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SECTION 1. Definitions. The expressions" debt," "gross debt," and "net debt" are not used in the same sense in all systems of municipal book-keeping. Sometimes temporary loans issued in anticipation of taxes and payable within the year are included, and sometimes not. In some systems loans authorized but not negotiated are included, and in other systems they are excluded. Sometimes all the cash in the city treasury is taken into account, and sometimes even unliquidated assets, such as real estate, is deducted at its estimated value in figuring out the net indebtedness. By the expression "net debt" is generally meant, however, the balance obtained by subtracting from the gross debt all liquidated assets of the city applicable to its redemption.

The system in use in Boston from an early period is to include in the gross debt all outstanding loans, notes, scrip, and other negotiable or registered obligations, not issued in anticipation of the taxes and payable within the year, and to include in the means of redemption all liquidated assets or property which is pledged to the redemption of the debt; the net debt being found by subtracting these means of redemption from the gross debt.1

1 The "net debt" of towns and cities, defined by St. 1883, chap. 127, is arrived at by taking the gross debt of the city, deducting the amount issued for water purposes and also the amount of the sinking-funds. The "net indebtedness" of the city of Boston used as a basis for determining the borrowing capacity is reached by deducting from the gross debt all water loans, all loans authorized outside of the debt limit of 1885, and also the moneys and investments in the hands of the Commissioners of Sinking-Funds applicable to loans inside the debt limit. It is obvious that neither of these two kinds of "net debt " has anything to do with the real net debt of the city, as both of them leave out of account all water scrip and bonds, and one of them omits all loans issued outside of the debt limit. Moreover, neither of them include in the means of redemption anything beyond the moneys and investments actually in the hands of the Sinking-Funds Commissioners ; whereas, as a matter of fact, securities in the hands of the City Collector of Boston



In the means of redemption are thus included the cash in the hands of the Sinking-Funds Commissioners, and the other investments of the sinking-funds, as well as notes, bonds, mortgages, betterments, assessments, and other liquidated obligations in the hands of the Collector, which are applicable or pledged to the payment of debt, and are to be handed over to the Commissioners of Sinking-Funds when converted into cash.

SECTION 2. Increase since 1890. While the exact net debt of the city at any given date is therefore easy to compute, a comparison of the real increase of indebtedness in one administration with the increase in another is not an easy matter. Such a comparison is complicated by various conditions: the amount of cash on hand derived from loans; the amount of loans authorized but not negotiated; the amount of the expenditures rendered necessary by the acts of previous administrations, but for which no money had been provided; the amount of expenditure necessitated by the acts of the administration in question, for which money must be borrowed in the future; and the amount of State loans, the interest and sinking-fund requirements of which are paid by the city.1

On December 31, 1890, the gross debt of the city was $55,440,561.06, the means of redemption $24,381,864.08, and the net debt $31,053,496.98.

During 1891 there was no increase in the city debt meaning net debt for the reason that the change in the fiscal year effected that year enabled the city to procure from the tax levy a large surplus above the amount needed for the current expenses of 1891–2; and this surplus was used for certain per

are, generally speaking, as certain of collection and application to the redemption of the debt as the investments of the Sinking-Funds Commissioners.

The real net debt of the city has from the earliest times been held to be the gross debt, less all cash and other liquidated assets applicable to the redemption of the debt held by any committee, city official, or Board of Sinking-Funds Commissioners; and the statements of net debt have been made up upon this basis at the close of each calendar and fiscal year.

1 The annual assessments on account of these loans are included in the State tax, and represent moneys borrowed by the Commonwealth for local armories, for the Metropolitan Sewerage system, for the Metropolitan parks, and to secure the abolition of certain grade crossings.

manent improvements for which money would otherwise have been borrowed. During 1892 there was also no increase in the debt, a result partly due to the fact that the City Council of that year attempted to use the borrowing capacity of the city for purposes which did not meet with executive approval,1 and partly to the fact that the new buildings for the City Hospital and Public Institutions, to which a large part of the loans authorized that year related, could not be so pushed as to require much money until 1893. In 1893 and 1894 a considerable increase in the debt took place, the principal causes having been a change of policy respecting the completion of the park system, some unexpected opportunities for street widenings, the failure to sell the old Public Library building,2 and the interference of the Legislature with the street-construction law of 1891.

