The city bond issues to be voted upon April 13, 1920. Vote no on all four propositions

Ar ■ ,-i 1920

THE CITY BOND ISSUES

TO BE VOTED UPON APRIL 13. 1920

Vote NO

ON ALL FOUR PROPOSITIONS

STATEMENT TO THE VOTERS OF CHICAGO

BY THE

CHICAGO BUREAU OF PUBLIC EFFICIENCY
315 PLYMOUTH COURT

CHICAGO BUREAU

OF

PUBLIC EFFICIENCY

ORGANIZED 1910

TRUSTEES

Julius Rosenwald, Chairman
Alfred L. Baker, Treasurer
Onward Bates Victor Elting

George G. Tunell Allen B. Pond

Walter L. Fisher George H. Mead

Harris S. Keeler, Director

THE CITY BOND ISSUES

TO BE VOTED UPON APRIL 13. 1920

To the Voters of Chicago:

At the presidential primary election of April 13 there
will be submitted to the voters of Chicago for their ap-
proval or rejection propositions to authorize the issuance
of bonds to the amount of $34,500,000. The purposes for
which these bonds are proposed are as follows :

For the extension and rehabilitation of
the municipal street lighting system . . . $15,000,000

For bridge construction 9,500,000

For the construction of parks, play-
grounds, and other recreation facilities
and the purchase of sites therefor 5,000,000

For a municipal convention hall 5,000,000

Total $34,500,000

The Chicago Bureau of Public Efficiency believes that
all these propositions should be defeated. The reasons
therefor may be summarized briefly as follows :

SUMMARY

1. The bonded indebtedness of the City and also of
the other local governments within the City has been
growing at a rapid rate. In 1915, the tax levy for the
principal and interest on the bonded debt of the City
alone was $5,006,000; in 1920, it will be $10,289,887. The
further sale of bonds (either those heretofore authorized

4 Chicago Bureau of Public Efficiency.

but as yet unsold, or those which the voters are asked to
approve at the coming election) will add to the debt of
the community and will increase taxes for its payment.

2. If the City were to sell at once all the bonds already
authorized, its bonded debt would be within $1,000,000 of
the limit of its bonding power. The proposed bonds, if
voted, can be issued only as the present debt is reduced
by bond redemptions, or as the sale of bonds heretofore
authorized is postponed. To authorize the new bonds
under these circumstances would be equivalent to en-
cumbering the City's entire bonding power for the next
five years. Such a course would be bad policy and bad
financing. If possible, the City should always have a
reserve of borrowing power to meet needs which cannot
be foreseen.

3. The City now has under way important improve-
ments for which approximately $35,000,000 of unexpended
bond funds have been authorized. There is no assurance,
however, that this sum will be adequate to finance them.
Additional bond issues may be required for their com-
pletion. If so, and if, in the meantime, the proposed new
bonds should be issued and other improvements be com-
menced, it would be necessary either to abandon partially
finished work until the City were in a position again to
issue bonds within its debt limit, or to secure an increase
in the City's bonding power with the resultant further
increase in taxes. Both these alternatives should be
avoided.

4. If the proposed new bonds are sold in the near
future it wiU probably be at a price approximately 8 per
cent below their par value. When the money market be-
comes easier a much better price should be obtained and
the loss to be sustained, if any, would be substantially

The City Bond Issues. 5

reduced. Under present conditions, none but absolutely
necessary bond authorizations and sales should be coun-
tenanced.

5. The present is not an opportune time for construct-
ing public improvements. Prices are abnormally high
and labor is exceedingly scarce. Both labor and materials
are needed for more urgent purposes. So far as possible,
construction work of this kind should be postponed until
more favorable conditions exist.

