Governor's message [Henry D. McDaniel] July 8, 1885

GOVERNOR'S MESSAGE.
Jas. P, Harrison & Co.. State Printers.

GOVERNORJS MESSAGE,
Jas. P. Harrison & Co., PrinLecs, Atlanta.

GOVERNOR'S MESSAGE.
STATE OF GEORGIA, EXECUTIVE DEPARTMENT, ATLANTA, GA., July 8, 1885.
To the Senate and House of 'R.epresentatz"ves: . The provision made in the Act of December 23, 1884,
for the payment of $3.45 5,135.00 of principal of the public debt maturing in 1885. and 1886, has been carried hto effect to an extent which justifies the belief that further legislation for that purpose is unnecessary. Grave difficulties attended the execution of the statute, from the fact that of this amount $18,035.00 matured January 1, 1885, $91,000 April 1, 1885, while $120,200.00 will mature February 1, 1886, $99,000.00 April 1, 1886, and $2.968,000.00 July 1, 1886, and 158,900.00 August 1, 1886. Bonds to meet these amounts respectively might have been issued and sold, but not on satisfactory terms. It was considered advisable to issue one series only, bearing date July 1, 1885, and when sold to deliver them at such times and in such amounts as might be needed to pay maturing bonds, the State withholding accrued interest.
For the purpose of attracting attention and securing competition in the sale, bids for the whole amount, or for any part of it, were, on March 10, 1885, invited in the following advertisement, extensively published in all portions of Georgia and in leading Northern cities :
GEORGIA BONDS-FIVE PER CENT.-THIRTY YEARS. EXECUTIVE OFFICE, Atlanta, Ga., March IO, 1885.
Under authority of an Act, approved December 23, 1884, author

4
izing the Governor to issue bonds for payment of principal of bonds maturing in 1885 and 1886, SEALED PROPOSALS will be received at the office of the Treasurer of Georgia up to TWELVE O'CLOCK M. ON APRIL 15, 1885, for three million four hundred and fiftyfive thousand dollars ($3,455,000) FIVE per cent. (5 o-o) thirty year coupon bonds, as hereinafter set forth, bearing date July 1, 1885. Principal and interest payable in the city of New York, at the fiscal agency of Georgia, and at the office of the Treasurer of Georgia in the city of Atlanta. Interest payable semi-annually on January 1 and July I respectively.
Bids will be received for two hundred thousand dollars ($200,000) of the amount to be delivered on July 1, 1885. And for two hundred and twenty-five thousand :lollars ($225,000) to be delivered January 1, 1886, the accrned interest being withheld by the State. And for the remainder of the amount of three millicn four hundred and fiftyfive thousand dollars ($3,455,000), (or so much thereof as may be necessary for the purpose aforesaid), on June 1, 1886, the accrued interest withheld as aforesaid. As to last delivery, however, successful bidders will have the option of tendering any Georgia Bonds maturing as aforesaid, at their PAR value, in payment therefor, at any time after July 1, 1885, and receiving new bonds.
Bids must specify amount of bonds desired in multiples of one thousand doilars ($1,000), accompanied by certified check, or certificates of deposit of some solvent bank for five per cent. (5 o-o) of the amount of such bid, payable to the order of the Treasurer of Georgia, or by a deposit of bonds oi the State of Georgia.
Bids will be opened and declared by the Governor and Treasurer, the State reserving the right to reject any one or all of the bids.
The State will issue registered bonds in lieu of any of the above named five per cent. bonds, as provided in said Act, at any time on demand of the owner. Copies of the Act of the Legislature, and information touching the proposed issue of bonds, will be furnished on application.to the Treasurer.
HENRY D. McDANIEL, GOVERNOR. BY THE GOVERNOR :
R. U. HARDEMAN, TREASURER.
Proposals for $200,000.00, deliverable for cash on July
1, 188 5, would attract better bids than for $109,000.00.
And it was advisable to prepare for sale of only the
former amount, in the event satisfactory bids were not
made for the later deliveries. To meet the difficulty of
deliv7ries long before the money was needed, and at the
same time to secure the advantage in price of speedy de-
livery, an option was offered to persons holding bonds
which mature in 1886, to tender such bonds in payment

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of bids on the latest delivery at any time after July 1, 1885, at par value and to receive new bonds. In that case, the State would pay the coupons on old bonds at maturity, and cut off an equal number of coupons from the new bonds, so that the principal of the old bond would count as cash in the transaction, the purchaser paying whatever premium he might bid for the new bonds. This would be an exchange of bonds on terms fixed by competitive bidding. Five per cent. bonds were proposed because the General Assembly had named that as the maximum rate, and a fair opportunity would be presented to test what rate of interest would secure the best results.
The following bids were received at the Treasury up to noon of 15th of April, 1885:

6 List of Bids, April 15, 1885.

NAME OF BIDDER. Amount. Date to be.Deliver'd

BID.