The gross debt of the city on December 31, 1894, was $58,654,211.56; the means of redemption, $22,160,347.14; and the net debt, $36,493,864.42; an increase in four years of $5,440,367.44.

SECTION 3. Special Reasons for the Increase. A special reason might be assigned for this increase in the large sums of money which had to be borrowed during the past four years to meet what may be called the legacies of prior administrations, handed down in the shape of work to the execution of which the city was committed, but for

which no money had been provided.


Cochituate Water-Works.

Improved Sewerage
New Library Building
Roxbury High School
Stony Brook


1 See veto message of May 24, 1892.

This property was supposed to be worth $1,000,000, and has been in the market. for nearly a year. Its proceeds are pledged to the sinking-fund for the debt created to build the new Public Library on Dartmouth street.

3 As follows:

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Commonwealth Avenue
New Court House

Department deficiencies for the fiscal year


These items 3 would


Year in which the city was committed to the work.










Money borrowed between Jan. 1, 1891, and Dec. 31, 1894. $1,575,000 4,600,000










The amount charged to parks does not include the sums borrowed on account of the North End park taken in 1893 ($150,000), and on account of the Brighton playground taken in 1894 ($25,000).



account for $9,140,000, or almost double the entire in



All such arguments are, however, more or less fallacious, for the reason that every administration inherits a certain amount of borrowed money, leaves behind it a certain amount, has or ought to have a certain amount of property to sell, is obliged to finish up a great deal of work to which the city has been committed in previous years, and itself leaves uncompleted projects behind for which no money has been raised.

SECTION 4. Loans authorized, but not issued. It is particularly misleading to include in the net debt all unnegotiated loans.1 Every administration ought to leave ample authority to borrow money behind it; and the money should not be borrowed in advance of the necessity for it, as the city has to pay about three and a half per cent. per annum for interest, and receives only about two per cent. on its bank deposits. If, as must be the case, public works are authorized, the construction of which will take a number of years, it is better to obtain the authority to borrow all the money needed, and only issue the loans from time to time, as required, than to borrow it all at once, or fail to procure the right to issue enough bonds to complete the work.

A special effort has been made by this administration to secure from the Legislature and the City Council the

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1 As was done by Mayor Cobb, who in his valedictory address figured out that the debt had been reduced during the three years of his administration by over $500,000. The fact, however, is that during those three years the actual net debt of the city rose from $21,176,398.13, on December 31, 1873, to $28,277,032.96, on December 31, 1876, an increase of $7,100,634.83. Deducting from this figure the increase in the net debt due to the annexations on January 4, 1874, we have still an increase of $3,972,994.23 in the three years. The fallacy of taking into account the loans. authorized but not negotiated, at the beginning and end of the period in question, while leaving out of account the cost of works begun without providing the money to complete them, is further shown by the fact that during these three years the city was practically committed to a system of public parks, to the construction of the main drainage works, and to the extension of our water-works along the Sudbury river; enterprises which have since cost $25,000,000 more than the amounts provided for them prior to December 31, 1876.

Date of Order.

power to issue from time to time as required all the loans needed for the completion of the public works to which the city is committed. The loans authorized and not negotiated December 31, 1894, were as follows:


St. 1894, ch. 548


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Inside of Debt Outside of Debt

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$1,490,000 00 $10,950,000 00

The City Council can also authorize a further loan under St. 1891, chap. 323, for the laying out and construction of highways, of $747,162.91; while the borrowing capacity of the city under St. 1885, chap. 178, and St. 1891, chap. 93 was on January 1, 1895, $2,509,074. On that date loans amounting altogether to $15,696,236.91 could be issued without further action of the Legislature.

If any one deems it proper,1 in calculating the increase in the net debt during a given period, to include loans author

1 No regular statements were printed of loans authorized but not issued until recently, when, for the convenience of the Mayor and other financial officers of the city and for the information of the public, such a statement was incorporated in the monthly exhibit of the Auditor, first appearing in that for December 31, 1892. These statements have been thought by some persons to indicate a change of system, and the suggestion has been put forth that it was something altogether

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