wm k REP 0 ;B " 3 '. -. v: U \ \mw---'vr • • . •• • ••••••*. . •• •• • »• •••••• ON THE • • DEBT AND RESOURCES CITY OF BOSTON. BOSTON: JOHN H. EASTBURN, CITY PRINTER, No. 18 State Street. 1839 , 3 s £ * i ■p> G ^ In Common Council , March 7, 1839. This Report and the accompanying Resolves hav- ing been read, and the Resolves passed to a second reading, were, on motion of Mr. E. Williams, ordered to be printed for the use of the Council. Attest, Richard G. Wait, Clerk , C. C . 71 • Or O &-1r O® c4 REDUCTION OF CITY DEBT. In City Council , March 7, 1839. The Committee on Finance who were instructed “ to consider the expediency of appropriating the sum of $50,000 annually for the reduction of the City debt,” have attended to the subject, and ask leave to Report : That they are deeply impressed with the impor- tance of making effectual provision for the reduction and ultimate extinction of the City debt, and of ma- king such provision of a permanent character, and based upon a general view of the past and probable future wants and resources of the City. In the first place, they would remark that it has sometimes hap- pened that the appropriations for the current expenses of the City have not been sufficiently large, so that towards the close of the year it has been necessary to borrow a considerable sum to make up the defi- ciency. This was the case the very last year, w ? hen $28,000 were ordered to be borrowed to make good the deficit that it was known would occur before the first day of May next. It is sufficiently manifest that this is a kind of debt which would never be incurred by an individual, or a corporation, that had the power and the will to be only moderately prudent. It should never be suffered in a City like Boston, whose means are ample, and the liberality of whose inhabitants is proverbial. Whatever expenses are of a usual kind, and can be anticipated at the beginning of the financial year, ought to be fairly and fully provided for in the amount taxed, and not thrown upon the shoulders of posterity to pay, while we enjoy the exclusive benefit. 4 J /REDUCTlOTsf OF CITY DEBT. There* is another cMssof expenditures, often equal- ly necessary ’wlihjtJipsk which are customary, and that are never incurred unless from a manifest expediency, at least, which a loan is a very proper mode of meet- ing in part. But it has heretofore been the general practice of the City Government to meet such ex- penditures wholly by loan, instead of taxing a portion of them on the generation who authorized them, and who enjoy a part of the benefit derived from them. The expenses alluded to are those which arise from the erection of new buildings, as the Court House, Market House, &c., or from great improvements in highways, such as the opening of Commercial, Black- stone and Broad Streets, very expensive and desira- ble improvements, of which we partake of the advan- tages, and ought therefore to share the cost. There seems to have been a vague impression of an indefi- nite and growing value in the available City property, of which posterity were to have the benefit, and that therefore there was little danger of loading them with too heavy a burden of taxation. It is very clear, how- ever, that the value of the disposable City property is not only limited, but that it may be very easily esti- mated ; and it would seem equally manifest that jus- tice requires that it should not be mortgaged by any generation, or by the government of any particular year, beyond its actual value at the time. Posterity will have its own burdens to provide for, and it is but equitable that they should have their share of the ri- sing value of the public property. These, then, seem to the Committee to be reason- able limitations to the plan of defraying expenses by loan on the general credit of the City ; first, that all REDUCTION OF CITY DEBT. 5 current expenses should be paid by coincident taxa- tion, and secondly that the public property should never be mortgaged by loan beyond its actual value at the time. It seems also to the Committee that the period has arrived when it is necessary to make a careful comparison between the amount of the debt, and the value of the property which can be applied to its extinction — to make effectual provision for its gradual redemption — and to devise the proper mode of meeting such necessary expenses as tend to the mutual benefit of the present and future generations. It is so very probable as almost to amount to cer- tainty, that, in the present condition of the City, many expenditures must occur which it would be un- reasonable to provide for at once, and equally unreas- onable to defer entirely to a distant period. The only way to be just is one which is very easily practica- ble, viz: to provide by taxation for a due proportion of such sort of expense in each year from the time it is incurred, till the loan for the particular purpose shall be finally extinguished. Besides this, it seems to the Committee in the highest degree desirable that the amount annually taxed for the reduction of the City debt, should be increased, and should bear a certain proportion to the whole amount of the debt. What this proportion should be must be determined by re ference to the character of the work which has beer performed by means of loans, as well as that which will hereafter be done, should further loans be neces- sary. If a new street be made, there is little proba- bility that it will ever be discontinued, and the pay- ment of the cost might properly be distributed over a greater number of years than if a public