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The interest-bearing debt consists of:

Bonds held in private hands
Bonds held in trust for the State School Fund
Bonds heid in trust for the University Fund.-

$603,500 20 1,737,500 00

952,500.00

Total

$3,293,500 DA

The bonds held in private hands, bearing interest at this date, are:

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As I said in my financial exhibit of the State, etc., published in December, 1881:

The Funded Debt Bonds of 1857 were issued under the Act of April 28, 1857. The total amount of bonds issued was $3,900,000, all of which, with the exception of bonds amounting to $5,000, have been redeemed or refunded. Those outstanding were called for July 31, 1875

, at which date interest ceased.

The bonds of 1860, to the amount of $198,500, were issued under the Act of April 30, 1860. These bonds have all been redeemed or refunded, excepting bonds amounting to $500, which were called in July 31, 1875, but have not been surrendered. Interest ceased from date of notice to surrender.

The Soldiers' Relief Bonds were issued under the Act of April 27, 1863. The amount of bonds issued was $600,000. The amount outstanding is $95,500. These bonds mature July 1, 1883. The last Legislature authorized the levy of a tax to raise the sum required to pay them when due.

The State Capitol Bonds of 1870 were issued under the Act of April 4, 1870. The amount of bonds issued was $250,000. These bonds are all outstanding, and become due July 1, 1885.

The State Capitol Bonds of 1872, to the amount of $250,000, were issued under the Act of March 28, 1872. They are all outstanding, and become due July 1, 1887.

The bonds known as the Funded Debt Bonds of 1873, were issued in that year, under the Act of ril 2, 1870. The amount issued was $2,801,000. They are made payable within twenty years from date of issue. In compliance with recommendations made in my former report

, the Legislature passed an Act directing the transfer of $103,000, a surplus that had accumulated in the general Interest and Sinking Fund, to a fund to be known as the Funded Debt Fund of 1873, 10 be used for the redemption and payment of this class of bonds.

On June 1,1881, the State Treasurer published a notice stating that he was prepared to redeem this class of bonds, from Nos. 1 to 10% inclusive, amounting to $103,000, and that interest upon said num. bered bonds would cease September 1, 1881. Of the bonds so called for $99,000 have been surrendered, leaving $2,702,000 of the clas outstanding, of which, $2,668,000 bear interest.

The annual interest upon the State debt, by the calling in of these bonds, is reduced $6,180, leaving it $203,565, to which is to be added $105,000, the amount for which the State is obligated to pay annually until January 1, 1885, for interest upon Central Pacific Railroad bonds, as per Act of April 4, 1864, making the total amount of inter est to be paid annually by the State, $308,565.

As before said, the State Capitol Bonds of 1870 will become due os

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the first of July, 1885. Under ordinary circumstances it would be necessary that the incoming Legislature should provide for their payment. But as the bonds, with the exception of $14,000, are held for the School Fund, it is quite probable that the Legislature will authorize refunding of them.

In this connection, I am reminded of the suggestions contained in your Excellency's annual message to the Legislature at its twentyfourth session.

In accordance with the views you expressed, I believe that it would be wisdom on the part of the State to refund her bonded debt at a lower rate of interest, or rather to refund that portion that is practically owned by herself and to call in the balance.

Of the $3,303,000 outstanding bonds of the State, $2,690,000 are held by the State for the School and University Funds, leaving but $613,000 in private hands. Of this amount, $9,500 have been called in, there being money in the treasury to pay them. There has also been a tax levied to pay the outstanding Soldiers' Relief Bonds, amounting to $95,500, which become due on the first of July, 1883; so, in reality, there is but $508,000 of bonds lield in private hands for which means have not been provided to pay. I believe that it would

be good policy on the part of the State to call these bonds in. inting 1875, The money, $297,000, now in the treasury as proceeds of the sale of

school lands, which sum will be augmented by the first of July next by an addition of from $100,000 to $125,000, making a total of at least $400,000, and this amount, increased by about $100,000, to be raised by the levy of a small rate of tax, would be sufficient for the payment of all of the bonds of the State not now owned by her, and for which payment has not been provided for.

I would therefore recommend that new bonds, bearing interest at the rate of four per cent per annum, be issued and substituted for the bonds of the State which are now held in trust for the School and University Funds. Also, that additional bonds, bearing the

same rate of interest, be issued for the benefit of the School Fund, to sued

an amount equal to the amount of money that may be appropriated sued

from the School Land Fund in payment of the bonds now held in from

private hands.

I would further recommend that after the bonds now held in trust port

for the School and University Funds shall have been refunded, that 00, the bonds held in private hands be called in for payment. The king

means for payment to be provided in accordance with the sugges13, 6tions I have made. By following out these recommendations, the

money that has accumulated from the sale of school lands, and which is now lying idle in the treasury, would become invested and productive of revenue for the support of our schools.

