APPENDIX C CITY OF SALEM, OREG., PRESS RELEASE NO. 1, MARCH 1, 1967 The City of Salem, Oreg., received eight bids today on $1,339,000 general obligation improvement bonds maturing April 1, 1968 through 1977. The successful bidder was Bankers Trust Company, New York City, whose bid was at an effective interest rate of 3.32797%. A premium of $176.75 was bid. The detail of the low bid is as follows: $130,000 on Apr. 1, 1968- Percent 5.0 $135,000 on Apr. 1, 1973. Percent Other bidders on the issue and their effective net interest bids were: (1) A syndicate headed by the First National Bank of Chicago and in- (2) Continental Illinois National Bank & Trust Co. of Chicago.. (5) A syndicate headed by the Northern Trust Co. (Chicago) and in- (6) A syndicate headed by the First National Bank of Oregon and including Merrill Lynch, Pierce, Fenner & Smith, Inc.; Pacific Northwest Co.; Blankenship, Blakely & Strand, Inc., and Rippey, Inskeep, Hess & McFall, Inc__ (7) A syndicate headed by the U.S. National Bank of Oregon and including Blyth & Co., Kalman & Co., Dominick & Dominick, Inc., and Atkinson & Co- 3.2 3. 25 3. 25 3. 3 3.3 Percent 3. 3394 3. 3485 3. 3556 3.3777 3. 4287 3. 4413 3.4766 CITY OF SALEM, OREG., PRESS RELEASE No. 2, SEPTEMBER 7, 1966 The City of Salem, Oreg., received four bids today on $1,300,300.33 general obligation improvement bonds maturing August 1, 1967 through 1976. The successful bidder was the First National Bank of Oregon whose bid was at a net interest rate of 4.5545%. The detail of the low bid is as follows: Other bidders on the issue were: a syndicate headed by the U.S. National Bank of Oregon and including Blyth & Co., Kalman & Co., and Atkinson & Co., (4.8181%); a syndicate headed by the Northern Trust Company of Chicago and including Foster & Marshall, Inc. (Seattle), and the National Bank of Washington, Tacoma (4.62819%); and the Continental Illinois National Bank & Trust Company of Chicago, (4.60701%). CITY OF SALEM, OREG., PRESS RELEASE Nos. 3 AND 4, OCTOBER 13, 1965 The City of Salem, Oreg., received bids today on $745,000 general obligation sewer bonds maturing October 1, 1966 through 1980. The successful bidder was a syndicate headed by the First National Bank of Oregon whose bid was at a net interest rate of 3.21278%. The syndicate also included: Merrill Lynch, Pierce, Fenner & Smith, Inc.; Pacific Northwest Company; Dean Witter & Co.; June S. Jones & Co.; Charles N. Tripp Co.; Blankenship, Blakely & Strand, Inc.; and Rippey, Inskeep, Hess & McFaul, Inc. A discount of $7,777.80 was bid on the issue with coupon interest rates as follows: $50,000 on Oct. 1, 1972. 3.00 $60,000 on Oct. 1, 1980-‒‒‒‒‒ 3. 20 $50,000 on Oct. 1, 1973-_-_-_ 3.00 Other bidders on the issue were: The Western Security Bank of Salem; a syndicate headed by the U.S. National Bank of Oregon and including Blyth & Co.; Kalman & Co.; and Atkinson & Co.; The First National Bank of Chicago; and a syndicate of the Northern Trust Company of Chicago and Foster & Marshall, Inc. (Seattle). Also awarded to the same syndicate headed by the First National Bank of Oregon was a 10-year issue of $305,166.07 street, sewer and water improvement bonds at a net interest rate of 3.2319%. CITY OF SALEM, OREG., PRESS RELEASE No. 5, OCTOBER 14, 1964 The City of Salem, Oreg., received bids today on $500,000 general obligation sewer bonds maturing July 1, 1966 through 1975. The successful bidder was the First National Bank of Oregon & Associates whose bid was at a net interest rate of 2.9559%. A discount of $3,450 was bid on the issue with coupon interest rates as follows: Percent 22 $50,000, July 1, 1971. 212 $55,000, July 1, 1972. 22 $55,000, July 1, 1973. 2. 70 $55, 000, July 1, 1974_ 2.80 $55,000, July 1, 1975_ Percent 2.80 2.90 2.90 3.00 3.00 Other bidders on the issue were the Commercial Bank of Salem, a syndicate of Blyth & Company, Kalman & Company and the Salem Branch of the U.S. National Bank of Oregon, and a syndicate of Foster & Marshall, Inc. (Seattle) and the National Bank of Washington. Also awarded to the First National Bank of Oregon & Associates was an issue of $129,518.92 street and sewer improvement bonds at a net interest rate of 2.965% APPENDIX D CITY OF SALEM, OREG., SUPPLEMENTAL INFORMATION CONCERNING FIVE MOST RECENT BOND SALES A. FINANCIAL CONSULTANTS The City of Salem has not retained a financial consultant for any of its latest bond sales. The City has a full-time Director of Finance whose job it is to properly prepare and sell the City's bond issues. B. BOND