ONE OF BEST GOVERNED CITIES IN THE UNITED STATES
Dayton Is Manager-Administered
Dayton was a pioneer city in the city manager form of government. That government has worked very well. There are few criticisms to be made of the present charter; none of them serious. The Dayton Research Association functions constructively in matters of city operation and finance.
Debt Has Been Kept Down
Dayton's total debt per capita is low, as it should be, considering the city's size. The school debt per capita is also low, and so is the public utility debt; this last a rather notable fact. The school debt is now being increased. This probably reflects a progressive rather than a regrettable condition.
Probably Dayton Is Not Spending As Much As It Really Should
The cost of municipal government has been increasing on a rapid scale, practically everywhere. During the active war years, when commodity prices increased most rapidly, municipal governmental expenditures, for several good reasons, increased at a lesser rate. Then, after commodity prices began to decline, the accumulated shortages of municipal improvement had to be made up. Moreover, as cities grow, expenses always increase; and they increase faster than population; because cities do more for their people as growth goes on. In particular, when growth is rapid, as it has been in Dayton, there are special adjustment expenses which always develop. Such expenses are a part of the price to be paid for growth For much the same reasons, municipal debts have increased rapidly in the last five years. They have, in fact, been increasing at dangerous speed throughout the United States. Dayton has kept its debt under control and is exhibiting today the lowest net debt per capita of any important Ohio city. It is fortunate that this is so, because in most Ohio cities the debt service rate absorbs so large a percentage of the total tax rate that there is little left for operating expenses. Dayton gets most of its operating revenue through taxes, while many other Ohio cities resort generally to special assessments, sales tax, and other expedients. City operation is somewhat handicapped by the limited funds available.
Assessments Have Recently Been Equalized
Montgomery County had a systematic revaluation of property in 1924. The present schedule of assessed valuations shows no abnormal features. In the business section of Dayton, there are naturally rapid gradients of frontage values. With the exception of two or three peaks in the heart of this section, centrally located business property is assessed at approximately $2,000 per front toot. Assessments on outlying residential lots run down to figures as low as $3 or $4 per front foot. Assessments on acreage vary all the way from $100 to $4,000 per acre, according to remoteness, rail connections, etc.
Control of Platting
Subdivision platting In the city and within the three-mile limit outside is fully controlled by the city, and recent developments seem to have been laid out In a satisfactory way.
Flood Menace No Longer Exists
Dayton's greatest experience was the flood of March, 1913. This was due to excessive rainfall on saturated soil and the amount of run-off is estimated to have come within 20% of the maximum possible. The central business section of the city was submerged to a depth of about eight feet and the whole of the heavily occupied portion was flooded; portions of it to depths of 20 feet or more. In spite of a disposition on the part of some to rush into temporary protective works ("Say it with shovels"), comprehensive and careful plans involving the whole Miami Valley were prepared for the entire elimination of flood danger. These involved not only channel improvement, but the building of enormous retarding basins or reservoirs upstream. Although there were legal complications and opposition from various sources, the program was successfully carried through as a war-time job by a special organization assembled for the purpose. The total cost of $32,000,000 was within the estimates. Protection has been provided on a scale of 20% in excess of the estimated maximum possible flood. The flow In the improved channels under a storm of that like 1913 would be only 40% of the unrestrained flow then experienced. The conservancy or flood control work thus successfully brought to completion had many by-products. One of them was the development of new protective methods; a second was, and still is, the unification of Dayton sentiments and abilities in a construction project of the first order of magnitude. Incidentally the final impetus to the movement for commission-manager government was given by the flood. Dayton's example in this last respect has been followed by hundreds of towns and cities in several countries.
Ohio Tax Laws Need Revision
In the usual case when an Industry contemplates a new location, it inquires carefully and somewhat tearfully regarding taxes and the tax rate. Industries abhor high taxes. In Dayton they have good reason rather to fear low taxes. Dayton's municipal revenues are so low that it is difficult to operate the city properly. This has not, as yet, done much harm. It is a menace for the future. The thing that is to be feared Is continued interference from the state capital In limitation of local taxation.
Ohio has no Income tax. Revenues from the inheritance tax are divided equally between the city and the state. Corporations, whether foreign or domestic, are subject to the state franchise tax, which is not heavy. State license taxes and local miscellaneous taxes are not in any case oppressive. Many local improvements are paid for by local assessments on the property benefited. In all of these respects, Ohio's tax practices are reasonable and normal. According to the law, realty and personalty are taxed on the same basis, according to the so-called "uniform rule." The law, if enforced, would reduce the yield on a money investment in Dayton this year (1926) from six percent to 3.76 percent. It would eventually drive liquid capital out of the state. It is not enforced. Much personal property escapes taxation. There is general assent to this; yet a constitutional amendment proposed last fall, which would have permitted the classification of property for tax purposes, was defeated. Consequently, Ohio may go on hoodwinking itself in disregard of the experience of other states, where a reduced rate of tax on personalty has increased the yield.
The correction of Ohio's negative and destructive tax legislative policy is a matter that merits the best thought and effort not only of Dayton, but of all other municipalities of the State.
FINANCIAL SITUATION
Dayton's Industry Does Not Create Wealth Rapidly
Annual earnings of industrial workers in Dayton are high and are getting higher. In 1920 they were $1,280 as compared with $985 for a neighboring city of similar characteristics. In 1923 average annual earnings in Dayton were above $1,700 in several lines of industry and below $1,300 in only a few lines. The annual value of industrial products per worker is low in Dayton: in 1920 it was $5,600 as compared with $7,400 for Detroit. This comparison is not a reflection on Dayton: it is due to the character of its Industries. Dayton creates wealth slowly.
