the
bills mentioned in the preceding section and is unchanged.
SECTION 39 repeals Charter Section 1053. It provided for a
complete record of sales, now contained in Section 103I.




I35


SECTION 40. Charter Section 1054 is renumbered so as to be
Section 1051. It provides for the preservation of affidavits of
the publication of notices and remains unchanged.
SECTION 41. This section is not a part of the Charter and is
designed to save to the city and the taxpayers all rights acquired
before the passage of the Act.
The proposed bill is as follows:
AN ACT to amend the Greater New York Charter relative to
sales of lands for taxes, assessments and water rates.
The People of the State of New York, represented is Senate
and Assembly, do enact as follows:
SECTION i. The caption of Chapter XVII. of the Greater
New York Charter, as re-enacted by chapter four hundred and
sixty-six of the laws of nineteen hundred and one, is hereby
amended so as to read as follows:
CHAPTER XVII.
TAXES AND ASSESSMENTS.
Title I. Department of Taxes and Assessments;
powers and duties.
Title 2. Assessments for local improvements other
than  those  confirmed  by  a  Court of
Record.
Title 3. Vacating and modifying assessments for local
improvements other than those confirmed by
a Court of Record.
Title 4. Opening Streets and Parks.
Title 5. Sales of tax liens on lands for taxes, assessments and water rates.
SEC. 2. Section nine hundred and nine of the Greater New
York Charter, as re-enacted by chapter four hundred and sixtysix of the laws of nineteen hundred and one, is hereby amended
so as to read as follows:
ASSESSMENT-ROLLS TO REMAIN IN      CUSTODY OF BOARD OF
ALDERMEN.
SEC. 909. The tax or assessment rolls, when finally submitted
to the board of aldermen on the first Monday of July in each




136


year, shall remain in its custody, but the president of the board
may, by written permission, permit access to them, and he is
hereby, in the name of the board of aldermen and as its act, authorized and directed to cause to be properly estimated and computed the taxes annually imposed, and cause the same to be properly set down or extended in the several assessment rolls or tax
books, as required by the next section. It shall also be the duty
of said president to cause the items of said taxes to be carefully
added, and to set down the amount of the same therein; and when
completed to deliver the tax books relating to real estate to the
comptroller, in order that the unpaid water rents, and the expenses of meters, with their connections and setting, water rates
and other lazefull charges for the supply of water measured by
meters of any [each] preceding year may be entered therein.
After such completion of the assessment rolls or tax books it shall
be the duty of the city clerk to procure the proper warrants authorizing and requiring the receiver of taxes to collect the several sums therein mentioned according to law, and such warrants
need be signed only by the president of the board of aldermen,
and countersigned by the city clerk, and immediately thereafter
the president of the board of aldermen shall deliver the said assessment rolls, with the warrants aforesaid annexed thereto, to
the receiver of taxes, at the same time notifying the comptroller
of the amount of taxes in each book, in order that he may cause
the proper sum to be charged to the receiver for collection.
SEC. 3. Section nine hundred and twenty of said law, as
amended by chapter three hundred and three of the laws of nineteen hundred and seven, is hereby amended so as to read as follows:
UNDIVIDED PARTS OF TAXES: PAYMENT OF.
SEC. 920. If a sum of money in gross has been or shall be
taxed upon any lands or premises, any person or persons claiming any divided or undivided part thereof may pay such part of
the sum of money so taxed, also of the interest and charges due
or charged thereon, as the said comptroller may deem to be just
and equitable. The department of taxes and assessments shall
apportion the assessed valuation of such land or premises when
requested by the comptroller so to do, and shall certify such apportionment to him. The determination of the said comptroller
shall be based upon such apportionment so certified. The re



I37


mainder of the sum of money so taxed, together with the interest
and charges, shall be a lien upon the residue of the land. and
premises only, and the tax lien upon such [which] residue may
be sold to satisfy [the residue of] such tax, interest or charges
thereon, in the same manner as though the residue of said tax
had been imposed only upon [the] such residue of said lands or
premises.
SEC. 4. Section nine hundred and sixty-four of said law is
hereby amended so as to read as follows:
RE-ASSESSMENT.
SEC. 964. Any lands which may be discharged from any
lien for an assessment for any local improvement or as to which a
sale [for non-payment] of the tax lien thereon for such assessments authorized to be made by section ten hundred and twentyseven of this act has been vacated or set aside may be again
assessed in the manner provided by law, for such amount as
would have been justly chargeable if fraud or irregularity had not
been committed; and the amount so assessed shall be a lien on
said lands until paid, and shall be collectible in the manner provided by law for the collection of assessments, but all proceedings to make a new assessment shall be at the expense of the
city.
SEC. 5. The caption of Title 5 of Chapter XVII. of the
Greater New York Charter, as re-enacted by chapter four hundred and sixty-six of the Laws of nineteen hundred and one, is
hereby amended so as to read as follows:
Title 5. Sales of tax liens on lands for taxes, assessments
and water rates.
SEC. 6. Section ten hundred and seventeen of said law is
hereby amended so as to read as follows:
WHEN TAXES AND WATER RENTS TO BE LIENS ON LANDS
ASSESSED.
\SEC. IOI7. All taxes and all assessments for local improvements and all water rents, and the expenses of water meters, with
their connections and setting, and water rates and other lawful
charges for the supply of water measured by meters, and the interest and charges thereon, which may, in The City of New York,




I38


as by this act constituted, hereafter be laid or may have heretofore been laid, upon any real estate now in said city, shall continue to be, until paid, a lien thereon, and shall be preferred in
payment to all other charges. No assessments for any local improvements shall be deemed to be fully confirmed, so as to be due
and be a lien upon the property included in the assessment, until
ten days after the title thereof, with the date of confirmation
shall be entered with the date of such entry, in a record of the
titles of assessments confirmed, to be kept in the office of the collector of assessments and arrears.
The words " water rents" whenever they are used in this title
shall include, the expenses of meters, with their connections and
setting, water rents, water rates and all lawful charges for the
supply of water measured by meters.
SEC. 7. Section ten hundred and twenty of the Greater New
York Charter is hereby amended so as to read as follows:
RATE.
SEC. 1020. Interest shall hereafter be charged and collected
at the rate of seven per centum per annum on all arrears of taxes
and assessments returned to the collector of assessments and arrears from the time they become due [until the date of payment,
or in case a sale has taken place, as provided in section ten hundred and twenty-seven, until the date of the certificate mentioned in said section] and on [the] water rents and [charges
for water] the penalties thereon from the time the taxes become
due, to which they may be added [as required by section ten hundred and twenty-five, until the same date respectively] until the
date of payment, or until such other date when the amount thereof may have been advanced to the city by the purchaser of the tax
lien in respect thereof.
SEC. 8. Section ten hundred and twenty-one of said law is
hereby amended so as to read as follows:
APPORTIONMENT OF ASSESSMENT.
SEC. I02I. If a sum of money in gross has been or shall be
assessed for local improvements, upon any lands or premises in
The City of New York, any person or persons claiming any divided or undivided part thereof may pay such part of the sums of
money so assessed, also of the interest and charges due or charged




