220 MASS. EXPERIMENT STATION BULLETIN 256 



THE PUBLIC DEBT 



Borrowing has long been the customary method of providing money for 

 the construction of public works. 



Money may be borrowed for a short time in order to meet necessary ex- 

 penses before taxes are collected, i.e., revenue loans; or for a period of years 

 for permanent improvements through the issuing of bonds, notes, or other 

 certificates of indebtedness. Bonds may be issued by the State, by counties, by 

 cities, by towns, and by various fire, water or other hnprovement districts. The 

 long-time indebtedness is usually spoken of as the public debt. Bonds and 

 notes are either serial, a certain amount of the loan being paid off each year; 

 or sinking fund, in which a certain amount of money is set aside at interest 

 each year to accunmlate for the repayment of the entire loan. According to 

 law, all of the recent long-time municipal loans have been either serial bonds 

 or notes. 



In the discussion of the public debt, the following terms have been used. 

 Net debt refers to the outstanding debt exclusive of sinking funds. State debt 

 refers to the direct indebtedness of the State government. Contingent debt 

 is the indebtedness which has been incurred by the State for the benefit of the 

 municipalities in the Metropolitan Boston district. This contingent debt is 

 legally a direct obligation of the State, but the entire charge for interest and 

 serial payments is borne by the municipalities. Enterprise debt refers to the 

 debt which has been incurred in the establishment of public service enterprises. 

 General debt is used to describe that incurred for purposes of general govern- 

 ment other than public service enterprises. Municipal debt is that incurred by 

 towns and cities whether for general purposes or for public service enterprises. 



The Amount of Debt" 



The total net outstanding State and municipal debt at the beginning of 

 1927 was slightly more than $335,000,000. Of this amount, municipal debt made 

 up $270,000,000 or 81 per cent. The remainder was State debt of which $50,- 

 000,000 was contingent debt chargeable to municipalities in the Metropolitan 

 Boston area. Therefore, over 95 per cent of the net outstanding public in- 

 debtedness is a direct obligation of the cities and towns. The net State debt 

 for general purposes was only $16,168,000 at the beginning of 1927. Approx- 

 imately one-fourth of the municipal debt is for public service enterprises such 

 as gas, electric light, and water companies. The net general debt incurred 

 either by or for cities and towns (including State contingent debt) was $260,- 

 000,000, or more than 90 per cent of the total net general debt. (Table 49). 



The greatest increase has been in the city debt, but the percentage increase 

 has been greatest in towns of over 5,000 population. The net general debt of 

 cities increased only 45 per cent from 1910 to 1926, while in towns over 5000 the 

 increase was 118 per cent. The increase of 90 per cent in the indebtedness of 

 towns under 5000 is an understatement of the true situation, since there are 

 fewer towns of this class now than in 1910. Making full allowance for the 



" Statistics on debt were obtained from the following sources : 



Annual Reports of the State Treasurer, Mass. Pub. Doc. 5; Annual Reports of 

 the State Auditor, Mass. Pub. Doc. 6; Annual Reports of the Commission on 

 Administration and Finance, Mass. Pub. Doc. 140 ; Annual Reports on the Sta- 

 tistics of County Finances, Mass. Pub. Doc. 29 ; Annual Reports on the Sta- 

 tistics of Municipal Finances, Mass. Pub. Doc. 79. 



