il
The Portland Oregonian
analyzes the Grange Bill^
HORSE
“ WILL OREGON INVITE
REPUDIATION?
“ It would be difficult to exa g g era te the
m enace to O regon s prosperity and gen­
eral w elfare that resides in the proposed
constitutional am endm ent for people's
w ater and pow er utility districts.* It is the
one measure on the ballot fo r the N ovem ­
ber election that leaves the gate wide
open. It would provide entry for every
hare-brained schem e that might be d e­
vised in the field o f w ater and pow er d e­
velopm ent. A ll that would be required
would be prom oters sufficiently plausible
and en ergetic to ‘sell* their schem es.
‘
“ The greatest evil in this pending amendment
— and there are many— lies in the fact that it
wipes out all limitations on taxation and the sale
of obligations. The state has built up a structure
for taxation that is carefully guarded to protect
against extravagance which might lead to finan­
cial disaster. The constitution places a 6 per cent
limitation on the state. The extent to which cities
may create indebtedness is definitely fixed. There
are hard and fast limitations on the taxing and
debt-incurring powers of school districts, ports,
irrigation and drainage districts— on every unit
within the state that has such authority.
“ But, he re co m e s a m ea su re that
ignores all precautions and bluntly au­
thorizes the districts to be created under
it, am ong other things:
*To levy taxes upon the taxable prop­
erty o f such districts.
*To issue, sell and assume evidences o f
indebtedness.*
“ Neither the 6 per cent limitation nor any
other restriction would apply to these districts
because they would be set up on the authority of
the constitution, and the legislature, in passing an
enabling act, could not provide conditions that
would narrow the powers granted in the amend­
ment. That is the strongly prevailing legal opin­
ion. Attorneys for the proponents have been
unable to show restrictions in other parts of the
constitution that would be applicable. If the
amendment is approved the lid is off.
SENSE
SERIES
NO. 9
“ Parts of any one district do not need to be
contiguous— they do not need to he in the same
county; they can be as far apart as the slate
boundaries permit; they can include one or more
cities, or they can be exclusive o f cities.
“ It is an open invitation for g erry­
mandering, and it would be seized upon
by professional prom oters who would
hope to profit through unsound d evelop ­
m ent schem es and the sale o f securities.
“ The a“g orient has been advanced that the
people o f the districts would be able to protect
themselves by settin** their own limitations on
financing and investment. But would they do
so? It has not been the experience elsewhere
that they would. Irrigation districts now are up
to the neck in trouble because the guess was
wrong on the burdens that they could carry. The
state, which guaranteed the interest for five
years, under a provision that it is now proposed
to revoke, is out more than $4.000,000 on that
experiment, much, perhaps all, o f which will
never be returned but must be passed on to the
general taxpayers. If the property owners o f
these sprawling, disconnected and overlapping
districts could be depended upon to protect
themselves, why has it been thought necessary
to place taxation limitations on every other tax-
levying agency?
“ This step would court disaster and
repudiation. It com es at a time when
there is hysteria on the su bject o f p ow er
developm ent, inspired fo r political pur­
poses. Those who think m ore clearly, y et
believe in public ownership o f utilities,
are against this visionary and loosely
drawn am endm ent.
“ But the time is ripe for schemers to rush these
districts, if they are created, into difficulties from
which they could never extricate themselves and
wnich would injure, if it did not undermine, the
credit of Oregon and o f its subdivisions.
“ It was unrestrained enthusiasm for develop­
ment and overconfidence in ability to pay that
first brought repudiation into our financial vocab­
ulary. That was a great many years ago, in the
early days of the republic, but the experience has
its lesson for us in this year 1930. The country
was rich in resources, but their development was
retarded by lack o f transportation. Then came a
tidal wave of sentiment for the laying o f rail­
roads and the digging o f canals, the building o f
Reprinted verbatim from the editorial
page of The Oregonian, issue of September 26, 1930.
Pacific Northwest Public Service Co. "Pepco”
highways and other public works, for all of which
public credit was staked, with no thought o f a
day of settlement. Says a writer in reference to
that era: ‘Private ambition and public spirit were
skillfully played upon to induce voters to ratify
with eagerness what doubtless seemed to many
a public duty as well as a private gain.’
“ But there was a day o f reckoning and it ranks
among the major catastrophies in the history o f
the nation. Between 1830 and 1842, in this orgy
o f public expenditure, the debt o f the states in­
creased from $13,000,000 to $213,000.000, and
suddenly they found that they could not pay.
State after state was unable to meet its obli­
gations. Pennsylvania, Maryland. Mississippi,
Michigan, Florida, Indiana and Illinois were on
the verge o f bankruptcy. All o f them suspended
payment o f interest. All o f them were put to dire
extremes to weather the storm and three, Mis-
sissipni. Michigan and Florida, repudiated cap­
ital debt. The heavy indebtedness o f many south­
ern states hung over until after the civil war.
More repudiation follow ed and in 1880 those
southern states which h?.d refused to pay were
joined by a northern state, Minnesota, which
settled its railroad bonds at 50 cents on the
dollar.
“ Nor has repudiation been confined to the
early era o f construction nor to the states. Numer­
ous cities, towns and counties defaulted on their
obligations follow ing the panic o f 1873 and the
courts o f the land were clogged with resulting
litigation.
“ The effect o f repudiation then, and
always, has been to impair or ruin credit,
to stifle growth and progress.
“ The lesson o f these experiences and the in­
creased wealth o f the country have confined
repudiation to isola ted cases in later years.
‘Another and perhaps more efficient safeguard
against its recurrence,’ says a historian, ‘is to be
found in the innumerable restrictions against the
debt-making power o f the states which have
found their way into recent state constitutions.’
“ The lesson is plain, y e t here in our
own state it is proposed to ignore it by
departing in our constitution from this
established policy. Surely the voters of
O regon will have more regard than that
for their future w elfare and the good
name and financial standing o f their
s ta te ”