6. The City's finances are thoroughly demoralized.
Expenditures are being voted by the City Council without
regard to where the funds with which to meet them will
be obtained, but with the hope and expectation that ulti-
mately additional taxes will be imposed. Bond issues
which are on a larger scale than ever before are being
asked for and if authorized will add still further tax
burdens. It is time for the voters of Chicago to awaken
to a realization of what is going on in the matter of city
finances. The defeat of the bond issues now proposed
would have a salutary effect in restraining further reck-
less and wasteful expenditures.

Each of the proposed bond issues presents to some ex-
tent a need of the City, but none of them has been as well
considered as it should be prior to submission to a refer-
endum. At another time and in modified form they might
deserve approval. At the coming election, however, the
voters have no alternative but to approve or reject them
as they are submitted. Under present conditions and in
their present form they should be rejected.

6 Chicago Bureau of Public Efficiency.

THE BONDED DEBT OF CHICAGO

The bonded debt of the City has mounted rapidly dur-
ing recent years. January 1, 1916, it was $31,924,600;
at present it is $53,754,100. The present total bonded
indebtedness of all the local governments in Chicago, in-
cluding the County, Forest Preserve District, and Sani-
tary District, is $95,247,600.

Besides its actual bonded debt of $53,754,100, the City
has a potential debt of $28,155,600 in the form of bonds
as yet unsold, but authorized by the voters for various
projects, most of which have been started and all of which
it is proposed to complete within the next five years.
These unsold bonds may be sold at any time in the dis-
cretion of the City authorities. The sale of such bonds,
of course, converts them from a potential into an actual
liability of the City. Since January 1, 1920, sales of
similar bonds aggregating approximately $8,000,000 have
in fact been made.

The County, Forest Preserve District, and South Park
District, each of which depends either entirely or largely
upon Chicago taxpayers for funds with which to pay the
principal and interest on its bonded debt, have unsold
bonds aggregating the further sum of $26,000,000 which
have been authorized for projects that it is also proposed
to complete within the next five years.

The following table shows the bond issues authorized
since 1915 by the City of Chicago and other local govern-
ments.

The City Bond Issues.

TABLE SHOWING BOND ISSUES AUTHORIZED PROM JANUARY
1, 1916, TO APRIL 1, 1920, BY THE CITY OP CHICAGO AND
OTHER LOCAL GOVERNMENTS.

Purpose for Which Authorized.

City of Chicago: Year Amount

Bridge Construction 1916 $ 5,100,000

Municipal Street Lighting System 1916 3,750,000

Completion of Contagious Diseases Hospital 1917 750,000

Waste Disposal Building and Equipment 1917 1,000,000

School for Boys 1917 250,000

Public Comfort Stations 1917 150,000

Completion of Michigan Ave. Improvement 1918 3,000,000

Completion of Michigan Ave. Improvement 1919 2,000,000

Twelfth Street Viaduct 1919 1,200,000

Judgment Funding 1919 9,500,000

Western Ave. Street Improvement 1919 2,400,000

Ogden Ave. Street Improvement 1919 5,400,000

South Water Street Improvement 1919 3,800,000

Robey Street Improvement 1919 9,200,000

Ashland Ave. Street Improvement 1919 5,800,000

Total, City of Chicago ?53,300,000

County of Cook:

Road Construction 1918 ( 1,000,000

Oak Porest and County Agent Building 1919 600,000

State Aid Roads 1920 5,000,000

Juvenile Detention Home 1920 1,000,000

Total, Cook County $ 7,600,000

Forest Preserve District:

*Por the Creation and Management of the Forest

Preserve District 1916 | 3,000,000

1917 1.000,000

1918 1,000,000

1919 2,000,000

1920 2,000,000

Total, Porest Preserve District I 9,000,000

Sanitary District:

*Por General Corporate Purposes 1917 % 3.000,000

1918 2,000,000

Total, Sanitary District % 5,000,000

South Park District:

For Acquiring, Constructing and Improving Parks
and Boulevards (principally Lake Shore de-
velopment) 1920 $20,000,000

Lincoln Park Board:

Park Extension 1916 % 1,000,000

Grand Total, Chicago and other local governments . . $95,900,000

•All bonds of the Forest Preserve District and of the Sanitary
District are issued without being: submitted to a referendum.

