“PAY-AS-YOU-GO”

Hawke's Bay Tribune, Volume XXII, Issue 40, 1 February 1932, Page 10

“PAY-AS-YOU-GO”

IN MUNICIPAL FINANCE.

REDUCING INDEBTEDNESS

Vancouver, Jan. 6. During the past quarter of a century, municipal taxation, debt, assessed values, and expenditure have grown out of all proportion to the increase in population in Canada and the United States. This is not peculiarly a North American anomaly: it applies also, though in considerably less degree, to Australia, New Zealand, and South Africa.

In thirteen cities of the United States this disproportionate increase ranges from 2 per cent, in the case of , Boston to 17 per cent, in the case of ! Baltimore. It is 15 per cent, in Chicago which has not paid its teachers for the past eight months, cannot now pay its police and firemen, and may have to close all its schools. It is 14 per cent, in Philadelphia, where the citv employees have not been paid for December, and where banks refuse to honour the city’s tax assessment warrants. But in Milwaukee, where there are no gangs or gunmen, and where the city has a surplus equal to half a million sterling, the municipal debt and taxation have not increased in the same proportion as population. Canadian municipalities have also recorded disproportionate increases in debt. The school system of the city of Toronto, which has cost £6,600,001), would have reduced its cost by hall had it been financed on the “pay-as-you-go” plan. The reason for municipalities living above their income is world-wide: the increased popularity of municipal facilities for borrowing, the decreased value in the purchasing power of the pound or dollar, the general improvement in the character and efficiency of civil services, elaborate schemes of town planning and extensions, and widening of public highways incidental to the phenomenal increase of automobile traffic It is also true that widespread development of home buying, and needed—often unneeded—accessories of the home on the instalment plan has caused extravagance in city expansion. An economist once observed: “In times of prosperity we make our debts. In times of depression we pay them. Then we start all over again.” Prior to the present slump, individual and public expenditures were recklessly undertaken, without regard for the inevitable day of reckoning. A casual observer could see that Canada and the United States must pay the piper for the reckless stock market gambling of the 1926-28 period, when people i mortgaged homes and furniture — j everything they had—to “play the market.” The wonder of it is that Governments have not the moral courage to warn them or to deliver a salutary object lesson in thrift, before or after the fever period. But the people have learned their lesson. The craze for spending has gone. Brokers’ offices are empty. In tile city of New York 42 per cent, of the downtown buildings are unoccupied. The “pay-as-you-go” plan is getting an airing. In Massachusetts several cities have decided to meet the cost of public works more and more from current revenues. The intention is ultimately to defray, from revenue sources, most of the expenditures now charged to capital. Cleveland hopes to wipe out its school debt by 1939. Detroit aims to liquidate its’ school debt in thirty years and to pay cash thereafter. If Governments and municipalities gave a lead, there would be a slowing down in the appalling rate of time-payment purchasing. But perhaps that is too Utopian to anticipate.