by Paul R. Spitzzeri
When he arrived in Los Angeles as a teen in 1854, William H. Workman settled with his family in a town of a few thousand persons in population. Seven years removed from the American seizure of Mexican California, with a seething tension often expressed in significant violence between Anglos and Latinos, the Angel City lately experienced no small amount of prosperity during to the Gold Rush, but that soon came to an end.
The glut in the cattle market, which drove the local economy, was compounded by drought and, later, a national depression, and the financial situation would only worsen in the next decade with the dual devastation of flood and drought during the Civil War years, along with grasshopper infestations and smallpox epidemics. The town’s treasury was then operating on a true shoestring budget and a chronic lack of funds.
When the city experienced its first sustained and significant period of growth in the late Sixties, Workman, nearing thirty, entered the political arena, serving several terms on the Board of Education and the Common (City) Council, while, in 1872, spent a large amount of his own money to travel to Baltimore and serve as an alternate delegate to the Democratic National Convention.
Recently leaving his longtime profession, with brother Elijah, as a successful saddle and harness business owner because his wife, Maria (pronounced Mar-eye-ah) Boyle inherited, from her late father Andrew, a large estate across the Los Angeles River in what was formerly known as Paredon Blanco (White Bluff), Workman became an agriculturist of note, working orchards and vineyards, especially along “the Flats” along the river.
In 1875, he, banker Isaias W. Hellman (former partner of Workman’s uncle, William of the Rancho La Puente) and merchant John Lazzarovich, launched the subdivision of Boyle Heights, ushering a new career in real estate, which Workman pursued for the remainder of his days. While a depression came soon after, that involved the failure of his uncle’s Temple and Workman bank, and Boyle Heights experienced limited growth during America’s “Long Depression” through the rest of the decade, a new boom came soon after a direct transcontinental railroad link was made by the Atchison, Topeka and Santa Fe at the end of 1885.
The great Boom of the Eighties peaked during Workman’s two-year term as the Angel City’s mayor from December 1886 to December 1888. He followed this with service on the city’s parks commission (he was co-founder of Hollenbeck Park in Boyle Heights and, as with Elijah, had an avid interest in developing Los Angeles’ system of parks), while continuing his work at Boyle Heights and with other business ventures.
As the 19th century came to a close, Workman ran again for political office, winning election as city treasurer in 1900. He was a rare Democrat among the dominant Republicans, but hewed to a conservative philosophy that led to reelection in 1902 and 1904. After a half-century in Los Angeles, much of it in public service, he was widely and fondly known as “Uncle Billy” and his popularity was reflected in multiple ways, personally, professionally and politically.
This second part of a post on his work as city treasurer during 1903, after a first part which looked at general elements of his office’s operations, turns to an aspect which was gaining much greater importance in the Angel City, as elsewhere throughout America in these early years of the 20th century, when it came to funding increasingly larger and more sophisticated public works projects: the issuance and sale of municipal bonds.
This was a far cry from the earliest days of American-era Los Angeles, including when F.P.F. Temple served as the town’s second city treasurer from 1850-1852. The community had no public schools, bridges, sewers, storm drains and many other later urban essentials and water was delivered from the river by open ditches called zanjas. When Workman held that position, these and much more were considered necessary public works projects, though bonds were often problematic, especially if the city’s credit was not considered worthy enough by individuals, banks and investment houses.
The matter was one of major media significance during the middle part of 1903. The 1 June edition of the Los Angeles Express reported that “only one solitary bid was received this morning for bonds proposed to be issued by the city of Los Angeles for municipal improvements” and that was a small one for $100,000 offered by the Los Angeles Trust Company for a bridge bond, but only for the par (face) value.
More than $2 million, however, were left without any interest and it was remarked that the 3 3/4% interest offered by the City was considered insufficient, though members of the City Council were concerned that, because that was the rate assigned to $2 million in water bonds picked up by a New York City investment house, offering more would not be fair.
Those bonds that were not bid upon included $1 million for an outfall sewer line to the Pacific where the Hyperion treatment plant is now adjacent to Los Angeles International Airport; not quite a half million for general school purposes; $400,000 for storm drains; and $200,000 for a polytechnic high school, which would be the second in the city. Keeping the bidding open into the afternoon, rather than the 11 a.m. deadline originally imposed, did not improve prospects, however.
The Los Angeles Record of the same day remarked that “securities and bonds of Los Angeles have become a frost, and a drug on the market” and noted that Workman and City Attorney William B. Mathews believed the interest rate sufficient because, when the water bonds were peddled in the Big Apple, the Empire State’s legislature created a special act making them securities for savings banks to offer, but there was astonishment at the lack of interest by local investors for the raft of new bonds.
Workman told the press,
I think the bonds will sell all right. We had the same trouble last year. The bond buyers want Los Angeles securities, and I expected several of the largest bond-buying firms to submit bids, but they are hanging out, as usual, until the second advertisement, expecting to make better terms with us than if they bid them in on the first offer.
Mathews and Mayor Meredith P. Snyder offered similar views and the article concluded that “the bonds may be readvertised or the representatives of the city may be sent to New York to market the bonds,” though the Council believed that local investment was imminent and was confident enough to instruct Mathews to begin condemnation proceedings for a school site.
In its edition of the 5th, the Los Angeles Times reported that “negotiations are underway for the sale” of the bonds “to a local syndicate, headed by the foremost banking institutions of Los Angeles,” though there was some caution to offer too much optimist about a deal because “the financial thermometer is very sensitive.”