I39


thereon, as the comptroller may deem to be just and equitable.
The board of assessors shall apportion the assessed valuation of
such lands or premises when requested by the comptroller so to do,
and shall certify such apportionment to him. The determination
of the said comptroller shall be based upon such apportionment so
certified. [and] The remainder of the sum of money so assessed,
together with the interest and charges, shall be a lien upon the
residue of the land and premises only, and the tax lien upon such
[which] residue may be sold in pursuance of the provisions of
this act, to satisfy the residue of such assessment, interest or
charges thereon, in the same manner as though the residue of said
assessment had been imposed upgn [the] such residue of said
land or premises.
SEC. 9. Section ten hundred and twenty-three of said law is
hereby amended so as to read as follows:
RECEIVER OF TAXES TO RETURN ARREARS TO THE COLLECTOR.
SEC. 1023. The receiver of taxes shall, on the first day of
June, in each year, make a return to the collector of assessments
and arrears, of all taxes on real estate and of water [rates and]
rents, which have been added thereto, remaining unpaid, and shall
notify the comptroller of the aggregate amount of arrears so returned, and balance on his books the accounts of the arrears so returned, by charging the amount thereof to the said collector, and
shall thereafter receive no payments on accounts of arrears so returned, but may, nevertheless, certify to the collector of assessments and arrears any errors, which shall, upon such certificate,
be corrected by the said collector any time before settlement.
SEC. IO. Section ten hundred and twenty-four of said law is
hereby amended so as to read as follows:
WATER RENTS TO BE PROVIDED FOR IN ASSESSMENT-ROLLS.
SEC. 1024. There- shall be ruled in the yearly assessment-rolls
of each section or ward a column headed " water rents " in which
immediately after the confirmation of such assessment-rolls, the
collector of assessments and arrears shall cause to be entered opposite the ward, lot, town block and map numbers of the property
on which the said arrears may be due, the amounts due for " water
rents " and the expenses of meters, with their connections and setting, water rates and other lawful charges for the supply of water




140


measured by meters, as transmitted to him by the commissioner of
water supply, gas and electricity, in accordance with the law, and
the same shall be collected at the same time and in the same manner [with] as the taxes to which they shall be added.
SEC. II. Section ten hundred and twenty-five of said law is
hereby amended so as to read as follows:
ARREARS LIKEWISE TO BE PROVIDED FOR.
SEC. 1025. There shall be ruled in the yearly assessment-rolls
of the taxes in each section or ward, a column headed " arrears,"
in which the collector of assessments and arrears shall annually,
before any taxes for the year are collected, cause to be entered the
word " arrears " [or " sold," according as the fact may be,] opposite to the ward, lot, town block and map numbers on which
any arrears of taxes, or of taxes with the water rent added, shall
be due, or on which any assessment shall remain unpaid which was
due or confirmed one month prior to the first of June, then last
past. [or which may have been sold for assessments, taxes or
water rents, and yet be redeemable.]
SEC. I2. Section ten hundred and twenty-six of said law is
hereby amended so as to read as follows:
BILLS FOR TAXES TO SHOW ARREARS.
SEC. 1026. There shall be ruled a column for "arrears" in
every bill rendered fpr taxes for lots on which said arrears or assessments, or taxes with water rents added, may be due, as aforesaid, [or.may have been sold and yet be redeemable,] in which
shall be written opposite the entry of the ward, lot, town block and
map number of said lot, " arrears " with the date when such arrears or any part thereof first accrued; [or " sold," according as
the fact may be;] and at the bottom of said bill shall be printed:
"Whenever any tax or assessment shall remain unpaid for three
years or any water rent shall remain unpaid for four years the tax
lien on the property will be sold to satisfy such arrears of taxes,
assessments or water rents, and all taxes, assessments and water
rents up to the day of the date of the first advertisement of sale
as stated therein" [" the columns for arrears indicate lots sold for
arrears, or to be sold therefor; arrears to be paid and lots redeemed at the office of the collector of assessments and arrears."]




I4I


SEC. 13. Section ten hundred and twenty-seven of said law is
hereby amended so as to read as follows:
SALES OF [LANDS] Tax Liens FOR TAXES AND ASSESSMENTS:
PROCEEDINGS.
SEC. I027. The right of the city to receive taxes, assessments
and water rents and the lien thereof, may be sold by the city, and 
after such sale, shall be transferred, in the manner provided by
this title. The right and lien so sold shall be called " tax lien"
and the instrument by which it is assigned shall be called " transfer of tax lien."  Whenever any tax on lands or tenements, or
any assessments on lands.or tenements for local improvements,
shall remain unpaid for the term of three years from the time the
same shall have been confirmed, and also whenever any [rents
for] water rents in said city shall have been due and unpaid
for the term of four years from the time the same shall have been
due, it shall and may be lawful,,for the collector of assessments
and arrears, under the direction of the comptroller, to advertise
the tax liens on the said lands and tenements or any of them for
sale, including in such advertisement the tax lien for all items up
to the day of the date of the first advertisement as stated therein
and by such advertisement the owner or owners of such lands and
tenements respectively shall be required to pay the amount of
such tax, assessment, or water rents, with the said penalties thereon so remaining unpaid, together with the interest thereon at the
rate of seven per centum, per annum to the time of payment, with
the charges of such notice and advertisement, to the said collector, and notice shall be given by such advertisement that if
default shall be made in such payment the tax lien on such lands
and tenements will be sold at public auction at a day and place
therein to be specified, for the lowest rate of interest, not exceeding tIwelve per centumz per annum, [term of years] at which any
person or persons shall offer to take the same in consideration of
advancing the said tax, assessment [or]and water rents and penalties as the case may be, [and] the interest thereon as aforesaid
to the time of sale, [and] the charges of the above mentioned
notices and advertisement and all other costs and charges accrued thereon; and if, notwithstanding such notice, the owner or
owners shall refuse or neglect to pay such tax, assessment, [or]
water rents and penalties with the interests as aforesaid, and the
charges attending such notice.and advertisement, then it shall and