1 S. Leeman.................... $ 20,500 July, 1886...;..... ......

103

2 W. G. Solomo,1............ 200,000July 1st, 1885.......... 101 to 102

W. G. Solomon............ 40,000January 1st, 1886.....

102

3 John H. Inman............ 3.455.135 As advertised.........

100

4 C. C. S9:unders ............ 5,000 ......... .......... ...........

107

5 4th Ni.;10nal B'k, N. Y. 200,000 July 1st, 1885 .........

100

4th NatioIJ.al B'k, N. Y. 225,000 Janu,,ry 1st, 1886....

100

4th National B'k, N. Y.. 575,000June 1st, 1886.........

100

6 Henry Harvey, adm'r.. 3,000 .......... ......... ...........

101

7 James Camak............... 7,000 .................. ............

107

8 Yoang L. G. Harris...... 15.000 June 1st. 1886.........

107

Young L. G. Harri~...... 5,000 July 1st, 1885 .........

107

9 C. T. Lathrop............... 5,000 July, 1885 ..............

100

C. T. Lathrop............... 5,000 Jure, 1886 ..... ..... ..

101

10 John Blackmar............ 5,000 June, 1886...............

98

John Blackmar............ 5,000 .......... ....................

99

John Blackmar............ 5,000 ..............................

100

11 W. A. Mayre..... ......... 5,000 July 1st, 1885..........

105

W. A. Mayre...... ......... 5,000 June, 1886 ..............

104

12 Herry- Blun................. 50,000June 1st, 1836.........

102

Henry Blun.............. .. 50,000June 1st, 1886.........

102

13 Thos. J. Smith............. 13,000 July 1st, 1885 .........

102

14 W. M. & R, J. Lowry.... 17,000 July 1st, 1885 .........

102

15 M. N. Ison.................. 15,000 July 1st, 1885 .........

105

16 S. Marks...................... 10,000 July 1st, 1885..........

107

17 F. Phiniz;y................... 50,000July, 1885...............

107

F. Phiu;,iy................... 100,000June, 1886...............

106

18 So. M:tual Ins. Co....... . 65,000June, 1886 ..............

107

19 Southern Bank, Sav'nh 100,000 J.uly, 1885............... 100% to 101%

20 Tbs. Branc':i&Son, R'nd 200,000 July, 1885..............

105 13-100

21 A. J. N;cbols............... 5,000July, 1885...............

100

22 W. D. Grnnt ............... 50,000Jane, 1886...............

106

23 Nancy H. Heard......... 5,000 July, 1885... ...........

105

24 J. J. G.esham .............. 25,000 July, 1885...... .........

102%

J. J. Gresham.............. 25,000 or January, 1886 .....

101

J. J. Gresham .............. 50,000 June, 1886... ...........

101

J. J. Gresham.............. 25,000Juue, 1886.... .........

100

25 Moses, Taylo--: & Co...... 3,455,135 As advertlsed.. ......

104

26 Fred. Wolffe & assoc'ts 3,455,135 Option of purchaser par for 4 bond

It will be seen that the bid of Moses, Taylor & Co., of New ,York, was the best for the whole amount on the terms advertised ; that bids for the $200,000.00 deliverable July 1, 1885, and for a part of the latest delivery, considerably higher than the former, were made; and that the highest bid for the entire amount, or for any part of
it, was that of Fred. Wolffe and C. W. Rogers, being par