8 Chicago Bureau of Public Efficiency.

The actual bonded debt of the City has increased $21,-
829,500 since 1915 ; that of the City and other local gov-
ernments combined, $28,041,600, That the increase in
the actual debt of the City and the other local govern-
ments has not been as great as the bond authorizations
shown in the preceding table is due chiefly to the fact
that all the bonds authorized have not as yet been sold
and partly to the redemption from year to year of those
bonds which have been sold.

MORE BOND SALES MEAN HIGHER TAXES

Each new bond issue means more taxes irrespective
of what taxes may be levied for other purposes. Funds
for the redemption of bonds and for the payment of in-
terest thereon are derived from taxes which are always
levied in addition to taxes for all other purposes.

In 1915, the tax levy for the principal and interest on
the bonded debt of the City was $5,006,000; in 1920, it will
be $10,289,887.

The further sale of bonds of the City and other local
governments, aggregating $54,000,000, now authorized
but unissued, which it is proposed to sell within the next
four or five years, will substantially increase present
taxes for bond and interest purposes.

BAD POLICY TO ENCUMBER FUTURE BORROWING POWER

In April, 1919, the aggregate of all the bond issues,
which had then been approved by the voters of the City,
approached the debt limit prescribed by law and, in order
that the Ogden Avenue and other projects sponsored by
the Chicago Plan Commission might be promptly financed,
the Legislature was appealed to to increase the City's
bonding power. An increase of fifty per cent, or approxi-

The City Bond Issues. 9

mately $27,000,000, was granted and in November, 1919,
bonds aggregating $28,600,000 were approved on refer-
endum.

The margin which now exists between the limit of the
City's debt-incurring power and its authorized bonded
debt is about $1,000,000. It is obvious, therefore, that the
$34,500,000 of new bonds now proposed can be issued
only as the further sale of bonds heretofore authorized
is postponed, or as the present bonded debt is reduced by
the redemption of outstanding bonds.

To make room for the issuance of $34,500,000 of new
bonds by redemptions will require from four to five years.
Therefore, if the City proceeds to sell bonds to complete
the projects already undertaken and votes and sells bonds
for the projects now proposed, it will be unable to issue
any other bonds during the next five years, no matter
how necessary or desirable it may be to do so.

Of course, this embarrassment may be avoided by de-
laying the completion of street or other improvements
the construction of which has been begun. In fact, it has
already been suggested by city ofl&oials that, if necessary,
the street improvement program for which $26,600,000 of
bonds were approved in November, 1919, might be de-
layed in the interest of the newer projects.

It is not only for new purposes, however, that what-
ever margin of bond-issuing power can be acquired
through bond redemptions during the next five years may
be needed. The City now has in various stages of com-
pletion public improvements for which unexpended bond
funds approximating $35,000,000 have been authorized.
The original bond issue for the Michigan Avenue Im-
provement (the Boulevard Link) was $3,800,000. Since
that time two other issues aggregating $5,000,000 have

10 Chicago Bureau of Public Efficieticy.

been authorized and there still remains a deficit for the
financing of which no provision has yet been made. City
officials have on several occasions stated that it is prac-
tically certain that additional bond issues also will be
necessary for the completion of the other street improve-
ments authorized in November, 1919.

If, during the next five years, the necessity arises for
issuing new bonds for purposes now unforeseen or addi-
tional bonds for the completion of improvements now
started, and if the City's bonding power is then ex-
hausted by the issuance of all or part of the $34,500,000 of
bonds now proposed, two alternatives will be open. Par-
tially completed improvements may be allowed to remain
unfinished until as a result of further bond redemptions
the right is acquired to issue new or additional bonds.
The other alternative will be to secure greater bonding
power. Greater bonding power and additional bond
issues thereunder will of course mean still more taxes for
the payment of principal and interest. The City should
not put itself in a position where it will be necessary to
resort to either of these courses.

