826 REPORT—1899. 
The problem of expenditure is that of the modern industrial city. Urban 
growth involves an improvement in the quality, and in, up to a certain point, a more 
than proportionate increase in the cost of municipal service. It is not only a 
question of paving and lighting more streets, but of substituting asphalt for rough 
stones, and electric light for oil lamps. 
The essential source of municipal income in the United States has been the 
general property tax. Inefficiency of administrative machinery and the escape of 
intangible wealth have combined to render this tax an increasingly rigid form of 
revenue. Save in the case of cities still undergoing rapid expansion, the taxable 
basis increases slowly, and increased expenditure necessitates an addition to a 
burdensome and, not infrequently, an oppressive local rate. 
These two conditions—urgency of municipal expenditure and inelasticity of 
municipal income—have heightened the natural tendency of the American city to 
the use of large funded loans for the extension of the municipal plant. Stimulated 
by the high favour of municipal securities as a form of private investment and by 
the easier terms upon which municipal loans can be negotiated, American cities 
have shown no hesitation in borrowing upon long time the funds required for 
desirable improvements properly chargeable to current expenditure, but for which 
there existed no likelihood of an ordinary budgetary provision. 
The budgetary procedure of the American city has been a crude adjustment of 
a local tax rate to the anticipated expenditure by a variously constituted ways 
and means committee of the municipal council. The utility of a low tax rate as 
political capital has commonly resulted in an impossible reduction of departmental 
estimates (subsequently corrected by extra-budgetary appropriations), or by a 
deliberate over-estimate of municipal income—with the common result of a floating 
debt, ultimately funded as a permanent deficit. 
The probable tendencies of American municipal finance in the several par- 
ticulars indicated are: (1) Continued progressive increase in expenditure; (2) a 
more efficient administration of the general property tax; (8) longer use of sources 
of local revenue, other than district taxation; (4) relative stability in funded in- 
debtedness ; (5) systematisation of budgetary procedure. 
2. Municipal Trading and Profits. By Rosert DonaLp. 
There should be no reason to object to Municipal trading, from a commercial 
point of view, as the figures in a recent Government return show that the average 
annual profit on Municipal water, gas, and electricity works, markets, tramways, 
and workmen’s dwellings amounts to 43 per cent. on the capital invested. 
The chief opposition to Municipal trading last Session of Parliament arose with 
electricity supply. It will be found that Municipalities produce electricity at a lower 
cost and supply it at lower prices than do companies. A comparison between 
twenty-one Municipal and twenty-one company undertakings, including in the 
latter the large London concerns and the companies of Birmingham, Leeds, and 
Sheffield, where the supply has been recently Municipalised, gives the following 
result :— 
Cost of production per unit—Municipalities, 1:87d.; Companies, 2:71d. 
Average price per unit to consumer—Companies, 53d.; Municipalities, 43d. 
Profit on mean capital—Companies, 73 per cent.; Municipalities, 7} per cent. 
Thus municipalities produce electricity at ?d. less per unit than companies, sell 
it at 1d. less per unit, and earn only + per cent. less profit. 
Municipalities as a rule supply gas of a higher illuminating power than 
companies and at a lower price. A comparison between a representative number 
of Municipal and privately managed Gas Works shows that the average price of 
the Municipal gas is less by 8d. per 1,000 cubic feet, the candle power is higher, 
and the average profit on capital employed only 1 per cent. less than that obtained 
by companies. 
The direct operation of tramways by Corporations has been done under easy 
conditions as regards capital expenditure, and has at once led to increased traffic, 