for 4 I-2 per cent. bonds, deliverable at their option at any time after July I, I 885. The bid of Moses, Taylor & Co. was lower in price than bids of Georgians for portions of the amount, and the fatter bids were lower than that of Wolffe & Rogers for the entire issue. But th~ last-named bid could not be accepted, because it would have been unwise, even if authorized by the provisions of the law, to place a large amount of mone:r. in the Treasury so long before it was needed, or could be used under existing law, for the payment of maturing bonds.
For these reasons '1 decided, after careful consideration, that the public interest required the rejection of all the bids. The law expressly provided for such rejection, and the right was reserved in the advertisement.
Attention having been sufficiently attracted to the proposed loan by the adverti~ement and the publication and rejection of bids, it was unnecessary to advertise for further bids. The statute provided for sale by private negotiations on failure to obtain satisfactory bids by advertisement. Accordingly, private offers were received and entertained for four and a half per cent. bonds-for the entire issue and for portions of the amount-none of them below par. Mr. Albert Netter, of Cincinnati, proposed to buy the entire series 4 per cent. bonds, at a premium of 1-4 of I per cent., to receive and pay for them in amounts and at times named in the previous advertisement for bids, and to give a satisfactory guaranty of performance of the contract. No offers were made for portions only of the loan at a higher rate than par. And these contempfated speedy delivery. Messrs. Wolffe & Rogers renewed their proposal to purchase the entire

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loan, on terms better for the State than any other person offered, for the whole or a part only of the bonds. After full consultation with the Treasurer and the Attorney-General, I decided to contract for the sale of all the bonds in one transaction. On May 5, 1885, a contract, prepared by the Attorney-General, was made with Messrs. Wolffe & Rogers, for the sale of all the bonds it was deemed nee:.. essary to issue, to-wit: .$100,000 July 1, 1885; $250,000 January J, 1886, and $3,042,000 May 1, 1886, to bear date July 1, 1885; interest 4 1-2 per cent., payable semiannually, at Treasury, or State's agency in New York, due July I, 19r5. The price to be paid is par and ''a premium of five-sixteenths of one per cent. in legal tender treasury notes of the United States, or its equivalent in good and lawful money, at the Treasury of the State, or State's fis, cal agency in New York, at the option of the State, on delivery of the bonds.''
As security for the faithful performance of every part of the contract, the purchasers have deposited in the Treasury the sum of one hundred and seventy-two thousand seven hundred and fifty-six dollars and seventy-five cents in cash, on condition that the State may use the same as a temporary loan, and return it with 6 per cent. interest from 27th June, 1885, upon such compliance; or in the event of failure to comply with any part of the contract on the part of the _pur&asers or their assigns, that said sum of money, and all right to interest thereon, shall be absolutely forfeited to the State, and the same shal_l not be rep~id.
The forfeit of said sum of money will not relieve said purchasers from liability for any loss by the State, ads-

ing from non-compliance with'.th!! contract, beyond the amount so forfeited. In case the purchasers present maturing bonds, at any time after July 1, 1885, an equal
amount of 4 1-2 per cent. bonds will be delivered to them,
the principal of the old bond counting as cash for its par value, the purchasers paying the premium of 5~16 of one per cent. and retaining all unpaid coupons for presentation at maturity, while the State will retain and cancel an equal number of the first coupons on the new bonds. This provision is intended to facilitate speedy deliveries, not only without loss of interest to the State,, but with actual saving of interest, because, to that extent, it would not be necessary to place the money paid for the new bonds in the Treasury in advance of the maturity of old bonds, so as to promptly pay them. In addition to this saving of interest, the State would redeem and can-eel maturing bonds, and deliver new bonds in the same transaction.
The security for this contract is in our own hands. The bonds will not be delivered except on payment of the pur~ -chase money. Times of delivery are arranged to give ample opportunity to sell the bonds to other parties so as to meet maturing bonds, in case of failure by the purchasers to comply with their contract.
With t~e cash guaranty of $172,756.75 in the Treasury, there is little danger that the purchasers will not comply with their contract; and to have postponed the sale until next year, upon the near approach of maturity of existing bonds, would have involved the State in all the risks of unfavorable changes in the money markets.
Two important ends are secured, viz.: a reasonably cer-

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tarn provision to pay thebonds 9f the State at m.atrity,

and the sale of the new bonds at c:1, pdce which should l;>e

sat_isfactory to the people.

