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2b. The city is under certain obligations to pay for real estate privately purchased, and this item is completely neglected by the Department in its calculations.

3. The Comptroller has not added to the City's liability contracts payable out of the proceeds of bonds when contracts have been actually let and entered into between the departments and contractors, but which he has not yet certified to and carried into the City's general books. It is possible for the Comptroller from time to time, by failure to certify such contracts, to contract or expand the borrowing capacity of the City, a practice which we do not believe was contemplated by the Constitution, notwithstanding the fact that no contract can be sued on until so certified. Such contracts have been authorized by the Board of Estimate and Apportionment, have been duly entered into, and in our opinion should, for the purpose of calculating the debt limit, be treated precisely in the same manner as contracts which have received the Comptroller's certificate. If we are right in this belief, there should be added, in round figures, as of November 1, 1908, for such contracts, $3,500,000. To this should be added all contracts awarded, but which have not yet been forwarded to the Comptroller's office, and which may aggregate a large sum.

We de termined precisely what this was as of July 1st last, and to do so required an investigation which continued for six weeks. It would now require not less than a month to make the exact corresponding figures as of November 1st.

4. The Comptroller has, in his calculation, made a deduction of $2,348,935 for proceeds of bonds remaining in the City Treasury, "which have not been apportioned, and transferred to the credit of the various accounts on account of which said bonds were authorized to be sold,” but are mingled with the common fund. This is deducted by the Department on the theory that the amount is applicable to the payment of land liabilities, or to payment on account of contracts already included in the debt. Until the cash is so used, however, it is merely an asset of the City, like any other asset, and the ruling of the courts does not seem to authorize any deductions for assets of any kind, and particularly where the fund in question is not separated from other moneys in the Treasury, but is used for the payment of the City's current bills.

5. It should be observed, in passing, that no estimate is made of the contingent liability of the City in some 25,000 actions now pending against it. Judgments entered in these actions, as a rule. are ultimately paid out of appropriation account, but that seems to be no reason why some proper estimate should not be made for so much of such judgments as cannot be paid out of appropriation accounts.

6. At this point attention should also be called to the fact that by Chapter 208 of the Laws of 1906, the Board of Estimate and Apportionment was required, on or before the first day of October, 1906, to "authorize corporate stock of The City of New York to be issued to an amount equal to so much of the deficiency on the 1st day of January, 1905, in the product of taxes theretofore levied and deemed by the Board to be uncollectable, as shall not be provided for in prior tax levies or by the issue of corporate stock of The City of New York," which act was to take effect immediately. The Board of Estimate and Apportionment determined such amount to be $36,000,000, and authorized the issue of $36,000,000 of corporate stock. Under such authorization, however, it has up to this time actually issued but $3,000,000. The question is at once raised as to whether it was the intent of the Legislature that this $36,000,000 of uncollectable taxes should be funded, and if so, whether the Board of Estimate and Apportionment has any discretion in the premises. We understand the law to be mandatory, and not to be limited to the authorization of the issue, but to the exercise of the authority.

In view of the foregoing, we now call attention to what we believe to be the necessary readjustment of the estimated margin of borrowing capacity as shown by the statement of the Finance Department, namely

$37,931,640 00

Additional estimated land liability..
Cash improperly deducted ..
Contracts let but not certified.

$23,500,000 00

2,348,935 00 3,500,000 00

$29,348,935 00 Readjusting the Comptroller's figures by the de

duction of this amount we have a remainder of but...

$8,582,705 00 exclusive of contracts awarded but not yet in the Comptroller's hands, and contracts for purchase of real estate, still unconsidered.

In addition to the questions involved in the foregoing considerations, our attention has been called to another matter of much gravity, namely, the question as to whether the assessed value of special franchises for purposes of taxation should be included in the assessed real estate, for the purpose of determining the borrowing capacity of the City within the constitutional limitation.

Article VIII, Section 10 of the Constitution contains the following provision as the same was adopted in 1884 and subsequently in 1894:

“No city or county shall be allowed to become indebted for any purpose or in any manner, to an amount which, including existing indebtedness, shall exceed ten per centum of the assessed valuation of the real estate of such county or city, subject to taxation as it appeared by the assessment rolls of said county or city on the last assessment for state or county taxes prior to the incurring of such indebtedness; and all indebtedness in excess of such limitation, except such as may now exist, shall be absolutely void, except as herein otherwise provided. No county or city whose present indebtedness exceeds ten per centum of the assessed valuation of its real estate subject to taxation shall be allowed to become indebted for any further amount until such indebtedness shall be reduced within such limit."