The City ought to have in reserve borrowing power to
meet unforeseen contingencies. It should always hesi-
tate, when nearing its debt limit, to put out more bonds,
except for most necessary purposes. To do as is now
proposed — to authorize bond issues aggregating $33,500,-
000 in excess of the existing debt limit and thereby en-
cumber the entire bonding power of the City for the next
five years — is exceedingly bad financing. The Bureau
believes that none of the purposes for which these new
bonds are proposed is sufficiently urgent to justify such
action.

The City Bond Issues. 11

CITY BONDS NOW SELLING BELOW PAR

There is another reason why the bonds now proposed
should be rejected. If they are authorized, an effort un-
doubtedly will be made to anticipate, in part at least,
future bonding power and to issue some of the new bonds
immediately so that construction work may begin at once.
If the C^ty should sell these bonds in the near future, it
probably would receive for them only about $92 for each
$100 bond. This would mean a loss of approximately 8
per cent on all bonds sold. Under more favorable condi-
tions in the money market, a much better price can be
obtained for City bonds.

STREET LIGHTING BONDS

The $15,000,000 bond issue for electric lighting is pro-
posed for the purpose of carrying out a five-year program
of construction. The major features of this program are
as follows:

The replacement of 10,450 gas and gasoline lamps
with 25,000 one hundred candle-power tungsten elec-
tric lamps. This latter is the type of lamp placed on
low posts and now in use in parts of Hyde Park,
Rogers Park and certain other residential sections
of the city.

The replacement of 6,000 electric lamps now sus-
pended from high poles which are in use in certain
sections of the south side with 25,000 "low" lamps
of the type above mentioned.

The installation of 35,000 '^ow" lights on 500
miles of residence streets in the outlying sections of
the city which are now without lights. 250 miles of
these streets are now improved with buildings and

12 Chicago Bureau of Public Efficiency.

it is estimated that the remaining 250 miles will be
so improved within five years.

In addition to the specific installations above enumer-
ated, certain minor changes in the present equipment are
planned and it is said also that general plant construc-
tion will be provided so as to enable the prompt and
economical installation of additional lamps as rapidly
as building developments require them in all territory
within the present city limits.

The gasoline lamps now in use are not owned by the
City. They are installed and operated by a private com-
pany, the City paying the company about $60 per year
per lamp for the service. There are 10,450 gas and gaso-
line lamps now in use and city oflficials estimate that,
unless the electric lighting system is extended, the num-
ber of these lamps will have to be increased to approxi-
mately 34,000 during the next five years.

It is urged that *'the saving in actual operating costs
in the districts covered by the proposed bond issue will
be greater than is necessary to retire these bonds at their
maturity and the City will have acquired as an asset an
addition to its street lighting system of $15,000,000 worth
of modern equipment." This statement should not be
construed to mean that the savings in operating expenses
will be sufficient to retire the bonds (even if so applied)
and to leave the City with $15,000,000 worth of equip-
ment.

The argument above advanced is based upon a com-
parison of the $60 yearly rental charge for a gasoline
lamp with the City's expenditure of $9.33 per year for
the operation of an electric (tungsten) lamp. This latter
figure does not take into account the cost of installing the
City's lamp or the interest charge on the City's invest-

The City Bond Issues. 13

ment. In the 1918 report of the Department of Elec-
tricity, depreciation and interest are estimated at ap-
proximately $15 per year per lamp. With the increased
cost of plant construction and the increased interest rates
which now prevail, the charge for these items would be
higher.