142


may be lawful for the said collector under the direction of the
said comptroller, to cause such tax lien on such lands and tenements to be sold at public auction [for a term of years], for the
purpose and in the manner expressed in the said advertisement,
and such sale shall be made on the day and at the place for that
purpose mentioned in the said advertisement, and shall be con,
tinued from time to time, if necessary, until all the tax liens on
the lands and tenements so advertised shall be sold [and the said
collector shall give to the purchaser or purchasers of any such
lands and tenements a certificate of sale, in writing, describing the
lands and tenements so purchased, the term of years for which
the same shall have been sold, the sum paid therefor, and the time
when the purchaser will be entitled to a lease of the said lands
and tenements]. But [no] the tax lien on houses or lots, or
improved or unimproved lands, in the City of New York, shall
not be hereafter sold [or leased] at public auction for'the nonpayment of any tax, assessment, or water rents which may be due
thereon, unless notice of such sale shall have been published once
in each week successively for three months in the City Record
and the corporation newspapers, which advertisement shall contain, appended to said notice, a particular and detailed statement
of the property the tax lien on which is to be sold. [for taxes,
assessments or water rents.] Or the said detailed statement and
description, instead of being published in the City Record and
the corporation newspapers, shall, at the option of the said comptroller, be printed in a pamphlet, in which case copies of the
pamphlet shall be deposited in the office of the said collector, and
shall be delivered to any person applying therefor. And the
notice provided for in this section to be given of the sale of tax
liens on houses and lots and improved and unimproved lands shall
also state that the detailed statement of the taxes, assessments,
or water rents, and [the ownership of] the property [taxes]
taxed, assessed, [and] or on which the water rents are unpaid,
is published in the City Record and the corporation newspapers,
or in a pamphlet, as the case may be, and that copies of the
pamphlet are deposited in the office of said collector, and will be
delivered to any person applying for the same. No other notice
or demand of the tax, assessment, or water rent shall be required
to authorize the sale of tax liens on any lands and tenements as
hereinbefore provided.
SEC. 14. Section ten hundred and twenty-eight of said law is
hereby repealed.




143
SEC. 15. Section ten hundred and twenty-nine of said law is
hereby renumbered so as to be section ten hundred and twentyeight and is amended so as to read as follows:
POSTPONEMENT OF SALES.
SEC. 1028. It shall be lawful for the comptroller to suspend
or postpone any sale or sales of tax liens on lands and tenements
or any portion thereof which shall have been advertised for sale,
to any time not exceeding fifteen months from the day specified in
any such advertisement. All sales which shall be postponed or
suspended [shall] may be made without further advertisement,
other than a general notice of such postponement, to be published
in the City Record and the corporation newspapers.
SEkc. i6. Section ten hundred and thirty of said law is hereby
renumbered so as to be section ten hundred and twenty-nine and
is amended so as to read as follows:
SALES [FOR TAXES AND ASSESSMENTS] OF TAX LIENS
TO BE CONDUCTED BY THE COLLECTOR OF ASSESSMENTS AND
ARREARS [:.PROVISION FOR REPAYMENT OF PURCHASE
MONEY WHEN THE SALE IS VACATED].
SEC. I029. The collector of assessments and arrears or his assistant shall conduct the sales hereinbefore provided to be made,
and no auctioneer other than said collector or his assistant shall be
employed to make such sale, and no auctioneers' fees shall be
charged thereon. The comptroller shall require from each purchaser of a tax lien at the time of such sale a deposit on account
of the amount of the tax lien purchased by hin, and shall prescribe a time not later than thirty days from, the date of sale,
when the balance shall be paid to the collector of assessments and
arrears, at his office.' Transfers of tax lien [certificates of sale]
shall be made and delivered to the purchaser without charge upon
payment of the amounts therein shown to be due. [And all certificates of sale not paid for within thirty days following the date
of sale, may be canceled by the collector of assessments and arrears and the sales relating thereto declared void. In case any
sale shall be vacated or canceled, the purchaser, his legal representative or assign, shall be repaid the amount paid by him, at such
sale, with interest thereon from the time of such payment.] In
case any purchaser. shall not complete h.s- purchase in accordance




144,
with the terms prescribed as herein provided, then the amount deposited by him at the time of the sale shall be forfeited to the city,
and the entire tax lien upon the lands affected by such purchase
shall be sold again. Such resale shall be'held at such time as the
comptroller may direct and shall be advertised in the City Record
and the corporation newspapers, in such manner and for such
time, not less than two weeks, as the comptroller may direct. All
'deposits forfeited as aforesaid shall be paid into the General Fund
of the City of New York.
SEC. 17. Sections ten hundred and thirty-one to ten hundred
and forty-nine, both inclusive, of said law.are hereby repealed.
SEC. I8. The said law is hereby amended by adding thereto
a new section, to be section ten hundred and thirty, and to read as
follows:
TRANSFERS OF TAX LIENS.
SEC. 1030. A transfer of tax lien shall operate to transfer
and assign the tax lien upon the lands or tenements described
therein for the taxes, assessments and water rents, and penalties,
the interest thereon, and the charges of the notices and advertisement given pursuant to section ten hundred and twenty-seven of
this act, and all other costs and charges, so advertised for sale,
free of all taxes, assessments and water rents, constituting such
tax lien, which were mentioned in such advertisement of sale, but
subject to the lien for and right of the city to collect and receive
all taxes, assessments and water rents which accrued or which
became a lien on and after the day of the date of the first advertisement of such sale as stated therein. A transfer of tax lien
shall contain a transfer and assignment by the city of the tax lien
sold to the purchaser, the date of the sale, the aggregate amount
of the tax lien so transferred, and the items of taxes, assessments,
water rents, penalties, and interest composing the tax lien, the annual rate of interest which the purchaser has bid and will be entitled to receive, the date when the amount of the tax lien will
be due, and a description of the real property affected by the tax
lien, which description shall include the name of the borough in
which the property lies and shall refer for certainty to the designation of said lot on the tax map, by its lot number and the number of the block, ward or section in which it is contained, and
such other identifying description as the collector of assessments
and arrears mav deem, proper to add. Each transfer of tax lien




