 Golden
Gate Bridge User Tax Contract
with the general public and it shareholder.
Voters in the six newly-formed Golden Gate Bridge and Highway
District counties went to the polls on Nov 4, 1930 to approve
a major bond issue during the depths of the Depression to
fund construction of the Golden Gate Bridge. Promises made
during the campaign were amusing. This 1930 campaign brochure
promised that tolls on the proposed bridge would drop to
25 cents a car by 1960, and transit across the span would
be free by 1970. The “yes” vote was 145,697, and 47,005
voted “no.” The bridge also replaced the profitable Sausalito
ferry, but the District, later, raised tolls to support
an expensive, and unprofitable, bus and ferry system.
The
total bond issue to be voted upon at the election November
4 for the Golden Gate Bridge, will be $35,000,000. Total
earnings in 40 years will be $110,942,800. Bonded indebtedness
in any one of the six counties included in the Golden Gate
Bridge and Highway District will not be increased by the
approval of the bond issue. The bridge will pay for itself
out of tolls. These tolls will redeem the bond issue, pay
all interest, pay for maintenance of the bridge and accumulate
a vast profit--not less than $17,242,800, within the 40
year period. It is the consensus of opinion of all who have
studied the subject that the construction of this span will
increase property values not only in the territory tributary
to the bridge, but throughout the entire metropolitan bay
area.
The
Golden Gate Bridge will eliminate dependence on a ferry
system which has reached its saturation point. The Hyde
Street-Sausalito ferry can maintain a headway of about one
boat every three minutes, but this requires that additional
floating equipment be diverted from other bay ferry lines.
The average capacity of the boats is 73.6 vehicles, closely
packed. The congestion at the Marin shore due to inadequate
transportation across the bay has caused thousands of motorists
great delay and inconvenience on Sundays and holidays. The
ferry schedules cannot be increased without immense cost
and even then the inadequacy of ferries as compared with
a Golden Gate bridge is apparent to all.
The
Golden Gate Bridge with its six traffic lanes will have
the capacity to pass without congestion all traffic that
its north and south approaches will deliver. Directors of
the Golden Gate Bridge and Highway District are on record
in a signed pledge to the voters of the District that if
after the bridge bond issue of $35,000,000 has been approved
at the polls by the necessary two-thirds majority vote,
it is found that bids upon the span exceed the present estimates
of the engineers, 35 million, the bonds will NOT be sold
but the whole proposition will be re-submitted to the voters.
This
will act as an effectual safeguard against any possible
overrun in the estimated cost of the bridge, silencing the
objection that after the bonds once have been voted, the
cost of the bridge will run many millions of dollars above
the engineers' estimates. The financing plan employed by
the Golden Gate Bridge and Highway District is the issuance
of forty year 5% bonds covering the cost of building the
bridge and placing it in operation and redeemed from the
earnings of the bridge at five year intervals. The cost
above referred to includes the carrying charges during construction.
This
plan of financing has been established as the safest and
the best. It not only protects the District, but the bondholder
is protected as well, because the District guarantees the
payment of interest and redemption of the bond. This makes
the bond salable at the highest premium and at the lowest
possible interest rate. This method is the only method approved
by financiers and the only method in use for toll bridges.
Earnings have redemption possible during the twenty-first
year of operation, but for better salability the bonds will
run forty years. At the end of forty years, the bridge becomes
a free bridge and reverts for operation to the State, at
the option of the State.
Under
this plan of financing, the taxpayers carry no burden. The
toll pays for the bridge and also refund the preliminary
expense tax. The plan presents a thoroughly tested method
of bridge financing, established as standard practice by
leading cities and States. It substitutes a users’ tax for
a direct tax, and thus not only eliminates bridge taxation
but produces revenues applicable for the lessening of general
taxation. The Golden Gate Bridge District as finally formed
includes the counties of San Francisco, Marin, Sonoma, Del
Norte and parts of Mendocino and Napa.
As
the result of a careful investigation the Board of Directors
fixed the total amount of bonds to be authorized at $35,000,000.
Of this amount $32,000,000 may be issued and $3,000,000
retained as a reserve. The estimated cost of completing
the structure is $32,815,000. Thirty-two million dollars
face value of bonds with a coupon rate of five per cent
will with the expected premium produce an amount in excess
of the construction “cost” sufficient to provide a further
contingency item. The policy of the directors will be to
award contracts in open competition to the lowest qualified
and responsible bidders. The successful contractors will
be bonded to insure faithful performance. Under this procedures,
unless bids come within the estimates of the engineers,
no contracts will be awarded, hence the completion of the
bridge within its estimated cost is automatically guaranteed.
This
policy, and the reserve of approximately $3,000,000 in bonds
safeguards the enterprise against the possibility is often
suggested that the bridge may be started and not finished
for lack of money, and that additional financing might become
necessary. The foregoing was the procedure followed in the
building of the Hudson River bridge in New York, the engineers
of which are also the engineers for the Golden Gate Bridge,
the contract awards in the case of the Hudson River bridge
under-ran the engineers' estimates.
The
power to fix tolls rests with the Board of Directors, but
the rate of toll is governed by economic considerations
as the charges of any public or private service are governed.
The toll schedule proposed in the beginning will produce
a revenue of 84.3 cents per average vehicle, which is approximately
the average toll in effect at the Carquinez bridge and lower
by approximately fifteen percent than the present average
San Francisco-Sausalito ferry rate. Tolls will be progressively
decreased as earnings warrant to a minimum of 25 cents during
the last ten years.
Under
the system of financing adopted, the bridge district lends
its credit only, and reliance is placed on the demonstrated
ability of the toll bridge to redeem the bonds issued to
cover their cost. The schedule of redemption set up assumes
that retirements will not begin until the tenth year, and
then at the rate of only 200 bonds per year, but that this
rate is to be gradually increased at five-year intervals
until the last five-year period of the term, the rate of
redemption will be 2800 bonds annually. At the fortieth
year, the bridge having retired its bonds, and accumulated
a substantial surplus of seventeen million odd dollars besides,
can become free.
The
Golden Gate Bridge is based on the most rational of all
methods of taxation, namely, the user’s tax. This tax falls
only on those who use the bridge. The toll system of payment
for the building of the Golden Gate Bridge is not only logical
but the most favorable plan of financing from the standpoint
of tax immunity and tax relief that it is possible to devise.
Roads, schools and like public improvements are liabilities-public
charges. A public toll bridge, on the other hand, is an
asset, an income-bearing property, a profit-sharing public
corporation, in which each taxpayer in the district is a
stockholder and receives annual dividends.
Bridging
the Famed Golden Gate [1930]
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