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The terms of sale, in comparison with the best o{ the

bids submitted Apr:il IS, and rejected as above ~ntioned,

viz. : that of Wolffe & Rogers, present decided advant-

ages to the State. In interest alone on sums of money
placed_ in .the Treasury before maturity of bonds, there is :a

saving of more than $9<>,000, which, added to the- premj-

_um. $10,6oo, wUl show the actual present cash difference

~o be more than $100,000. The reduction of annual in-

terest on the public debt,

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effected '

b. y this

sale, '

d.eserves

attention, - On the $3,455,135 maturing bonds, the_ State

paid jn 1884 $240,427.40 interest. An equal. amount of

4 1-2 per cent. bonds, after July 1, 1886, will bear

$155,481.07 annual interest-:-~ reduction of $84,946.3~.

To this, if we add the reduction of interest in 1884,

through the payment of $750,000 of the principal of the
re- same _seric;s of boqds, $50,053, it will apf>ec:1,r. tha~ ~

dui;tioo ?{ $134~929,~3 per 11nnum b~s been made in the

interest charge upon ~he State, in the period from Febru

ary 28,-1884, to July 1,. 1886.

_

This sale a'( $3,392,000 of bonds at 4 1~2 per cent. saves

to the tax..payers of Georgia, annually, $84,800 in re.duc-
tion pf_ interest below the il,verage rate heretofore paid ;

and

this

saving .

in

t_he

_thirty years .,.

the

bond~
)

h

a.

y
'

e

to:

run

will aggregate the handsome amount 9f $2,544,000, with-

out m~kin~ any allowan_ce 'ra'r the pr'emium rece.ived, or

computation of _interestqn the annual saving._

.

0r. the first instant, the p.rc;has~rs of the ,new bonds

.

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' ,, ' .

. ; .' .

. , : -

_received and paid. for the_ first $1QQ,OOO of the issue as

. '

. . . .

.,

'.!

provi"ded in the contract.

,The- only expense at~ending the issue anq sale pft.h~

4 1-2 per cent. bonds will be the cost of engraving and

printing, $2,300.00; on account of advertising for bids

$496.80; and the necessary expenses of the Treasurer

'

.

,

.

in visiting New York and Philadelphia, on busine!?S con-

nected with the transactions, $381.53.

It affords me pleasure to acknow_ledge the valuable as-

sistance rendered by the Attorney-General, Hon. Clifford

Anderson, and the Treasurer, Hon. R. U. Hardeman, in

the negotiation and sale of these bonds.

The Trustees of the University of Georgia, on 21st of

April,last, deposited in the Treasury matured bonds of the

State to the amount $63,0.JO, for which they were enti:-

tled to receive the State's obligation, in accordance with

the provisions of an .f'\ct, entitled '' an Act to make per-

manent the income of the University of Georgia," ap-

proved September 30, 1881. For that reason the amount

of bonds sold was $3,392,000, instead of $3,455,135, as

contemplated by the Act. On the 15th of May last a

further deposit of similar bonds to the amount of $23,000

was made by the Trustees. And on 21st of June obliga-.

tions of the State, in pursuance of the statute aforesaid,

for $86,000, were issued and delivered to them.

The question pending before officials of . th~ State of

New York, whether or not Savfogs Banks, under the law

of that State, could invest in Georgia bonds, was made

by private parties, after the _sale of the bonds. No offi

cial of the State of Georgia_ has had anything to do with

the matter, directly or indirectly, nor is the State in any

sense a party to that controversy.

. The steady improvement in the credit of the State

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should cause general satisfaction,- - All classes of the people share in the benefits. It were better that the thrift of the people of Georgia made them lenders of money to other communities. Then they _would not only supply the private demand for loans in the State, but would absorb public loans at home and abroad, and all the_interest would be kept at home. But so long as our b~siness men and corporations borrow money in other States, it is a matter of congratulation that the State can :sell a large amount of 4 1-2 per cent. bonds at .a premium.
The success attending these transactions encourages the belief that bonds_ bearing even a lower rate of inter-est can be sold to pay the large amount of public debt maturing in the years 1889 and 1890. To secure this result provision should be made by improvement in the laws for the return and valuation of property for_ taxation, or by an increase in the rate of taxation, to raise money enough to pay off the floating debt, to meet the expenses of the State, and to create an an uual sinking fund of one hundred thousand dollars, re-quired by the Constitution for the gradual extinguishment of the public debt; These duties are imperative, and re1ferring to the recommendations in this behalf, submitted in my message to the General Assembly upon its organization in November last, I invite your earnest consideration of measures best adapted to secure such result.
HENRY D._ McDANIEL.