COUNSEL Although the City has a full-time City Attorney who is extremely helpful to the Director of Finance in the preparation of bond issues, the necessity for a formal legal opinion on a bond issue generally dictates that a city obtain outside bond counsel. The bond counsel is an expert in the field of municipal bond law and is particularly versed in the laws of the state in which he practices. His approving opinion on a bond issue is looked to by the investment world as a guarantee that the bond issue is legally sound. The law firm of Schuler, Rankin, Myers & Walsh of Portland, Oreg., has been retained by the City of Salem for a great number of years to provide the legal opinion for its bonds. The costs for the legal services are thought to be reasonable. Fees for the five most recent bond issues are as follows: Consulting engineers have been retained to aid the City in only two bond issues in the past ten years. These issues were the $4,355,000 issue in 1963, which financed a new sewage treatment plant and the $3,750,000 issue of 1957, which financed a new water transmission line from the City's source of supply. The role of the consulting engineers was one of design and supervision of work for these projects themselves. Their role in connection with the bond issues was confined primarily to providing statistical information and total cost estimates upon which the amount of the bond issue was based. D. OBTAINING MOST FAVORABLE BOND RATING AND LOWEST INTEREST COSTS The City of Salem gives careful attention to the preparation and marketing of each of its bond issues. Much has been written and said about how a city can achieve the lowest possible interest on its bonds. Without going into detail, a city, generally tries to follow most of these guidelines, which are as follows: (1) Keep the bond rating services continually informed as to the city's financial condition. (2) Follow the legal requirements for the bond sale to the letter. (3) Within the legal requirements, construct the bond issue (maturities, denominations, call date, interest limits, etc.) to appeal to the widest number of bidders. (4) Time the sale, if possible, to take advantage of market conditions. (5) Publicize the sale as widely as possible. (6) Distribute an attractive, informational bond prospectus to a large number of potential bidders and answer any further requests for information promptly. (One copy of Salem's most recent prospectus is attached as Appendix E.) (7) Publicize the results of the bidding. (8) Continue to keep the investment world informed of the city's financial plans. E. EXTENT OF STATE ASSISTANCE The State of Oregon offers virtually no assistance to its municipal governments in the preparation and issuance of bonds. 参 F. EXTENT OF FEDERAL ASSISTANCE The City of Salem has not received assistance from any federal governmental agency in the preparation or issuance of any of its bonds. CONCLUSION AND RECOMMENDATIONS In completing this potpourri and this tearful recitation of the continuing problems we city officials daily face, we would make to you several specific recommendations. SPECIFIC RECOMMENDATIONS First, develop a block grant program for sharing Federal revenues with the cities, and directly with the cities. We point out past performance of the several States and question their ability or inclina tion to channel such grants to the needy cities without placing undue restrictions on us, or "sopping up" the money on the way through. Second, we would suggest some type of a federally subsidized public informational program-call it advertising if you wish-designed to acquaint the consumer with the basic fact that the local public sector of the economy must progress in harmony with the private sector or he will be unable to enjoy his private affluence due to the pollution and crowding of his environment, which will inevitably result unless such balance is upheld. Third, we would suggest that Congress drastically limit the tax exemption privilege for public bonds used for the sole benefit of a private corporation. Fourth, municipal officials would like to see the Congress restore the full intent of the Life Insurance Company Tax Act of 1959; permit the withholding of municipal income taxes from Federal employees pay; and permit regulated investment companies to distribute the interest on our bonds without loss of the tax exemption. Fifth, we would suggest that the public facility loan program be properly funded so it can be utilized, and that it be expanded to financially