145


shall be subscribed by or in behalf of the collector of assessments
and arrears, making the sale or a successor in office of such col'lector, and shall be acknowledged by the officer subscribing the
same in the manner in which a deed is required to be acknowledged to be recorded in the county in which the real property affected is situated.
SEC. 19. The said law is hereby amended by adding thereto a
new section to be section ten hundred and thirty-one and to read
as follows:
RECORD OF TRANSFERS OF TAX LIENS.
SEC. I03I. The collector of assessments and arrears shall keep
in his office a public record of sales of tax liens, and a copy of
each transfer of tax lien issued by him. A transfer of tax lien
and any assignment thereof, duly acknowledged, shall be deemed
conveyances under Article VIII. of the Real Property Law, and
may be recorded in the office of the recording officer of any
county in which the real property which it affects is situated.
Transfers of tax lien and all assignments thereof shall be recorded by recording officers in the same manner as mortgages and
assignments thereof, but without payment of tax under Article
XIV. of the Tax Law. The record in the office of the collector
of assessments and arrears of sales of tax liens, of a transfer of
tax lien, and of a copy of a transfer tax lien; a record of a transfer'tax lien in the office of a recording officer, and of an assignment of tax lien, duly acknowledged, in the office'of a recording
officer, shall each be evidence in'any court in the state without further proof. A transcript of any record enumerated in this section, duly certified, shall be evidence in any court in the state
with like effect as the original instrument of record. Neither the
tax lien nor the rights transferred by a transfer tax lien shall be
impaired by failure to record the transfer of tax lien in the office
of a recording officer. Unless a contrary intent appears, a tax
lien shall' be presumed to be merged with the title of the owner in
fee simple of the lands or tenements described therein whenever
it shall appear from recorded instruments that the tax lien has
been transferred or assigned to the owner of such lands or tenements, notwithstanding other intervening estates or liens.
SEC. 20. The said law is hereby amended by adding thereto a
new section, to be section ten hundred and thirty-two, and to read
as follows:




I46


RIGHTS OF PURCHASER OF TAX LIEN,
SEC. 1032.' The aggregate amount of each tax lien transferred
pursuant to this title, shall be due three years from the date of the
sale. Until such aggregate amount is fully paid and discharged,
the holder of the transfer of tax lien-shall be entitled to receive interest on such aggregate amount from the day of sale, semiannually on the first day of January and July, at the rate which
the purchaser shall have bid. At the option of the holder of any
transfer of tax lien the aggregate amount thereof shall become
due and payable after default in the payment of interest for thirty
days or after default for six months after the delivery of transfer
tax lien in the payment of any taxes, assessments or water rents,
which become a lien on and after the day of the date of the first
advertisement of the sale as stated therein, of the tax lien transferred by such transfer of tax lien. Any person having a legal
or beneficial interest in property affected by a transfer of tax lien
may satisfy the same before maturity upon giving thirty days'
notice in writing to the holder thereof, of the day on which payment will be made and upon payment of the principal with interest at the rate bid to a time three months after the day so fixed
for payment. If notice of intention to make payment be given as
herein provided, and such payment be not made, then the whole
amount of any tax lien concerning which such notice shall have
been given shall become due and payable at the option of the
holder thereof. Or any such person may pay to the collector of
assessments and arrears such principal with interest at the rate
bid up to a day six months after such payment. In case such
payment be made to the collector of assessments and arrears he
shall receive the same for the benefit of the holder of the tax lien
thus discharged, and shall give notice thereof to the purchaser
or the personal representative or assignee of the purchaser, by
mail addressed to such address as may have been furnished to
the collector of assessments and arrears. Upon receiving surrender of such transfer tax lien the collector of assessments and
arrears shall pay to the person entitled thereto the amount thus
deposited.
SEC. 21. The said law is hereby amended by adding thereto
a new section, to be section ten hundred and thirty-three, and to
read as follows:




I47


DISCHARGE OF TAX LIEN.
SEC. 1033. A tax lien sold pursuant to the provisions of this
title must be discharged upon the record thereof by the collector
of assessments and arrears when payment is made to him of the
principal and interest as provided in the last preceding section,
and also when the transfer-of tax lien is surrendered to him for
cancellation and there is presented to him a certificate executed by
the purchaser, or the personal representative or assignee of the
purchaser, acknowledged so as to be entitled to be recorded in the
county in which the:real property affected by such tax lien is
situated, certifying that the tax lien has been paid or has been
otherwise satisfied and discharged. The transfer of tax lien thus
surrendered and such certificate of discharge must be filed by the
collector of assessments and arrears and he must note upon the
margin of the record of such sale, upon such transfer of tax lien
and upon the copy of the transfer of tax lien kept in his office a
minute of such discharge and the date of filing thereof. If the
transfer of tax lien shall have been lost or destroyed or mutilated,
application for an order dispensing with the production of the
transfer of tax lien may be made in the same manner as is provided' in section two hundred and seventy-a of the Real Property
Law, the provisions of which so far as the same may be, are hereby made applicable to discharge of tax liens. The collector of assessments and arrears shall upon demand issue his certificate
showing the discharge of any tax lien which miay have been duly
discharged as provided in this section, and such certificate may be
filed in any office where the transfer of tax lien is recorded, and
any recording officer with whom such a certificate is filed, shall
record the same, and upon the margin of the record of such transfer of tax lien in his office shall note a statement that the same has
been discharged with a reference to the record of such certificate
in his office.
SEC. 22. The said law is hereby amended by adding thereto
a new section, to be section ten hundred and thirty-four, and to
read as follows:
EXEMPTION FROM TAXATION.
SEC. 1034. Tax liens and transfers of tax liens shall be exempt from taxation'by the state or any local subdivisions thereof,
except from the taxes imposed by article ten of the tax law. 'The
real property affected by any tax lien shall not be exempt from
taxation by reason of this section.




148


SEC. 23. The said law is hereby amended by adding thereto
a new section, to be section ten hundred and thirty-five, and to
read as follows:
FORECLOSURE OF TAX LIEN.
SEC. I035. If the amount of any, tax lien which shall have
been transferred by a transfer of tax lien shall not be paid when
under its terms and the provisions of this title such amount shall
be due, the holder of such tax lien may maintain an action in the
Supreme Court to foreclose such tax lien. In an action to foreclose a tax lien any person shall be a proper party of whom the
plaintiff alleges that such person has or may have or that the/
plaintiff has reason to believe that such person has or may have,
an interest in or claim upon the real property affected by the tax
lien.  Except as otherwise provided in this title an action to
foreclose a tax lien shall be regulated by the provisions of the
Code of Civil Procedure and by all other provisions of law, and
rules of practice applicable to actions to foreclose mortgages on
real property. The People of the State of New York may be
made party to an action to foreclose a tax lien in the same manner as a natural person.
SEC. 24. The said law is hereby amended by adding thereto
a new section, to be section ten hundred and thirty-six, and to read
as follows:
PLEADING TRANSFER OF TAX LIEN.
SEC. IO36. Whenever a cause of action, defense or counterclaim, is for the foreclosure of a tax lien, or is in any manner
founded upon a tax lien or a transfer of tax lien, if in any pleading or petition, there be set forth a copy of a transfer of tax lien,
together with a statement of the time and place of the recording
thereof in the office of the collector of assessments and arrears or
in any other public office, it shall not be necessary to plead or
prove any act, proceeding, notice or action preceding the issue of
such transfer of tax sale, nor to establish the validity of the tax
lien transferred by such transfer of tax lien. If a party or person in interest in any such action or proceeding claims that a tax
lien is irregular or invalid, or that there is any defect therein or
that a transfer of tax is irregular, invalid or defective, such invalidity, irregularity or defect must be specifically pleaded or set
forth, and must be established affirmatively by the party or person pleading or setting forth the same.