building be 6 REDUCTION OF CITY DEBT. erected, which there is much reason to believe may be superseded by another for the same purpose in a short period, because the public necessity will require a larger and more commodious edifice. Entertaining these general views the Committee are prepared to give them a more definite expression, by proposing to the City Council a certain per centage for each class of expenditure. They are of the opinion that it is expedient, and they therefore recommend that the sum appropriated each year towards the reduction of the City debt, be not less than three per centum on the amount of the debt, as it stands in the Treasur- er’s books at the time of passing the annual appropri- tion bill ; and that whenever a loan for a specific purpose shall be authorized, if the object be not of the most 'permanent kind, i. e. if it be for building a City Hall, a Court House, or for any thing which may last but for a short term of years, provision shall be made, at the time of contracting said loan, for re- deeming it at the rate of five per centum per annum till it shall be extinguished; and if it shall be found, on the completion of any such improvement, that it has cost more than w 7 as anticipated, the sum levied shall be raised to the same per centage on the final cost. Thus, it will be perceived, the Committee are in favor of an annual appropriation which in thirty-three years would extinguish the debt, (if it could be im- agined that the City could exist and grow for thirty- three years without finding it necessary to borrow any thing,) and of a specific appropriation for all new loans for objects of a character less permanent than those which are most so, which shall extinguish that particular debt in twenty years. REDUCTION OF CITY DEBT. 7 It may be thought that such provisions will have a tendency to retard improvements, by increasing the tax necessary to complete them so much that the City Council will not attempt to raise it. But the Committee have no fear that improvements will be delayed longer than they ought to be, by this consid- eration. We cannot, to be sure, always go on at the rapid rate we sometimes have done, while the debt was increased by scores of thousands of dollars per annum, and only $ 15,000 were appropriated to re- deem it ; and is it right that we should ? Ought we not to be more careful in spending money on the credit ©f our children ? The living generation, the actual members of the City Government, have seen the debt rise from nothing to a million and a half of dollars. Can this go on ad infinitum? The Com- mittee are of opinion that it is time to begin to raise, by taxation, a sufficient sum to authorize us to anti- cipate a real reduction in the amount of the debt within no lengthened period. They do not recom- mend any particular and fixed sum, because that might become, in a few years, disproportionately small. The rate of three per centum per annum on the highest amount to which the debt shall reach, seems to them a fair and reasonable rate ; and it should be so arranged that when the debt is dimin- ishing, this appropriation should be maintained ; oth- erwise the reduction would proceed in a constantly decreasing series, and the extinction of the debt be indefinitely postponed. At this rate, it cannot, of course, be expected that the debt will disappear in precisely thirty-three years, but there would be good reason to hope that it would not increase so as to be- 8 REDUCTION OF CITY DEBT. come an intolerable burden, and that, indeed, at some not very remote period, it might possibly be extin- guished. With regard to the danger of raising the tax bill too high, by adding so much to the necessary annual appropriations, the Committee will take the opportu- nity to throw out a single suggestion. It is not so much the amount, as the inequality of taxation which renders it vexatious and burdensotne ; and if a way could by devised by which taxes could be ren- dered less unequal than they now are, a great portion of all the complaining which is now heard in our streets would be at once silenced. Almost any change would be an improvement, as our system of taxation is singularly imperfect. But there is a plan, which is practised in another City with excellent re- sults, and is familiar to all who have paid even a slight attention to political economy, which the Com- mittee will take this occasion to bring to the atten- tion of the City Council, as one well worthy of the most careful consideration. It is levying the whole tax on real estate. However alarming this may, at first, sound to those who hold much real estate, (and the Committee do not expect them to hear it, for the first time, with entire composure,) yet if they can be induced to examine into its probable, its certain re- sults, the Committee persuade themselves they will find nothing in the proposition which need disturb their equanimity for a moment. It is, in fact, only an indirect way of taxing that personal property which is used in the community, or in other words, it is a tax on consumption. No man can now buy a hat, or a pair of gloves, without paying some minute portion REDUCTION OF CITY DEBT. 9 of the rent and taxes of the person to whom he makes the purchase ; and if the whole tax were levied upon the real estate of the City, he would, in every pur- chase, pay an imperceptibly greater portion of the same rent and tax. At present, the tax on real es- tate, though at the same ratio with that on personal property, amounts to nearly two-thirds of the whole assessment; and if it were all levied on