No. 359.
Mr. Merrill to Mr. Bayard.

No. 85.]

Sir: Referring to my dispatch, No. 78, of September 2,1886, in which I inclosed an act to authorize a national loan, I have the honor to inform you that Mr. Macfarlane, referred to in the same dispatch as interesting himself in negotiating the bonds in London, returned here on the 9th instant. On the 12th instant the attorney-general, as an amendment to section 4 of the loan act, offered the following: Provided,That hereafter no bonded debt shall be incurred, nor any bonds issued prior to the maturity of the bonds issued hereunder, unless provision [Page 561] be first made for the payment of bonds issued under and in accordance with the provisions of this act,” which was earnestly supported by the ministry, except the minister of finance, but was defeated on a division by a majority of 10, and caused the change of ministry as stated in my dispatch, No. 84, of the 14th instant.

One peculiar feature of the vote by which the amendment was defeated, was that nearly all the members of what is known as the opposition party, who have constantly opposed borrowing and advocated the limitation of the expenditure of money to the lowest possible sum, suddenly changed, and not only voted against the amendment offered by the attorney-general, but supported other amendments, which were adopted, and which I inclose, whereby the bonds can be negotiated for 98 per cent, of their nominal par value, while the consolidated revenue of the Kingdom is pledged for the payment of the interest.

In the discussion of the amendment in the Legislature it was charged that it was offered in the interest of Spreckels & Co., American bankers, doing business in Honolulu, to whom the Hawaiian Government now are indebted in the sum of about $700,000, while a counter-charge was made that those opposing were acting in the interest of an English syndicate.

I am reliably informed and it is well understood here that in the event the amendment to section 4 was adopted not only Spreckels & Co. would, if desired, take the total amount of bonds at par, but that Bishop & Co., American bankers of Honolulu, were willing to advance a portion, at least, of the $2,000,000 on the bonds at par. Even under the law as amended it is probable a portion if not all the bonds could be negotiated either here or in San Francisco if an opportunity was offered.

The defeat of the amendment offered by the attorney-general and the adoption of those inclosed, as well as the evident intention not to offer the bonds here, doubtless means the placing of the bonds in London, or, at least, endeavoring to do so before offering them in any other market.

I have, etc.,

Geo. W. Merrill.
[Inclosure in No. 85.]

AN ACT to amend an act entitled “An act to authorize a national loan, and to define the uses it which the money borrowed shall be applied,” approved September 1, 1886.

Be it enacted by the King and the Legislative Assembly of the Hawaiian Islands in the Legislature of the Kingdom assembled:

Section 1. That section 2 of said act be, and the same is hereby amended so as to read as follows:

Sec. 2. Said bonds shall be exempt from any taxes whatsoever, and shall bear interest payable semi-annually at the rate of 6 per centum per annum, the payment of which interest shall be a charge upon the consolidated revenue of the Kingdom and shall be redeemable not less than ten nor more than thirty years after the date of their issue, either by means of a sinking fund to be established after the tenth year of the issue of the bonds or otherwise as may by the minister of finance, with the approval of the King in cabinet council, be deemed most advisable at the periods of such redemption; the principal and interest to be paid in gold coin of the United States of the present standard or its equivalent.”

Sec. 2. That section3 of said act be, and the same is hereby, amended so as to read as follows:

Sec. 3. Said bonds shall be signed by the minister of finance and by the registrar of public accounts and be sealed by the seal of the department of the minister of finance, and shall not be issued at less than the rate of 98 per centum, of their nominal par value in gold coin of the United States of the present standard or its equivalent, except that the minister of finance, with the approval of the King in cabinet council [Page 562] may allow to any person or syndicate, which may negotiate the sale of said bonds a commission not exceeding 5 per cent, of the first issued portion of the loan, to wit, for $1,000,000, and such percentage as may be found necessary upon further issues, but not to exceed 5 per cent, upon such further issues.”

Sec. 3. That section 4 of said act be, and the same is hereby, amended so as to read as follows:

Sec. 4. The sums borrowed under this act shall be placed in the treasury to the credit of the loan fund, and shall be paid out for the following purposes and no other:

1. To recall and cancel all bonds at present outstanding, issued under any act of the legislature prior to the date of this loan, special loan and the interest accrued on special loan and outstanding bonds. $1,235,000.00
2. Encouragement of immigration 150,000.00
3. Inter-island cable and electric light, Honolulu 100,000.00
4. Honolulu water-works 50,000.00
5. Improvement of the harbor of Honolulu, and new wharves 100,000.00
6. Improvement of the streets of Honolulu and roadways of the kingdom 150,000.00
7. New bridges and landings 75,000.00
8. Purchase steam-tug Eleu 40,000.00
9. Expense floating loan, etc 100,000.00

Sec. 4. This act shall be in force from and after its approval.

Kalakaua Rex.