The European War Ate Kennewick's Bond Sale

The $23,000 funding bonds, the issuance of which was authorized by the voters of Kennewick at a special election June 9 for the purpose of taking up the outstanding warrants, have been lying in the vaults of the First National Bank of Denver, Colo., since early in August, and the city is still paying interest on the warrant indebtedness. The reason assigned is the European war.

Last spring, after the council had issued a call for a special bonding election, a representative of Keeler Brothers of Denver appeared before the council and made a proposition for the purchase of the bonds. He agreed to take the bonds at par at an interest rate of 5½ per cent. He also agreed to ascertain whether or not Kennewick was within its legal rights in voting the bonds, and to notify the council in time to save the expense of the election in case legality was not established by their attorneys.

The council accepted their proposition and entered into a written contract with the firm for the sale of the bonds upon the terms outlined by the representative. The company was furnished with certified copies of all the proceedings in the matter up to that time, together with a complete list of all the outstanding warrants. Everything was pronounced O.K. by the company's attorneys and the election was held. The ordinances declaring the election result and authorizing the bonds were drawn by the company's attorneys, and every detail of legal procedure was carried out under their directions, and with the assurance that the money would be forthcoming just as soon as the bonds could be lithographed and signed.

The bonds were signed by the mayor and city clerk and were mailed to the bank in Denver, August 8, for delivery to Keeler Brothers. After waiting a reasonable time without any reply from the contracting firm, the council, when the time drew near for making up the annual expense budget, wrote to ascertain the cause of the delay. This communication remained unanswered until it had been followed by another letter and a telegram. Finally, October 5, the date set for the final hearing on the budget, the city received word from the Denver firm that the bonds could not be handled at the prevailing interest rate. Writing at some length, they explained that a slump in the bond market had been brought about by the European war and that municipal bonds were selling at 6 and 6½ per cent, and asked permission to attempt a sale of the Kennewick bonds on that basis.

After considerable discussion members of the council decided that they were not responsible for the European war and voiced the opinion that the city had a valid contract with the company for the sale of the bonds at 5½. This decision was embodied in a resolution and forwarded to Keeler Brothers. The resolution gives the contractors until November 5 to make good on their contract, after which time the city will bring action to force compliance with the contract and to recover damages for any losses which have been sustained because of the delay.