149


SEC. 25. The said law is hereby amended by adding thereto a
new section, to be section ten hundred and thirty-seven, and to
read as follows:
JUDGMENT UPON TAX LIEN.
SEC. I137. In every action for the foreclosure of a tax lien,
and in every action or proceeding in which a cause of action, defense or counterclaim is in any manner founded upon a tax lien
or a transfer of tax lien, such transfer of tax lien and the tax lien
which it transfers shall be presumed tolbe regular and valid and
effectual to transfer to'the purchaser named therein a valid and
enforcible tax lien. Unless in such an action or proceeding such
tax lien or transfer of tax lien be found to be invalid it shall be
lawful in any interlocutory or final judgment, or any final order
entered therein, to adjudge that a tax lien transferred by a transfer of tax lien pleaded or set forth as provided in section ten hundred and thirty-six, or a tax lien established or proved in any
other manner to the satisfaction of the court, is a valid lien upon
all or part of the real property which it purports to affect, and
that the transfer of tax lien transferring the same is effectual to
transfer such tax lien to the purchaser named therein.
SEC. 26. The said law is hereby amended by adding thereto a
new section, to be section ten hundred and thirty-eight, and to
read as follows:
JUDGMENT OF FORECLOSURE OF TAX LIEN.
SEC. 1038. In an action to foreclose a tax lien, unless the defendants obtain judgment, the plaintiff shall be entitled to a judgment establishing the validity of the tax lien so far as the same 
shall not be adjudged invalid and of the transfer of tax lien, and
directing the sale.of the real property affected thereby, or such
part thereof as shall be sufficient to discharge the tax lien, or such
items thereof as shall not be adjudged invalid, and all other accrued taxes, assessments and water rents affecting the real prop'erty, together with the expenses of the sale, and the costs of the
action.
SEC. 27. The said law is hereby amended by adding thereto a
new section, to be section ten hundred and thirty-nine, and to read
as follows:




I50
EFFECT OF JUDGMENT FORECLOSING TAX LIEN.
SEC. 1039. Every final judgment in an action to foreclose a
tax lien shall be binding upon, and every conveyance upon a sale
pursuant thereto, shall transfer to and vest in the purchaser all
the right, title, interest and estate in and claim upon the real property affected by such judgment, of, the plaintiff, each defendant,
whether individual or trustee, upon whom the summons is served,
each person claiming from, through or under such a defendant by
title accruing after the filing of notice of pendency of the action
or after the entry of judgment and filing of the judgment roll in
the proper county clerk's office, and each person not in being
when the judgment is rendered, who afterwards may become entitled to a beneficial interest attaching to, or an estate or interest
in such real property or any portion thereof, provided that the person first entitled to such beneficial interest, estate or interest is a
party to such action or bound by such judgment. So much of
section four hundred and forty-five of the Code of Civil Procedure as requires the court to allow a defendant to defend an
action after final judgment shall not apply to an action to foreclose a tax lien. Delivery of the possession of real property affected by a judgment to foreclose a tax lien may be compelled in
the manner prescribed in section sixteen hundred and seventy-five
of the Code of Civil Procedure.
SEC. 28. The said law is hereby amended by adding thereto a
new section, to be section ten hundred and forty, and to read as
follows:
SURPLUS.
SEC. IO40. Any surplus of the proceeds of the sale, after paying the expenses of the sale, and all taxes, assessments and water
rents which accrued or became a lien on and after the day of the
date of the first advertisement of the sale as stated therein, under
which the foreclosed transfer of tax lien was -issued, and satisfying the amount of the tax lien and interest and the costs of the
action, must be paid into court, for the use of the person or persons entitled thereto. If any part of the surplus remains in court
for the period of three months, and no application has been made
therefor, the court must, and, if an application therefor is pending, the court may direct such surplus to be invested at interest,
for the benefit of the person or persons entitled thereto, to be paid
upon the direction of the court.




I5I


SEC. 29. The said law is hereby amended by adding thereto a
new section, to be section ten hundred and forty-one, and to read
as follows:
FORECLOSED TAX LIEN NOT ARREARS.
SEC. I04I. Any party to an action to foreclose a tax lien or
any purchaser or any party in interest may give notice of such
foreclosure to the collector of assessments and arrears, and after
such notice the items which constituted the tax lien thus foreclosed shall not be entered by the collector of assessments and
arrears in any yearly assessment roll, so long as the judgment of
foreclosure of such lien remains in force.
SEC. 30. The said law is hereby amended by adding thereto a
new section, to be section ten hundred and forty-two, and to read
as follows:
PROCEDURE WHEN NO BID FOR A TAX LIEN IS RECEIVED.
SEC. 1042. If no bid be received for a tax lien on any parcel
of property at a duly advertised sale and it shall appear to the
comptroller that the taxes, assessments, water rents, penalties and
accrued interest amount to so large a proportion of the value of
the property that-the security is insufficient to attract bidders,
then and in that event the comptroller and the corporation counsel shall investigate the facts and may fix a lesser amount for
which in their judgment a tax lien bearing twelve per centum interest can be sold. A certificate in writing, signed by them, shall
be filed with the collector of assessments and arrears, setting forth
the amount so determined by them, together with a brief statement of the reasons for such reduction, which certificate shall include the total amount of tho taxes, assessments, water rents, penalties and accrued interest, the assessed value of such parcel of
real estate, and the value of the land as the same appears on the
last preceding assessment roll. Thereafter such reduced amount
shall constitute the tax lien upon said real property for the items
therein enumerated, which reduced amount shall bear interest at
the rate of seven per cent. per annum from the date of such certificate until fully paid, or until the tax lien thus fixed, together
with the lien for any other taxes, assessments, water rents, and
penalties and interest becoming liens thereafter shall be sold. The
collector of assessments and arrears shall forthwith advertise the
tax lien for such reduced amount for sale to the highest bidder