Dayton's Wealth Is Well Distributed
While Dayton has comparatively few incomes above $5,000 per annum, it shows the maximum number of income tax returns per capita among the Ohio cities. Hence it has a large "upper middle class": a class in easy circumstances, not a leisure class. This group has succeeded in storing considerable amounts of capital, in spite of an atmosphere of easy living and comparatively free spending for many purposes. Accounts receivable on the books of local retailers are proportionately rather larger than in other cities.
The estimated per capita wealth of the city is $3,400, which may be contrasted with $3,500 for Cincinnati and $3,000 average for the nearer zone of influence. The average annual family income is estimated at about $2,900, which seems to Include the unusually large sum of $600 investment income. The former figure may be compared with $2,250 estimated as the current average family income in the Dayton nearer zone of influence. The total domestic purchasing power, including funds to be disposed of for investment, is distributed as follows: about $750 for food, $450 for clothing, $680 for rent, $115 for fuel and light, and $905 for savings and miscellaneous items. This is characteristically not a wage earner's budget, but an average family budget, influenced by the presence of a large proportion of wage earners. The people who are spending more for rent are applying some part of the savings fund included in the $905 for better housing on more or less of an investment theory.
Mortgage Rates
At first sight the seven percent interest rate on mortgages charged by the building and loan associations would seem to be excessive and a handicap. Inquiry does not disclose this to be the fact, and the reason is quite apparent upon study. Lower interest rates naturally prevail farther east and in particular around New York. The current rate there for small loans for dwelling construction is nominally six percent and actually around six and one-quarter percent, a premium generally being charged at the present time. The building and loan associations in that region operate quite differently from those in Dayton. They are fully mutualized; that is, the preponderance of .their current income is derived from installments paid on principal by borrowers, and the rate of interest credited the borrower on these installments is the maximum rate paid by the association, which, now averages well over eight percent. Cash deposits are paid only five percent. It results that the total interest cost of the average loan is quite low. It is fairer to compare the Dayton practice with that in other Ohio cities. In a nearby Ohio city the average rate charged in several of the principal associations is 6.24 percent. The credit for payments on account of principal is 5 percent. In Dayton, while the rate of interest charged is 7 percent the balance of principal requiring interest payments is reduced in exact proportion to payments made to the account of principal. In other words, the Dayton associations credit the borrower with 7 percent interest on his capital repayments. The total interest cost of a loan of $1,000 running 12¾ years in Dayton is $530. In the other nearby city compared interest payments on the same loan would run 13½ years and lead to a total Interest cost of $547.83, or under the rebate plan would run 18¾ years and lead to a total interest cost of $592.12. Moreover, Dayton's loans are made at exceedingly modest fees for service. Thus the 7 percent interest rate is no real drawback and is not regarded as a burden. Much lower carrying charges result when loans can be placed with the large insurance companies, but the shorter term of these loans, the greater, margin of security required and the higher fees make them unavailable for the average borrower.
Insufficient Liquid Capital
Ohio is a weath-producing state. Dayton's stored wealth is rather high: but an unusually large proportion of this latter is in the form of deposits in the building and loan associations. Dayton's bank deposits per capita are $335, as contrasted with Philadelphia's $528: but Dayton's Building and Loan Association assets per capita are $655, against Philadelphia’s $133. Truly liquid capital is scarce in Dayton. This is an important handicap. What capital is created (in large measure) is made unavailable for commercial credit. Hence money rates are high. The building and loan associations pay six percent on deposits. Commercial money rates are usually six percent. Dayton must go outside for much of the funds needed in its trade and industry. It is an importer, rather than an exporter, of capital; and will probably remain such for a long time.
Building and Loan Associations
The building and loan associations have combined assets exceeding $100,000,000. The six percent rate paid by them is more or less standard and has been for several years. The associations do a large share of the savings bank business in Dayton, and one or two of them do more of a savings bank business than of the ordinary periodical deposit type of borrowing. The association assets per capita are very much higher in Dayton than in even the other Ohio cities. The city has 12 percent of the building and loan assets of the state. Its assets are even larger than those of Cincinnati. Its associations are very large organizations. Cincinnati has twelve times as many associations in spite of its smaller total assets. The figures are the more impressive when it is remembered that the building and loan idea is very strong in Ohio, where there is about one shareholder for every family in the state.
Commercial Banking
Dayton's seven banks have combined assets of $59,000,000. Deposits have shown reasonable growth in recent years, but are lower than in any of the compared cities on a per capita basis. Their ratio to value of industrial products is exceedingly low, Akron being the only city showing a lower value for this ratio than Dayton. Similarly the ratio of value of industrial products to bank loans is exceedingly high, indicating very little commercial borrowing. Dayton’s loans per capita are lower than those of Pittsburgh. Bank debits per capita are similarly low. Fortunately, they are reasonably free from fluctuations. Only in Pittsburgh are bank debts less seasonal. Fluctuations of debits from month to month show well defined peaks at the middle and at the end of the year, so that demands for funds may be anticipated.
Few Business Failures
Dayton has comparatively few business failures of importance, and total liabilities in Dayton have been less than the average for the State They were lower in Dayton in 1924 than in 1923, although in many cities the reverse was the fact.
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