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A Proposal to Correct the Perverse Elasticity of Legal Debt Limitations

Published online by Cambridge University Press:  02 September 2013

Karl Scholz
Karl Scholz
Affiliation:
University of Pennsylvania
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Extract

During the depression years, many American municipalities were unable to engage in a program of local public works, with the aid of loan funds, because of legal limitations upon their borrowing power. In a number of states, there are constitutional limits to the incurring of local non-self-supporting indebtedness. For example, Pennsylvania limits the debt “of any county, city, borough, township, school district, or other municipality or incorporated district” to seven per cent of the assessed value of the taxable property therein. But the city of Philadelphia is permitted to incur non-self-supporting indebtedness up to ten per cent of the assessed value of the taxable property in the city.

Type
Municipal Affairs
Information
American Political Science Review , Volume 33 , Issue 1 , February 1939 , pp. 80 - 84
Copyright
Copyright © American Political Science Association 1939

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References

1 See, in particular, Hoyt, Homer, One Hundred Years in Land Values in Chicago (Chicago, 1933)Google Scholar, and Wenzlich, Roy, The Coming Boom in Real Estate (New York. 1936)Google Scholar.

2 Fearing that in Philadelphia 15 per cent of taxable real estate values, averaged over a period of nine years, would provide too large a current borrowing base for non-self-supporting indebtedness, State Senator George Woodward introduced a modification of the 1937 resolution in the 1938 extraordinary session of the state legislature (Senate Resolution No. 55, September 26, 1938). This substitute resolution, in so far as it relates to the city-county of Philadelphia, reduces the percentage from 15 to 10, and for purposes of simplification of computation uses as the base a ten-year rather than a nine-year average of taxable real estate values. But it accepts the principle, first incorporated in the 1937 resolution, of a long-range average of taxable real estate values as a basis, rather than a percentage of taxable values for the current year. It is the application of this principle that should serve to stabilize municipal borrowing power, and to establish a more or less inverse relationship between such borrowing power and the observed cycle in taxable real estate values.

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