it, it is aston- ishing how few persons would find the foot of their tax bill materially affected by it. It is sometimes said the landlord pays the tax on the house, or the store, and sometimes the tenant, but in fact it is neither. The tenant hires such a house and such a shop as he can afford from his business, to pay for, and his cus- tomers pay his rent in the price of his goods. This is one of the principal reasons, if not the most im- portant one, why articles are generally dearer in large than in small towns. Rents and taxes are higher, and prices must be proportionally higher. It would seem, then, that the only persons who would apparently escape a fair share of taxation, on this scheme, are capitalists possessing a large share of personal property, who accumulate much and spend little ; a class of persons happily very small in this country. And though they may individually pay too little, their money does not escape ; for such is the nature of our institutions and habits that whether they invest it in stocks, or notes, or in any way what- soever, it falls into the hands of business men who pay interest for it, and convert it into merchandise which is bought and sold, and thus pays a part of somebody’s tax on house or store. In this country, however, almost every one lives 10 REDUCTION OF CITY DEBT. up to his means, spends as much as he can afford, and therefore would pay as much tax as he ought to pay, if this plan were adopted. As it is, he may es- cape a fair tax, as his property may not be visible. There are thousands who live extravagantly, for one individual who lives penuriously. But the great ad- vantage of the plan is that it would prevent all guess- ing, as there would be no great difference of opinion among practical men respecting the value of real es- tate, and by thus preventing errors, it would save by far the greater part of all the complaint which is now so abundant about taxation. The Committee can testify from their personal experience, as they doubt not all who have served on the Board of Assessors can do likewise, that the great majority of complaints against the taxes arises from those on personal prop- erty, which are necessarily assessed without positive knowledge, and must be the result of chance infor- mation. Few men complain of the amount of their own tax ; many complain because they think their neighbor ought to be taxed more. Another advantage of this mode of raising the taxes is that, being levied on fixed property, it will prevent that fertile source of controversy, the removal into the country of those who possess large amounts of personal property. If they have any real estate, it will be assessed as at present ; and if they make any purchases, whether of raiment, food, or fuel, they pay a tax which though levied on the real, is paid by the personal property of the community, and which will be the same, whether they continue in the City, or remove to the country. And indeed, the more estab- lishments they keep, the greater the expense at which REDUCTION OF CITY DEBT. 11 they live, the more money they -will spend in the City, and the more tax they will pay. If it were true that the penurious rich man, pos- sessing a large amount of personal property, would escape his just share of taxation on this system, there would still be a compensation for this circumstance in the attraction it would present to his mind. It would seem to him a fine thing to escape this ex- pense, — he would come to reside among so judicious a people, and lend his money to the merchant, the jobber, and the mechanic, fertilize their fields of labor, and enable them to pay a tax on the very property he fancies is screened. Thus it may be shown that this imagined exemption is all a delusion. The real dif- ference between the penurious and the liberal man, would be that the one would pay his tax willingly, openly, and knowingly, the other would pay it with- out knowing it, and while he was flattering himself that his neighbor was paying it for him. An additional benefit of this mode of levying the tax, of no small weight, is its certainty. All taxes on real estate being a lien on the estate, cannot fail to be ultimately secure. All loss of taxes would therefore be prevented by introducing it. If, then, this plan were adopted, the amount of as- sessment might be easily increased, to the moderate extent which would be necessary to accomplish the object mentioned in this report, without exciting any complaint, and all the appropriations might be effec- tually provided for. In the present state of the law, the difficulty of raising the amount of the tax will be somewhat greater ; but, the Committee are persuad- ed, not greater than ought to be met and overcome. 12 REDUCTION OF CITY DEBT. In order to bring the whole subject before the City Council, the Committee offer the following resolves. For the Committee. SAM’L A. ELIOT. Resolved , That it is expedient that all current ex- penses of the City should be provided for by taxation, or the income of the City property, in each year. Resolved , That it is expedient that a sum not less than three per centum on the amount of the City debt be annually appropriated for its reduction ; and whenever a particular loan shall be necessary for an object which is not of the most permanent character, provision shall be made for annually raising a sum equal to five per centum on the amount of such loan, till the same shall be extinguished. Resolved , That it is expedient to apply to the Legislature for leave to levy the whole tax of the City of Boston on its real estate.