The State, by reason of the low rate of interest borne by her bonds, would attain an exalted position in financial circles. She would have the proud satisfaction of knowing that the interest she paid upon her bonds was paid to herself. It may be said by some that as most of the outstanding bonds are held for the benefit of the School Fund a reduction in the rate of interest paid would proportionately detract from the amount of revenue for the schools

. I answer, in reply, that a fixed sum is required each year for school support. The amount is derived from a tax upon property and interest upon investments made from proceeds of the sale of school lands. “As most of the investments are represented by bonds of the State, the

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interest upon which is provided for by a direct tax, it only follows that, in order to raise the requisite sum for the schools, the reduction made in the rate of tax for the payment of interest would have to be met by a corresponding increase in the rate levied for school poses. The revenue for the schools would not be lessened; the tax. payer's burden would not be added to.

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PERSONAL PROPERTY IN SAN FRANCISCO.

There should be a change in the mode of assessing personal property, or rather in collecting the tax upon personal property, in the City and County of San Francisco.

Under the Code governing each county other than San Francisco, whenever the owner of personal property has not real property sufficient to secure the payment of the taxes upon the personal property, the Assessor proceeds at once to collect the taxes on such personal property by seizure and sale of the same, if taxes are not paid.

In the Act of March 18, 1874, the City and County of San Francisco is expressly exempted from the above provisions of the Code, and the mode of assessing personal property, and collecting the tax thereupon, is provided to be as follows:

The Assessor completes the assessment of personal property on or before the first Monday in June, the assessment book is then returned to the Supervisors, and the property equalized. The Supervisors then fix the rate of taxation for city and county purposes, and the Auditor computes the tax, and by the second Monday in July the duplicate assessment book is required to be delivered to the Tax Collector, who proceeds to collect the tax. On the Wednesday fol. lowing the fourth Monday in September, the Tax Collector returns the duplicate assessment book to the Auditor, who then computes the State tax, and returns the book to the Tax Collector, who proceeds, as the Tax Collector in other counties, to collect the tax by simply advertising that he is ready to receive the taxes, and on a day when the same is delinquent he proceeds to sell, etc.

It requires only a statement to show that a more unequal and vicious system could scarcely be conceived, except such system as would entirely exempt San Francisco from paying any taxes to the State upon personal property,

The following table shows in a startling degree the delinquency of San Francisco in this respect: Amount of Tax for State Purposes, on Personal Property, Levied, Collected, and Delinquent in the City and County of San Francisco, on June 30, 1882, for the years 1875 to 1881,

inclusive.

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99,778 97 106,039 04 213,148 47 133,475 71

64.16 63.27 66.51 66.70 62.69 71.36

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The delinquency of San Francisco to the State, for tax upon personal property, in seven years, amounts to the enormous sum of $1,199,709 20.

Prior to 1881, only a shade over two thirds of the taxes were paid, and for 1881, 28.74 per cent is still delinquent.

If the City and County of San Francisco desires to continue the system of assessing the personal property tax, the Act, if the same is constitutional, should be amended so as to require the Assessor to collect the tax at once, as soon as the assessment is made; or he should send to the Collector a statement of the assessment, who should at once collect the tax, if not paid, by seizure and sale.

I understand that the authorities of San Francisco claim that the exigencies of her financial condition require that the city taxes should be collected in the Summer time. · Admitting this to be the case, the State should protect her interests, and provide for the collection of the taxes justly due her.

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The following table shows the number of poll taxes collected in the several counties for the years 1881 and 1882 respectively. The number of voters in each county is also given, in order that it may be determined, by a comparison, if the Collectors of poll tax have been efficient in the discharge of their duty. Every male inhabitant of the State over twenty-one and under sixty years of age, except paupers, idiots, insane persons, and Indians not taxed, are subject to the payment of poll tax.

I think it fair to assume that the number of aliens in the several counties exceeds the number of voters over sixty years of age, who are exempt from the payment of this tax, consequently there should be a greater number of poll taxes collected than there are voters.

Between the adoption of the Codes and the new Constitution, the proceeds from poll taxes were retained by the several counties in which they were collected, and placed to the credit of the County School Fund. Under the new Constitution it is required that the proceeds be paid into the State treasury, to the credit of the State School Fund. No change is made in the manner of issuing receipts and collecting of the tax.

Not having any data to go by, I am unable to determine how the collections, as now disposed of, compare with the collections when the proceeds were retained by the counties.

The compensation of fifteen per cent, allowed for collecting the tax, certainly seems adequate for the service, and, aside from an endeavor of the Collector to discharge his duties faithfully, should be an incentive for its thorough collection. In my opinion, however, this tax for the past two years has not, at least in some of the counties, been fully collected, and, as a result, the School Fund has been deprived of a portion of its intended revenue. The remedy for this is difficult to suggest.

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47.64

64.16

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66.55 66.70 62.69 71.26

Number of Poll Taxes Collected for the Two Years ending March 1, 1882.

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RAILROAD TAXATION.

There will be a deficiency in the receipts of the General, School, and Interest Funds for the thirty-second and thirty-third fiscal years, ending June 30, 1882, owing to the failure of the several railroad companies to pay the taxes due upon property assessed by the State Board of Equalization in the years 1880 and 1881.

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