152


in the manner provided for the advertisement for the sale of ordinary tax liens. Such tax lien shall bear interest at twelve per
centum and shall be sold to the person bidding the highest amount
of money in excess of the reduced amount so fixed by the comptroller and corporation counsel, provided that if the bidding
reaches the original amount of the tax lien on the real property
affected, the sale shall proceed in the manner provided in section'
ten hundred and twenty-nine. If no bid shall be received at such
sale, the comptroller and corporation counsel shall reconsider their
determination and may file a new- certificate in the manner herein-before provided, and the collector of assessments and arrears
shall proceed again as hereinbefore directed. Such procedure
shall be repeated until a tax lien for such taxes, assessments,
water rents and accrued interest shall be sold.
SEC. 31. The said law is hereby amended by adding thereto
a -new section, to. be section ten hundred and forty-three, and to
read as follows:
REIMBURSEMENT FOR DEFECTIVE TAX LIENS OR TRANSFERS OF
TAX LIENS.
SEC. I043. If a transfer of tax lien be vacated or be set aside
or canceled, or if it be adjudged in any action that a transfer of
tax lien is 'invalid or defective, or not sufficient to transfer a
tax lien to the purchaser thereof, or if in any action to foreclose
a tax lien, it be adjudged that the entire tax lien is void and not
a valid lien on the premises which it purports to affect, and that
the complaint be dismissed, the purchaser may surrender such
transfer of tax lien to the collector of assessments and arrears
and thereupon shall be repaid by the city the amount paid for
such transfer of tax lien, with interest from the time of such payment at the rate set forth in the transfer of tax lien, and the city
shall pay the taxed costs and disbursements of any action or proceeding in which such adjudication is made.
SEC. 32. The said law is hereby amended by adding thereto
a new section, to be section ten hundred and forty-four, and to
read as follows:
REIMBURSEMENT WHEN PART OF TAX LIEN IS DEFECTIVE.
SEC. IO44. If, in any action to foreclose a tax lien, it shall be
adjudged that some, but not all of the items constituting such tax




153
lien are void and not a valid lien on the premises covered by such
tax;lien, or if in any action or proceeding it be adjudged that a,
transfer of tax lien is invalid or defective, as to some though,not
as to all of the items transferred, the holder of the transfer of
tax lien, by instrument in writing duly acknowledged, shall retransfer to the city the items thus affected, and shall be repaid
by the city such portion of the amount paid for such transfer of
tax lien as may be applicable to the items thus affected, with interest from the time of such payment at the rate set forth in the
transferof tax lien, and the city shall pay the taxed costs and disbursements of any action or proceeding, other.than an action to
foreclose the tax lien, in which such adjudication is made.
SEC. 33. The said law is hereby amended by adding thereto
a new section, to be section ten hundred and forty-five, and to
read as. follows:
OWNERS MAY QUESTION TRANSFERS OF TAX LIENS.
SEC. I045. Any person interested in or holding a lien upon
any real property affected by any unpaid tax lien or transfer of
tax lien, may file a written notice with the collector of assessments
and arrears claiming that a transfer of tax lien is invalid or defective or that a tax lien which has been transferred pursuant to
this title or which is advertised to be transferred is invalid, defective, void or ineffectual, or should be vacated or set aside.
The collector of assessments and arrears shall transmit all such
notices to the corporation counsel, who shall examine into the
facts and proceedings resulting in the tax lien or transfer of a
tax lien mentioned in such notice,; hefore a 'determination is had
the corporation counsel shall serve a copy of such notice upon
the holder of the transfer of tax lien which is thus questioned or
which transfers the items thus questioned and shall give such
holder an opportunity to be heard. The corporation counsel shall
certify in writing his opinion upon the' matters and questions
raised by such notice, and if he concludes that a defense in an
action to foreclose the tax lien would succeed in whole or in part
he shall so certify, and shall recommend what action shall be
taken by the city concerning the same. If the corporation counsel concludes that such defense would succeed in whole or in
part and recommends repayment by the city of the amount paid
for a transfer of tax lien which would be applicable to any item,




I54 


he shall state the reasons for such recommendation, and if it be
approved by the mayor and comptroller the city shall require the
surrender of the transfer of tax lien or the retransfer to it of
the item or items of tax lien which are found to be void or defective, and shall make repayment therefor in the same manner
as if such transfer of tax lien, tax lien or items had been adjudicated in the manner provided in sections ten hundred and fortythree and ten hundred and forty-four. Neither the provisions of
this section nor any act or proceeding thereunder shall impair or
in any other manner affect the rights or remedies of any person
interested in, or holding any lien upon, real property to question
the validity of any tax, assessment, water rents or tax lien, or
any part or item of any tax lien.
SEC. 34. The said law is hereby amended by adding thereto a
new section, to be section ten hundred and forty-six, and to read
as follows:
CORPORATION COUNSEL TO PROTECT INTEREST OF CITY.
SEC. o146. N'o claim shall be made against the city under sections ten hundred and forty-three, ten hundred and forty-four or
ten hundred and forty-five by the holder of any tax lien, unless
action to foreclose the tax lien or transfer of tax lien upon which
such claim is founded be commenced within five years from the
time of the sale resulting in such transfer of tax lien. Nor shall
any claim be made against the city under sections ten hundred
and forty-three or ten hundred and forty-four, unless within ten
days after the commencement of any action or proceeding to
vacate, set aside or cancel a transfer of tax lien, or a tax lien or
an item mentioned in a transfer of tax lien, or unless within ten
days after the service of any pleading or other paper in an action
or proceeding in which any tarnsfer of tax lien, or item mentioned in a transfer of tax lien, is brought into question, sought
to be set aside, vacated, or canceled, or which sets forth or pleads
any defense to an action to foreclose a tax lien, a notice in writing be served upon the corporation counsel setting forth the question or-objection raised to the best knowledge of the holder of
the transfer of tax lien, or his attorney at law, and demanding
that the city take up the prosecution or defense of the action or
proceeding. All proceedings in such action or proceeding shall
be stayed for thirty days or such shorter time as the corporation




I55


counsel shall stipulate in writing. It shall be the duty of the corporation counsel to examine the questions raised, and, in order
to protect the interests of the city, he shall have the right to be
substituted for the attorney of record of the holder of the transfer tax lien, or to appear as attorney of record for the holder of
any such transfer of tax lien, to conduct or defend any such
action or proceeding in the name of the holder of the transfer
of tax lien, and to bring any other action or proceeding for, on
behalf of and in the name of the holder of such transfer of tax
lien as he may deem advisable, to take appeals, and to argue appeals taken by the adverse party, as he may deem advisable. It
shall be the duty of the corporation counsel to protect the interest
of the city in all matters, actions and proceedings relating to tax
liens and transfers of tax liens; to intervene on behalf of the city
or of the holder of a transfer of tax lien in, or to make the city a
party to any action in which he believes it,to be to the interest of
the city so to do, by reason of any matter arising under or relating to any tax lien or transfer of tax lien, or advertisement of
sale of tax liens. In any action or proceeding in which the corporation counsel pursuant to this section shall be substituted, or
shall appear, it shall be without expense to the holder of the transfer of tax lien, and all costs recovered on behalf of such holder
of a transfer of tax lien in any action or proceeding conducted or
defended by the corporation counsel shall belong to the city and
shall be collected, applied and disposed of in the same manner as
are other costs recovered by the city.
SEC. 35. The said law is hereby amended by adding thereto
a new section, to be section ten hundred and forty-seven, and to
read as follows:
DEFECTIVE OR INVALID TRANSFER OF TAX LIEN; PROCEEDING
ANEW.
SEC. 1047. If a transfer of tax lien be vacated or be set aside
or canceled or it be adjudged that a transfer of tax lien is invalid or defective, or insufficient to transfer a tax lien to the purchaser thereof, or if in any action to foreclose a tax lien, it be
adjudged that a tax lien is not a valid lien on the premises which
it purports to affect, because of some irregularity in the proceedings had, and if, in pursuance of any such adjudication the purchaser of said transfer of tax lien shall have surrendered such




