City Banking

The Mayor of Milwaukee, the Mayor of Houston, the Mayor of Louisville, a vice president of Manhattan's Chase National Bank, a professor from Princeton, a professor from Michigan, a professor from Northwestern, the Director of Finance of Dayton, the State Controller of New York, the City Auditor of New Smyrna, Fla.--such men. 75 of them, last week trooped down Chicago's sweltering Midway to Judson Court at the University of Chicago. There they held a Conference on Municipal Finance, to work out reconstruction measures for bankrupt U. S. cities.

Of $16,000,000,000 of state, municipal and local government debts, $1,000,000,000 is today in default not counting another large slice not yet technically so listed. Not less than 410 cities and towns have defaulted on their bonds. This is not a bad record compared to industry's defaults, but it is a nasty record considering the fact that cities, unlike industries, have legal authority to collect revenue in bad times as well as good.

Chicago, prime exemplar of rotten city finance, sent no important municipal official to attend. The polite guests did not refer to their host city's negligence. They called her not by name, but more than one of them took digs at the type of municipal financing Chicago has done, particularly ''borrowing" from schoolteachers and firemen by foisting on them payless pay days. Chief causes of city financial trouble as diagnosed by the conference:*

1) Real estate booms which get cities hopelessly in debt, ruin citizens. Biggest single crop of city defaults, in Florida, was traceable to this cause.

2) Failure to stagger the maturities of bond issues. To this fault of simple financial naivete are partly traceable the troubles of Detroit which has called on her creditors to refund $290,000,000 of her borrowings. Detroit, with depleted revenues due to Depression and banking crises, is faced with $138,000,000 of bonds due within the next ten years.

3) The use of tax anticipation warrants--borrowing on next year's income to pay this year's living expenses--which results in disaster during depressions when cities find difficulty in obtaining their usual short-term credits. New York City faces this difficulty.

Important cities and their debts:

Percent of Value Per Net Deb of Assessed Capita City (000) Property Debt

New York $1,432,794 7.6 $206.74 Chicago 136,147 1.3 40.32 Philadelphia 421,210 10.1 215.90 Los Angeles 67,570 2.4 50.50 Detroit 241,281 9.1 153.80 Cleveland 84,199 5.1 93-51 St. Louis 64,323 4.8 78.26 Boston 128,620 6.8 164.65 Baltimore 137,073 6.2 170.34 Pittsburgh 51,699 3-6 77-19 San Francisco 57,363 2.7 90.42

Prize cities from the standpoint of low debt are: Springfield, Ill. $206 .2 2.87 Kulamazoo 32 .04 .59

* None of which includes the chief cause of Chicago's troubles: so much crookery in tax assessments that tax payers were able to force new assessments, causing so much delay that for over two years Chicago collected almost no revenue, has not yet caught up. Chicago's debt is not high compared to that of many other cities; Chicago has not defaulted on her bonds.

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