If the total cost of operating and maintaining an elec-
tric lamp is placed as high as $30, it is still only one-half
the cost of the gasoline lamp, but it should not be over-
looked that where electric lamps are used the number
installed is at least twice as large as are used in areas
lighted with gasoline lamps. The actual outlay of money
for operation and maintenance under the new system
would, therefore, be approximately the same as that
under the present system. The City would gain, of
course, in that it would get much better lighting facili-
ties for the same expenditure.

Assuming the correctness of the Department's esti-
mates and cost figures, it may fairly be said with respect
to savings in direct operating expenditures that, if they
were so applied, they would probably be suflBcient to pay
the interest on the bonds and to retire the principal by
the time the new equipment became worn out. But that
is a proposition entirely different from retiring the bonds
and also leaving the city with $15,000,000 worth of equip-
ment.

The foregoing statement is not intended as a criticism
of the Department's plan. The policy of replacing un-
satisfactory and expensively operated equipment with
that which, because of its greater efficiency and economy
of operation, will give more and better service for the
same expenditure should be encouraged, and a depart-

14 Chicago Bureau of Public Efficiency.

ment head who advocates such a policy is to be com-
mended.

However, there is nothing in the financial arrangement
now proposed which contemplates that the operating
economies that may be effected will be applied to the
payment of bond principal and interest. Operating ex-
penses such as gasoline lamp rentals are paid from the
general corporate fund ; bond principal and interest, from
a special tax levy. Under the proposed plan any savings
in expenditures, which othrewise would have to be paid
out of the corporate fund, would be diverted to other
uses while the taxpayers would be left to pay the prin-
cipal and interest of a $15,000,000 bond issue. Where
operating savings are promised, as in this instance, the
plans for fiancing the improvement should give reason-
able assurance that the savings will in fact be realized by
those who pay the bills.

The present gasoline lighting service is inadequate and
unsatisfactory. Electric lighting is more efficient and
apparently no more expensive. The residents of outlying
sections of the City where there are no lights, or where
the service is admittedly poor, are entitled to an exten-
sion of the electric lighting system as rapidly as the finan-
cial affairs of the City and other conditions will justify it.
The Bureau believes, however, that, in view of the gen-
eral conditions set forth in the opening paragraphs of
this statement, the present is no time to embark upon an
expenditure of $15,000,000 for electric lights. Moreover,
a single issue of lighting bonds for that amount is too
large to ask for at any one time. If public officials are re-
quired to account at relatively short intervals to the
voters and taxpayers for the expenditure of improve-
ment funds of this kind and to secure further funds for

The City Bond Issues. 15

such work only upon the showing that they can make as
to past performances, the tendency will be toward more
efficient and economical work than otherwise will be had.

The Bureau recommends that voters vote " No " on the
lighting bonds.

BRIDGE BONDS

The proposition for $9,500,000 of bridge bonds should
be rejected by the voters.

For several years the City has had a nominal bridge
construction program. On two occasions bond issues
have been authorized for the purpose of carrying out
this program, but in the face of continually advancing
construction costs the funds provided have been insuffi-
cient. The bonds now proposed are to be used for this
same general purpose. There is no assurance, however,
that $9,500,000 mil complete the structures included in
the program.

The estimates upon which this amount is based were
prepared nearly a year ago. Since then there has been
a further heavy advance in costs. Moreover, if it should
be decided to build the Adams Street bridge under traffic
the actual cost will probably be at least twice the amount
of the present estimate. Under these circumstances ap-
proval of this bond issue means merely authorizing City
officials to proceed with the building of such bridges as
they may determine upon so long as the money holds out.

The Bureau is of the opinion that the need for new
bridges is not sufficiently urgent to justify their construc-
tion at this time, when to finance the work the City's
bonding power must be further encumbered and bonds
must be sold at a sacrifice, and when costs are extortion-
ately high.