156


transfer of tax lien to the collector of assessments and arrears and
shall have been repaid by the city, the amount paid for such transfer of tax lien, with interest and costs and disbursements of the
said action or proceeding in which such adjudication was made,
then and in that event, the tax lien which was purported to be
transferred and assigned in such transfer of tax lien shall remain
as a valid lien upon the premises which it affects, except to such
extent as it may have been adjudged irregular or invalid, and the
collector of assessments and arrears shall proceed to sell anew,
as provided in section ten hundred and twenty-seven of this act,
so much of the said tax lien as is not invalid as if no prior sale
purporting to transfer the said tax lien had taken place.
SEC. 36. Section ten hundred and fifty of said law is hereby
renumbered so as to be section ten hundred and forty-eight and
amended so as to read as follows:
LOST [CERTIFICATE]    Transfer of' Tax Lien DELIVERY    OF
[LEASE] Duplicate IN CASE OF.
SEC. IO48. Whenever any [certificate] transfer of tax lien
given by the collector of assessments and arrears, as in this title
provided, [of land sold] shall be lost, the [said] comptroller
may receive evidence of such loss, and on satisfactory proof of
the fact may direct the collector of assessments and arrears to
execute and deliver a [lease] duplicate to such person or persons
who shall appear entitled thereto [of the lands and tenements described in the certificate], and may also, in his discretion, require
a bond of indemnity to The City of New York. [Each certificate
shall be registered in the record of sales to be kept in the bureau
of said collector of assessments and arrears, and no transfer of
such certificate shall be valid until registered in said book.]
SEC. 37. Section ten hundred and fifty-one of said law is
hereby renumbered so as to be section ten hundred and forty-nine,
and amended so as to read as follows:
BILLS OF ARREARS OF TAXES AND ASSESSMENTS TO BE FURNISHED
WHEN REQUESTED.
SEC. IO49. The collector of assessments and arrears, upon the
requisition of any person, shall furnish a 'bill of all arrears of
taxes, and of taxes with the " water rents " added on any lot or




I57


lots due prior to the first of June, then last past, and of assessments which are due and payable [including the amount necessary to redeem it or them, if it or they have been sold for any
arrears of assessments, taxes or water rents and be yet redeemable]; and upon the payment of the said bill (which shall be
called a "bill of arrears and assessments, taxes and water
rents,") [and for redemption] his receipt thereon, countersigned
~by the comptroller, shall be conclusive evidence of such payment.
The comptroller shall cause to be kept a duplicate account of
amounts, so collected, and the certificate of the collector of assessments and arrears, countersigned by the comptroller, that there
are no [such] tar liens on said lot or lots, shall forever free the
said lot or lots from all liens of taxes, or for taxes with water
rates added, or for rents of water added to the taxes prior to
the first of June then last past, and for all assessments due and.payable prior to the date of the said receipt or certificate, but not
from the lien of any tax lien duly sold [and from all liens in consequence of sales for assessments, taxes, or water rents, or for all
of them, when the time allowed by law for redemption had not
expired at the date or time of said payment or certificate.]
SEC. 38. Section ten hundred and fifty-two of said law is
hereby renumbered so as to be section ten hundred and fifty.
SEC. 39. Section ten hundred and fifty-three of said law is
hereby repealed.
SEC. 40. Section ten hundred and fifty-four of said law is
hereby renumbered so as to be section ten hundred and fifty-one.
SEC. 41. This act shall not affect or impair any act done or
rigLht accruing, accrued or acquired, nor any penalty or forfeiture incurred prior to the time when this act takes effect, by
virtue of any section of the Greater New York Charter repealed,
-amended or modified by this act; but such right, penalty, or forfeiture, may be asserted, enforced, prosecuted or inflicted as fully
and to the-same extent as if this act had not been passed or said
sections,had not been amended, repealed or modified; no tax
lease heretofore issued nor any tax sale heretofore made shall be
affected by this act, but the rights of all persons, with respect
thereto, shall be the same as if this act had not been passed, and
all actions, suits, proceedings or prosecutions under the sections
of Title 5 of Chapter XVII. of the Greater New York Charter
hereby amended, repealed or modified and pending when this act




i58


takes effect may be prosecuted and defended to final effect in the
same manner as they might prior to the time when this act takes
effect.
SEC. 42. This act shall take effect January first, 1909.
TAX LIENS MADE LEGAL INVESTMENTS FOR SAVINGS BANKS.
In order that there may be as wide a market as possible for
the sale of tax liens, it is proposed that they shall be a legal investment for savings banks, the following bill is, therefore, proposed
to accomplish this object:
AN ACT to amend the Banking Law by providing that tax liens
of The City of New York shall be lawful investments
for savings banks.
The People of the State of New York, represented in Senate
and Assembly, do enact as follows:
SEC. I. Subdivision four of section one hundred sixteen of
chapter six hundred eighty-nine of the Laws of eighteen hundred
and ninety-two, being chapter thirty-seven of the General Laws,
as amended by chapter three hundred twenty-eight of the Laws
of nineteen hundred and three, is hereby amended so as to read
as follows:
4. In transfers of tax liens of the City of New York where
the amount of tax liens does not exceed half the assessed valzueof
the real property encumbered thereby, in the stocks or bonds of
any city, county, town or village, school district bonds and union
free school district bonds issued for school purposes, or in the interest bearing obligations of any city, county, town or village of
this State, issued pursuant to the authority of any law of the
state, for the payment of which the faith and credit of the municipality issuing them are pledged.
SEC. 2. This act shall take effect the first day of January,
nineteen hundred and nine.