At the time of the original adoption of this provision in 1884, as well as at the time of its re-adoption in 1894, and subsequently and until after the passage of the special franchise tax law of 1899, no special franchises were assessed for purposes of taxation in any city of this State. They first appear on the City's assessment rolls in 1901. At the time of the passage of the special franchise tax law “real estate” had a definite, fixed, technical meaning. It was defined by the Revised Statutes as “lands, tenements and hereditaments," and is still so defined by the Revised Statutes. When the Constitution was passed, personal property, although tangible, was excluded from the basis for the calculation of the debt limit, and special franchises as taxed and as defined by the law of 1899 is a new species of intangible property. Subdivision 3 of Section 2 of the Law of 1899 provides:

“ The terms land,' 'real estate,' and 'real property' as used in this chapter, include the land itself above and under water, all buildings and other articles and structures, sub structures and superstructures erected upon, under or above the same or affixed to the same, etc., etc., all surface, underground or elevated railroads, including the value of all franchises, rights or permission to construct, maintain or operate

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the same in, under, above or through streets, highways, etc., etc., and all mains, pipes and tanks laid or placed in, upon, above or under any public or private street or place for conducting steam, heat, water, oil, electricity or any property, substance or product capable of transportation, etc., etc., including the value of all franchises, rights, authority or permission to construct, maintain, operate, etc., etc., any mains, pipes, tanks, conduits, or wires, etc., etc., for conducting

water, steam, heat, light, power, etc.” The Court of Appeals held that this law created

a new system of taxation, brought within its range a new character of property, and assigned the duty of making the valuation to the state board of tax commissioners throughout the entire state.

The system thus created had never been known before, and as its main subject the act dealt with special franchises, which had never been taxed before. Property unknown as the subject of taxation to the framers of any of our constitutions was brought into the system, which required new methods of valuation and the exercise of functions which had never belonged to local assessors. The property was sui generis, and from its nature could not be valued by local assessors.

The valuation of special franchises had never been attempted before, but presented a new field of action and called for the exercise of new and different functions. They could not be scen, handled, measured, weighed or counted. They were specialties, and had no market value. There were no sales to guide, and no experience from ownership, rental or use to rely upon. The new property is real estate in name but not in reality, for it is a mere privilege to do something in public

streets and places not permitted to citizens generally." It will be noted that the definition which includes special franchises in “lands," " real estate” and “real property” is given “as used in this chapter.” The point is now raised that the term “real estate” as used in the special franchise law is not the term “real estate” as used in the Constitution; that the Legislature cannot enlarge the meaning of the Constitution directly by the attribution of new meanings to terms used in the Constitution, nor indirectly by the attribution to the Constitution of new meanings adopted by the Legislature for purposes within its power but not referred. to in the act or foreseen by the Constitution. If this contention

be correct, then the assessed value of real estate as of July 6, 1908, will have to be reduced by the amount of $192,490,470, thus reducing the basis of the calculation for the determination of the City's borrowing capacity by 10 per cent. of such sum, or $19,249,047. This is a matter of vital importance, and as it is answered in one way or the other, must determine the immediate future course of the municipal authorities in respect of the further issue of corporate stock.

The questions here raised are:

1st. Did the Legislature intend to enlarge the City's borrowing capacity ?

2d. If such was its intention, had it the power to carry such intention into effect?

The questions involved have been passed upon but once, and by the Appellate Division - Kronsbein v. Rochester, 76 App. Div. 194 -- which does not seem to have been considered with a view to the full consequences of the decision in their relation to the fundamental purpose of the Constitution.

There can be no question about the power of the Legislature to prescribe the method for determining the borrowing capacity of the City, provided such prescription is not obnoxious to the Constitution in that it would permit an extension of the municipal borrowing capacity beyond the 10 per cent. limit. That the Legislature has power to settle all of these questions, and to make it impossible in the future that there should be any doubt as to how the City's borrowing capacity shall be calculated, and incidentally thereto as to whether any issue of bonds is or is not invalid, is beyond doubt. Such being the case, we are of the opinion that the Legislature should be asked to pass a law applicable alike to all cities of the State, but in any event applicable to The City of New York, which should require the statement to be made as follows:

1. To include all assessment bonds due and outstanding, without deduction therefrom of amounts due the City on account of property benefited.

2. To include all outstanding revenue bonds issued for account of all taxes which shall have remained unpaid for more than two years.

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