encourage the several States to create subsidiary programs with which to assist cities to consolidate smaller municipal issues and secure better bond prices. Finally, we would hope that you would recognize that the paucity of revenue and the accompanying financial plight of the cities is a major factor inhibiting the full utilization of our system of local self-government.1 Mr. Ayres now will briefly review for you, from a different angle, small-city financing problems. Thank you for permitting us to appear before you. Chairman PATMAN. We shall be very glad to hear from Mr. Ayres. You have a very fine statement, Doctor. It will be very helpful to us. It is thought provoking, brings up the real problems that we have to face. Mr. Ayres, you may proceed with your statement, sir. STATEMENT OF DOUGLAS W. AYRES, CITY MANAGER OF SALEM, OREG. Mr. AYRES. Chairman Patman, Senator Proxmire, I do not believe that you will find Salem atypical of the cities of the Nation in the approaching resignation to despair which our written statement expresses. Nor will you find Salem any different from the majority of the cities in the country under a quarter million population in the form or substance of our local government and problems. Mayor Miller's concern is universal in the cities, even if it is not commonplace that he literally walked out of surgery to the airplane here after performing two major surgical operations yesterday morning. That deep concern is manifested by the additional fact that he has served our community more than a decade; all elected, nonpartisan and unpaid. This is an example of citizen action regarding the seriousness of the plight of our debt and obligation-ridden cities. 1 Reilly, op. cit., p. 40. SALEM'S STATISTICS AND THESIS Our thesis is that without a major revision in the Nation's spending priorities, both in the public and private sectors of the economy, that it is inevitable that the cities are doomed to a massive traffic jam on impossibly clogged streets to the tune of automobile stereotape decks. We feel, and document, that the rapid buildup of city debt is directly correlated to the rapidity of growth and the dearth of commensurate current revenue buildup available to the cities to meet this growth. We document that in the period from 1950 through 1966 Federal per capita debt went down 3.7 percent, but State-local debt climbed 345 percent. We feel we document that the cities are having to revert to bonding in lieu of financing current needs from current revenue, and that problems with bonded debt are symptoms only, not the diseasethe disease being the chronic deferral of current public capital investment in our cities due to our inadequate share of the gross national product. This is illustrated for example, by the fact that the value of tobacco products shipped exceed the total expenditures for all city police and fire protection, welfare, and parks and recreation. Our suggestion for a national "advertising" campaign comes from the fact that in 1965, advertising industry revenues alone came to within three-quarters of a billion dollars of equaling all general revenues of all cities in the Nation, for all local government service needs. If city utilities and liquor stores are eliminated from consideration, the advertising industry expended $3 billion more than all the cities of the United States took in from all general revenue sources. SALEM'S BONDING EXPERIENCE Salem has sold some $13.5 million in bonds since 1957, and we are a solid AA rated by Moody's. Yet the effective interest rate we pay has risen from 1.6 percent in 1950 to 4.55 percent in September a year ago. We document that our problem is no different from any other city, but we draw the conclusion that local governments have been unduly forced to bond capital outlays that more properly should have been financed on a pay-as-you-go-basis-all by virtue of the Federal and State governments preempting sources of revenue which tend to grow with the economy more than those left to cities. That, we think, is the real problem; not bond ratings, not underwriting practices, or even the tax exemption privilege. CONCLUSION I thank you, and express our joint appreciation for being invited to testify before the subcommittee. Should there be any questions, we would be pleased to attempt to answer them. Chairman PATMAN. Thank you, sir. (Additional material accompanying statements of Mayor Miller and Mr. Ayres is retained in subcommittee files.) Chairman PATMAN. Mr. Scott? Mr. SCOTT. Yes, sir. |