by Paul R. Spitzzeri
As the prior part noted, further sales of Los Angeles municipal bonds, in which City Treasurer William H. Workman was deeply involved, included those pertaining to the proposed Los Angeles Polytechnic High School, now the Francis Polytechnic High in Sun Valley in the eastern San Fernando Valley, were a perplexing issue for much of 1903. Gradually, however, success was realized, though it took considerable negotiations between Workman and other city officials and investors.
The 4 October edition of the Los Angeles Times reported that “a market has been found for the $200,000 issue” of the Poly High bonds as, the prior day, the City Council accepted a bid for the par value and the 3 3/4% interest—this previously viewed as too low—from the Los Angeles Trust Company and Pasadena’s William R. Staats Company, both of which were buyers of other bonds, including the $480,000 general school ones also recently on offer.
The two firms, however, quickly found outside buyers, including a Chicago bond house facilitating the purchase for a Canadian insurance company, with this latter seeking to place them with the State of California in lieu of its bonds. Thanks to lobbying by the trust company’s president, the insurance firm added $65,000 to its original $110,000 acquisition and eight Los Angeles banks ended up taking the remaining $25,000.
While there were some questions concerning maturity dates relating to what the insurance company sought to do, Los Angeles Trust chief James C. Drake, who has been the subject of a prior post here, told the paper that the specific interest in the school bonds was because “the bankers of the city are anxious to have the schools built” and “wish to do everything we can to aid the city,” while he noted “I do not believe the banks would have subscribed for a like amount of sewer bonds.”
Notably, the two local investment houses sought commissions, “but City Treasurer Workman refused to entertain their proposition,” even as the banks that held the money from the bond sales were in agreement with the idea. Workman, in his characteristically plain-spoken fashion, then told the Times,
I will not have it said that the money of this city is being used in such a way as to bring a commission to anybody. I get no commission from any of the banks and I don’t want any; neither will I be a party to any agreement of the kind.
It was emphasized that while Workman was compelled to keep the city’s growing moneys with banks because the municipal vault in his office was too small, though a new one was recently approved by the Council, he “naturally desires to exercise due caution.” He did, as noted before, agree to distribute the cash raised from the bonds among ten Angel City banks, with each expected to receive about $20,000 each for the Poly bond issue. With this concluded, however, the selection of a site for the city’s second high school was expected to be challenging, given problems in deliberations from the school board’s building committee on that point.
In the coverage of the Los Angeles Express of the 5th, Workman was quoted at some length concerning the Poly bond issue and informed the paper that he was going to Sacramento to retrieve the $200,000 and then distribute the tenths in each of the local banks, as he’d propounded and added that he considered it only fair to treat all of them similarly in the arrangement.
In another very public showing of his views on the stewardship of the city coffers, Workman told the paper,
When the sale was made the agreement presented contained a clause providing for the payment of interest by the several banks to those who negotiated the sale, to enable them to secure a commission for their services, but I am opposed to the collection of interest on public funds, for the safety of which I am personally responsible. Therefore I ran my pen through that clause and no interest will be exacted.
The Times of the 13th remarked that the certificates on the Poly bonds were safely tucked away in Workman’s office, including for the original issue amount and $2,750 in accrued interest, though it was added that there was a plan to take the documents to San Francisco, but an eleventh hour change was made.
It was reiterated that $110,000 was to go the Canadian insurance firm, $65,000 to the Chicago bond house and $25,000 to the eight local banks, while Workman was to deposit $25,000 of the bond purchase price at each bank until the funds were needed for Poly’s site acquisition or construction. In the meantime, the Los Angeles Trust Company held the money and took out a bond for twice the amount to indemnify Workman and the City and, once the banks received their funds, a similar doubling of those amounts was to be utilized.
The edition of the 15th of the Los Angeles Record ran a lengthy feature that reported an announcement from California’s Insurance Commissioner E. Myron Wolf that “Los Angeles city bonds, although long despised by investors, are as good as government bonds” based on his decision that two issues of municipal securities were authorized by him to be substituted for federal government ones when used as security for insurance firms.
The $100,000 in bridge bonds that were the first to be purchased, this by the Los Angeles Trust Company, were then assigned to the Conservative Life insurance company. Then Workman was informed by Wolf that $110,000 of the $200,000 Poly bonds, the amount bought by a Canadian insurance firm, “passed favorably” through the reckoning of the commissioner. Both amounts were deposited at Sacramento.
Of the remainder of the Poly issue, $25,000 was taken by N.W. Harris and Company, a Chicago brokerage whose principal in the late 1920s acquired a large property in today’s Chino Hills to join a cadre of horse breeders in that area, some 40 miles east of the Angel City, while the like sum was held, as noted above, by eight local banks. Thanks to a new state law, the paper remarked, “the system of registering municipal bonds and their acceptance as security makes them very desirable for insurance companies” because they substituted for cash in the state’s officers and bore that 3 3/4% interest.