The paper added that “an important understanding was reached with City Treasurer Workman regarding the disposition of the bond moneys” so that “the money received for the bonds shall be permitted to lie in the several banks until used” and construction funds allotted pro rata, which would both allow for the 3 3/4% interest and flexibility to draw money over a longer-than-usual period. Workman, though, insisted on indemnity bonds acceptable to his bond holders.
Notably, the Times remarked that “the vaults in the City Treasurer’s office are not sufficiently secure to warrant the storage of any considerable amount of money, and nearly all the city’s cash is deposited with private banking institutions” and it observed that there varying views on how that money was handled, especially if it stayed at one of the banks for long periods while major projects, like the outfall sewer, were being built. Yet, banks benefited from having those public funds in their keeping. In any case, confidence was expressed that the bonds would be sold, whether locally or not.
The Express of the 16th reported, from anonymous sources, that “City Treasurer Workman can do more than any other man toward floating the new . . . municipal bonds that now await a purchaser” and that “if he says the word the bonds can be sold to a syndicate of local bankers,” so that if he “will deposit the city funds with certain banks, to be designated, the bankers will take the bonds, even at their present unattractive rate of interest.” Apparently, officials at these institutions were willing to make that deal “merely for the purpose of thereby giving the city a great advertisement.”
Previously, Workman deposited most of the municipality’s monies, in a special account so that it was merely stored but not part of the cash on hand, with The Farmers’ and Merchants’ Bank, run by his Boyle Heights development partner, Hellman, but was considering a transfer to the Southwestern National, while some funds were with the American National Bank.
Those institutions not given opportunities with the city’s business “will find the way to turn into cash the bonds that are now stored in the strong box of the city” and the paper observed that the city’s cash balance “is a welcome addition to any bank’s reserve.” A local bank cashier, though, opined that no institution would take the bonds at less than 4% interest.
The practice of the “special deposits,” however, was “technically violated,” the Express continued, but this “is condoned on the score that to store so much coin serves to withdraw it from circulation.” It was felt that the city’s money “should not merely be ‘salted down'” even if the law prohibited using those funds while in the treasurer’s management. Workman, meanwhile, told the media,
I am much in favor of the plan. If the local bankers will take the bonds it will be good thing for them and the city. I will be glad to distribute the deposits as may be wished. I have not given any of the money to certain banks because they did not seem to want it, but now I understand they would take their share of the deposits under the plan proposed. I will do all I can to facilitate the sale of the bonds.
An unnamed bank president commented that the idea was to take bonds and sell them to buyers in the East at a rate of about $100,000 monthly, “but we find by inquiring that the Easterners do not want the securities at the rate of interest they bear.” Another remarked that they were considering the proposal, but “I am not sure we can make it go, even if we can thereby secure the city deposits,” concluding that “if the demand for money were to let up we could be more hopeful in placing the bonds.”
The next day’s edition of the Express editorialized that, given this situation, “it is in order for those having the plan to meet Mr. Workman with a bill of particulars,” while also observing that, given market conditions in the East, “inducements . . . are necessary, in order to attract buyers” which the City being “in a position to offer if the bonds are taken by a local [banking] syndicate.” With the aforementioned idea of depositing city money in banks accepting the bonds, the latter “should be able to realize a good profit.”
This was because, in addition to receiving the 3 3/4% bond interest, “this money can be loaned at a prevailing rate of 6 to 7 per cent” with this situation bringing “exceedingly profitable returns . . . even assuming the bonds are taxed reasonably, which is certain to be the case.” The paper downplayed the idea that such an arrangement would constitute good advertising for the municipality, asserting “that is asking too much of financial institutions which are in business for the purpose of making money for their stockholders.”
The real attractiveness of the propositioned, the Express argued, was that, with the City making it amenable for banks to accept the bonds, “any financier will admit the plan . . . is a good and safe one.” It added that, while the interest rate offered on the bonds was not desirable, “that is not the main reason why they are not taken by foreign buyers,” who were used to issuing and selling such bonds at 3% that were fine for long-term investment by savings banks and others.
Instead, the editorial continued, “the sole and only reason why the bonds are not snapped up without delay is because of the activity in the money markets in the East, where capitalists can earn big money on short term loans at the prevailing high rates.” It was anticipated that this situation would change within a few months, so the bonds should subsequently “be in active demand.” By then, as well, local banks “should be able to dispose of such of their holdings as they do not wish to retain for permanent investment at a profit that will pay them for keeping” and “all the additional interest earned on city deposits and the money from the bonds . . . will be so much net gain.”
The Express decried the fact that the water bonds ended up sold in New York City rather than at home, “but this mistake can be offset to a certain extent if a local syndicate will try the experiment with the later bond issue.” It repeated that Workman stood ready to make a deal and he would be supported by the City Council.
Lastly, the paper observed that, with some $40 million in deposits, the banks could easily accommodate a $2 million amount of bonds and it concluded, “to a local syndicate the city is in a position to make a most attractive offer, and the banks will surely be overlooking a good thing if they fail to take advantage of their opportunity.”
The Record, however, was not so sanguine about the situation, and that’s where we’ll pick up the story with part three—keep an eye out for that!
As quoted in this post, the Los Angeles Record commented on the City’s issuance of municipal bonds, stating that “securities and bonds of Los Angeles have become a frost, and a drug on the market.” I was a bit puzzled by the question mark you placed after drug – it wasn’t entirely clear whether you were suggesting it might be a typo for drag or simply adding drag as an interpretation.
From my understanding, “drug” can refer to something that is often oversupplied and therefore of little effect. In this context, the image of unwanted bonds flooding the financial market aligns effectively with the description of the bond issue as “a frost” – “a failure.” The two metaphors seem to well complement each other.
Thanks, Larry, your point is well taken and the post has been edited to remove the parenthetical (drag?) as the meaning seems clear as it was.