/        I59
INDEX.
Accounts  and  statistics, system  of.................................  9
r"    t"    "     committee on:
-  "   "     "        report on the system of accounts and
statistics of The City of New
Y ork............................  99
Application for remission or reduction of taxes, amendment in relalation  to....................................................  46
Arrears of taxes, uncollectible...................................  6
"    of real estate taxes and assessments, collection of.......  7
" of taxes, etc., uncollectible, report on....................  13
"    taxes and proposed amendments, memorandum as to....       22
"    of real estate taxes and assessments, report on collection
of, by Committee on Taxation and Revenue........    125
Assessments, real estate taxes and, collection of arrears of........  7
Bills, proposed by Commission:
Draft of an act to authorize the Board of Estimate and Apportionment in The City of New York to issue Corporate
Stock of the City for arrears of uncollectible taxes........  21
Draft of an act to amend the Greater New York Charter by providing for the levying of taxes to provide for deficiencies in
the actual product of taxes theretofore levied...............  2
Draft of an act to amend the Greater New York Charter relative to the power of the Department of Taxes and Assessments to add certain property and names to the assessment
rolls....................................................  45
Draft of an act to amend the Greater New York Charter relative to the power of the Department of Taxes and Assessments to  remit or reduce  a  tax............................  46
Draft of an act to amend the Tax Law relating to the cancellation and reduction of assessments and the remission of
taxes...................................................  47
Draft of an act to amend the Tax Law, by providing for the
apportionment of State taxes and for local option in taxation................................................   75
Draft of an act to amend the Greater New York Charter relative
to sales of lands for taxes, assessments and water rates....  135




i60


California, general property  tax  in......................................  66
Change in the time of collecting taxes, report as to the propriety of.  34
City Debt and Special Assessments, Committee on:
Report on the City Debt in its relation to the Constitutional
Limit of Indebtedness, containing a proposed amendment to
Section Io of Article VIII. of the State Constitution......  85
Collection of arrears of real estate taxes and assessments.........  7
"     of arrears of real estate taxes and assessments, report on,
by Committee on Taxation and Revenue............      25
Committee of Accounts and Statistics:
Report on the system of accounts and statistics of The City of
New York..............................................      99
Committee on City Debt and Special Assessments:
Report on the City Debt in its relation to the Constitutional
Limit of Indebtedness, containing a proposed amendment to
Section Io of Article VIII. of the State Constitution......  85
Committee on Taxation and Revenue:
Report on uncollectible arrears of taxes, etc....................  13
Report on personal property taxation..........................  79
Report on collection of arrears of real estate taxes and assessm ents..................................................  125
Constitutional amendment proposed by commission amending Section
Io of Article VIII. of the State Constitution..............  97
Limit of indebtedness........................................  8
Date for payment of taxes, report of Mr. Bell upon the bill to advance  the....................................................  36
Debt, city, method  of  computing..................................  32
"   incurring  capacity, margin  of................................  89
"   lim it  of,  constitutional......................................  8
"   of the city, future, to be incurred............................  92
Deficiency from uncollected taxes, amount of......................  23
Financing  the  city,  method  of....................................  24
Final report...................................................    5
General property  tax, history  of...................................  51
"    property  tax  in  Ohio.................................  57
"          Illinois..................................  60.".          "   M issouri  cities..........................  6i.         "  West Virginia..........................  62
"          ". Massachusetts........................    63
"       (."   New Jersey................................  64
"               "t  M innesota...............................  64
"  -  "        "   Kentucky................................   65




General property tax in Kansas..................................  66.." "          "     California.................                 66
cc           " "  Texas...66." "       Ontario.................................   66
"           "    c   M aryland...............................   67
property  tax,  theory  of...................................  68
Illinois, general property tax in...................                60
Kansas, general property tax in.....................................  66
Kentucky, general property tax in...............................    65
Letter of Mayor to Chairman of the Commission........   II
Limit of indebtedness, Constitutional....................          8
Maryland, general property tax in...............................   67
Massachusetts, general property tax in....................       63
Mayor, letter of, to Chairman of Commission......................
Minnesota, general property tax in................................  64
Missouri cities, general property tax in............................  6I
New Jersey, general property tax in..                                64
New York, city of, what can be done in............................   70
Ohio, general property  tax  in.....................................  57
Omitted property, amendment in relation to........................  45
Ontario, general property tax in..............  66
Payment of taxes, report of Mr. Bell upon the bill to advance the
date  for.....................................................  36
Personal property tax, report of Mr. Purdy on...................  49
property taxation, report on, by Committee on Taxation
and  Revenue................................   79
"    property,  taxation   of....................................  7
Purdy, Lawson, report of, on the Personal Property Tax..........    49
Real estate taxes and assessments, arrears of, report on collection
of, by Committee of Taxation and Revenue....................   125
Refunding by the State of uncollected direct taxes, amendment in relation to the.....................................     47
Report on personal property taxation by Committee on Taxation and
Revenue.........................................   79
"   on the City Debt in its relation to the Constitutional Limit of
Indebtedness, containing a proposed amendment to Section Io of Article VIII. of the State Constitution, by the
Committee on City Debt and Special Assessments..          85
" on the system of accounts and statistics of The City of New
York, by the Committee on Accounts and Statistics.....    99
on collection of arrears of real estate taxes and assessments
by the Committee on Taxation and Revenue............     125




162
States, American, experience of, in relation to general property tax.  57
Statistics  and  accounts,  system   of...............................  9
Taxes and Assessments, Real Estate, Arrears of:
Report on collection of, by Committee on Taxation and Revenue.  I25
Real estate, and assessments, collection of arrears of..........  7
Uncollectible  arrears  of.......................................  6
Uncollectible  arrears of, report on..............................  3
Taxation and Revenue, Committee on:
Report on uncollectible arrears of taxes, etc....................  I3
Report on personal property taxation.........................  79
Report on collection of arrears of real estate taxes and assessm ents..................................................  125
O f  personal  property.........................................  7
Texas, general property  tax  in....................................  66
Time of collecting taxes, report as to the propriety of a change....  34
Uncollected Taxes for the Years 1898 and Prior:
At October  I, 1905, statement of..............................  19
Taxes, amount of deficiency from..............................  23
Taxes,  annual  deficiency......................................  29
Direct taxes, refunding by the State, amendment in relation
to   the...................................................  47
Uncollectible  arrears  of  taxes.....................................  6
"      Arrears of taxes, etc., report on.......................  13
West Virginia, general property tax in............................  62




f
t
I4








tAOV 'io L
IV.
3.0~~~~~~~~~~~~~~~~~~~.i
* r:;I"~: ~I-   777'7'*^^
~/
'-9 -483~~~~~V4
190           11'  
4                      4
[^;'=ll:J^^ia.- ^:.l./:"e
/ j1:',!;^;-;^^:.^^;;  *   1.:
A w l ^^ ^ i'y 'l *^: ^.' ' *; ' *,*