Drake and A.B. Jones of the Southwestern National Bank, whose president John S. Cravens purchased Workman’s Boyle Heights orchard and vineyard tract during the year for development, were credited for their work in facilitating bond sales and Drake partnered with the Staats firm for the bridge, general school and Poly bonds. It was added that “they are now working with the $1,000,000 outfall sewer and $400,000 storm drain bonds,” though there were challenges with Drake telling the Record that “the sewer bond issue is a big deal” and “we have had a few inquiries—just nibbles, you know.”
The Times of the 21st reported that Workman made his apportionment of the $200,000 in Poly bonds to the several banks that took their portion, as per the agreement that the city treasurer brokered, and it was added that, when funds were needed for the site purchase or construction work, “withdrawals will be made proportionately from each bank.”
Notably, when the building committee took to the field to identify sites, one of them was offered at Boyle and 4th where his large estate was situated and the asking price was $30,000, though it was felt that Boyle Heights was too far afield and, after further dissension among the committee members, the school was located on Beaudry Avenue west of Bunker Hill, though it soon relocated to Flower Street and Washington Avenue at the southern extremity of downtown.
As for those less desirable (perhaps less glamorous, as well) outfall sewer and storm drains bonds, these finally sold. On the last day of the year, the Express reported that “local bankers have at least come to the relief of the city” by purchasing the former issue, totaling a million dollars, as the City Council accepted an offer by Joseph F. Sartori of the Security Savings Bank and the National Bank of California’s John E. Fishburn on behalf of ten Angel City financial institutions.
The prominent Farmers’ and Merchants’ and Sartori’s bank took $150,000 each, while a half-dozen other institutions, some led by such well-known figures as John M.C. Marble, Herman W. Hellman, William F. Botsford and Henry J. Woollacott, paid $100,000 each and a couple, including Drake’s trust company, expended $50,000 each.
The bankers, it was added, “desired that the money should be deposited proportionately among them and withdrawn proportionately as needed for sewer construction and “this was assented to by City Treasurer Workman” who typically required a bond double the amount deposited in the banks as security.
Readers may recall that, over a quarter-century prior, City Treasurer James J. Mellus deposited the city’s funds in the Temple and Workman bank, headed by William H. Workman’s uncle and the latter’s son-in-law on a promise of a remarkable 7% interest, but the failure of the institution meant the loss of the $23,000—all the city then possessed.
The Express added that the ten banks were also given a 90-day option to acquire the $400,000 storm drain bonds and the hope was they would follow through. As to the outfall sewer, part of the route to the Pacific was changed, but it was anticipated that over two years the gravity system with a pair of extensive tunnels, one 100 feet underground and the other at 80, would be completed, achieving a significant goal for the burgeoning burg.
The plans and specifications were complete and construction bids were soon expected, probably within a couple of weeks or so, with the city handling the provision of bricks and cement and comprising about half of the cost to be spent on labor. Importantly, “lower bids on construction are expected, now that the sale of the bonds has been accomplished without dependence on the contractor to sell them.” The subscribing financial institutions would realize interest on the securities and also be able to loan funds not needed immediately, “thus getting double interest” with an assumed profit of some $90,000 over that two years’ construction period.
At the end of March 1904, the Times informed readers that “yesterday arrangements were completed for the purchase” of the storm drain bonds, “the last unsold issue of the city bonds” and that the same consortium of banks accepted them at par value and the 3 3/4% interest. Significantly, it was remarked that, “recent rains have shown the need for the early completion of the storm-drain system,” though serious flooding was an occasional hazard that led to discussion of a variety of flood control measures and that would lead to countywide action another decade later.
City Engineer Harry F. Stafford stated that the drain system would carry to the Los Angeles River up to an inch per hour of runoff and it was added that a contract was already in effect for a storm drain along Hill Street with this paid for by accrued interest on the bond. With the new development, the paper commented that “the sale of the bonds will enable the rapid construction of the rest of the storm-drain system.”
As was the case before, the Chicago investment and bond house, N.W. Harris and Company, took up 30% of the issue of the outfall sewer bonds, so this meant that, with the taking up of the storm drain ones, the banking syndicate would have a little more than the $1,000,000 that was initially issued.
It took much longer than city officials, including Workman, expected, but the selling of these bonds was instrumental in trying to keep vital infrastructure in some form of alignment with the rapidly expanding metropolis following the latest major development boom in Angel City history, this commencing as the new century began. Before he left office, a few years later, Workman would be involved in a much more ambitions and massive, if not certainly as important, bond issue for the game-changing Los Angeles Aqueduct.
Meanwhile, given that we are commemorating the 150th anniversary of Boyle Heights this year, we’ll return with a post detailing William H. Workman’s extensive personal business, almost completely focused on that ongoing development project, so be sure to keep a look out for that.