16 Chicago Bureau of Public Efficiency.

Before authorizing bonds for additional bridges, ex-
cept in cases where the need may be specially urgent,
Chicago should determine a definite policy of bridge con-
struction. The present congestion of street traffic in the
central district has brought into new prominence the
question as to whether the bridges carrying streets over
the river shall be fixed or movable. If it should be de-
cided that the paramount needs of the City can be met
only by the use of fixed bridges, there will be a new policy
of construction, providing better architectural effect and
great saving in cost.

PARK AND PLAYGROUND BONDS

The proposal to authorize $5,000,000 of bonds for park
and playground purposes is not based upon any definite
or well considered plans. About a year ago, the Bureau
of Parks and Playgrounds submitted a tentative program
to the Finance Committee of the City Council, but this
has never been approved by the Committee. Since then
conditions have changed and it is admitted that the plans
therein outlined should be modified.

In placing the proposition upon the ballot, neither the
Committee nor the Council indicated specifically how
these bond moneys will be expended if authorized. The
proposition should be rejected upon this ground alone,
even if there were no other objections to it. But, of
course, all the objections to encumbering the City's future
bonding power, to selling bonds at a sacrifice, and to un-
dertaking any but the most urgent improvements while
present abnormally high prices prevail apply to the park
and playground proposition as well as to the other propo-
sitions to be voted upon.

The City Bond Issues. 17

CONVENTION HALL BONDS

The Bureau believes that, quite aside from the general
question of policy of the City's owning and operating a
Municipal Convention Hall, there are decisive objections
to approving at this time the $5,000,000 bond issue pro-
posed for such purpose.

The announced purpose of such a building would be to
bring business to Chicago. Incidentally, it might be used
for civic, social and amusement purposes. In support of
the proposition it is stated that this City is without ade-
quate facilities for handling large commercial conven-
tions and exhibitions and that, therefore, they are being
held elsewhere and as a consequence Chicago is losing
business.

No site has been selected and no definite plans have
been prepared. In a general way it is estimated that a
suitable structure ''about a block wide by two blocks
long" can be built for the $5,000,000, including the pur-
chase of the land. The location of the site and the char-
acter of the plans are such important factors in deter-
mining the cost of such a project that they should be
more fully developed before a bond issue is called for.
Otherwise, after the work is undertaken it is likely to be
found that the funds provided are inadequate and the
taxpayers may be called upon to provide a much larger
aggregate sum than they would have approved in the
first place had they been properly advised. Chicago has
had too many experiences of this sort in connection with
public improvements in recent years.

It is said that "the City's present financial condition

18 Chicago Bureau of Public Efficiency.

and bonding power have absolutely nothing to do with
the Memorial and Convention hall proposal. The public
is only asked at this time to approve the general proposi-
tion"; that the ''bonds will be issued when in the judg-
ment of the Finance Committee and the City Council, the
City's financial condition is such as to warrant the issu-
ance of the bonds."

The Bureau believes that there is a connection between
these bonds and the City's bonding power. They will be
in effect a mortgage on the City's future power to issue
bonds. Also, once they are authorized, they will compete
with other authorized bonds with respect to priority of
issuance and may succeed as against those more urgently
needed for other purposes.

It is claimed that the convention hall will be self-sup-
porting— that its rentals will pay at least its direct oper-
ating and maintenance costs and also the principal of
and interest on the bonds. The financial arrangements so
far discussed by City officials contemplate nothing of the
sort. Unless the Council is committed in advance to the
proposition of using such rentals to the extent that they
may be available for the payment of such bond principal
and interest, it is practically certain that they will be
used for other corporate purposes, while the taxpayer
will be saddled with the added burden arising from the
issuance of the bonds.

If the construction of such a building shall be com-
menced in the near future it will involve the use of labor
and materials much more urgently needed for other types
of construction.

The City Bond Issues. 19

The convention hall proposition can well afford to await
more opportune conditions. The voters are advised to
vote "No" upon it.

Chicago Bureau of Public Efficiency,
Habris S. Keeler,

Director.
April 6, 1920.

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