Part X

Towards a Stable Future Development

Conservative thinking on public financial matters has become rather unpopular of late. Emergencies have inspired drastic remedies, and immediate benefits have appeared as all-important, the consequences being shunned as remote, and assigned to the limbo of posterity. The enormity of the Federal public debt has staggered the imagination, and it has acquired a sort of nebulous quality so far as the average taxpayer is concerned.

The difference between the Federal debt and the bond issues of a local government is largely psychological with the citizen. Though a large Federal debt is inflationary, and can become a threat to the wealth of the country by devaluing the investments which are a means of security in the whole field of savings, it does not present itself as the direct threat endangering the home which shelters the family circle as does the indebtedness of the town in which the home is located.

Why Local Taxes Hurt 

In the case of the Federal debt, relief is obtained through taxes, many of which the citizen is unaware. Even the income tax does not present the direct threat against the home that the local tax does because the municipality depends almost exclusively on its real estate for its returns and imposes a prior lien on the property if the tax is not paid. It is therefore understandable why citizens who regard the mounting of Federal obligations with comparative indifference, display a keen and inquiring attitude toward their local affairs. The dangers resulting from a heavy municipal debt burden strike forcibly at home. 

Yet, in recent years the public mind has become confused by the example set by the Federal Government. The philosophy of increased civic spending has captured the popular imagination. There has been plentiful encouragement for extensive civic improvement.

Few Municipalities on Cash Bask

Few municipalities can meet the demands of their growing communities on a cash basis. They are forced to borrow against the collection of future taxes to institute improvements costing more than could be paid for out of current surplus funds. It is in the nature of these improvements where sound judgment is needed. The costs of projects so necessary to the public welfare as sewage treatment plants, trunk line sewers, and other investment of lasting value, are by special provision in the law, property distributed over the long period of years in which the improvement will be of service to successive generations of taxpayers.. The life of these improvements is likely to survive by a safe margin of time the period covered by the bonds issued to provide for them.

In a civilization so changing in its ideas and tastes, the plans made today are likely to be superseded by others tomorrow. Because of the speed of scientific research and its application, equipment installed today soon becomes obsolete. Therefore, improvements contemplated today should be fairly appraised in the light of their permanent value, and the costs distributed over the period in which the improvement will be of benefit. Obligations mounting as burdens to future taxpayers against improvements of a temporary nature, or incurred to satisfy a vogue, have been a means by which local governments have dissipated their borrowing capacity and brought their steady and healthful progress to a sudden halt.

Where Danger Lies

There is also the danger which lies in the honeyed words of political demagogues who entreat the citizens to abandon the principles of sound finance as a measure to relieve themselves from the exigencies of temporary conditions. Proposals offered by legislators which are designed to relax laws devised to protect the credit of municipalities should be studied carefully, and all efforts to "liberalize" municipal credit which tend to undermine the sound structure of a financial policy should be discouraged.

Many words in our language have lost the meaning originally ascribed to them, and "liberal" is one of them. Implying a free and generous heart, as differing from narrowness and bigotry, there has been a tendency of late to extend its scope of meaning to serve as a synonym for progress. Progress is not made always by refuting time-honored principles, and change is not always a state of righteous reform. To possess a liberal and enlightened point of view should not always imply that we abandon the precepts of fundamental thinking.

Regulations Help Municipalities

Some present regulations are a help to municipalities. The bonding capacity of municipalities has been extended in recent years by means of certain regulations imposed by the Federal Housing Administration on builders of speculative homes. Loan contracts provide that the builder shall install and complete all improvements such as sewers, curbs, and streets. This relieves the local government from issuing assessment bonds to pay for these items, collecting from the property-owner on an installment basis for a period of ten years. With these cost paid for at the time the building is completed, this sum, in effect, is released for other municipal projects. It is to be hoped that should the controls now exercised by the Federal Housing Administration be discontinued, that it will become the practice of the loaning companies and agencies to institute a similar provision in their contracts.

Through another regulation of the Federal Housing Administration, taxes together with other carrying charges are pro-rated and paid for monthly by the owner taking the loan. These taxes are remitted monthly to the Township by the bank acting as the FHA's local representative. This gives the Township a more even flow of revenue and virtually eliminates tax delinquency in these cases.

Vigilance and an understanding of the sound principles of municipal finance on the part of the taxpayers should assure Teaneck of the financial stability it now enjoys, and guide it in its progress in the years ahead.

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