Bond Measure Passes - Against the Odds?

Learn about the formation of a special district to build the Golden Gate Bridge

Transactions of the Commonwealth Club of CA, published 12/2/30

Groundswell of Opposition

Esthetes and environmentalists worried the bridge would mar the natural beauty of San Francisco world-famed harbor and destroy Sausalito’s splendid isolation. A formidable group of civic leaders objected to the financing of the span through the proposed bond measure placed on the ballot for November 1930. They formed a Taxpayers Committee Against the Golden Gate Bonds to fight passage of the bond measure. Interestingly, its membership included City Engineer Michael O’Shaughnessy who had asked Joseph Strauss to design present a bridge design in 1921. Commonwealth Club of San Francisco was urging defeat of the bond measure. Also opposing the bond measure were Pacific American Steamship Association and Ship Owners Association of the Pacific Coast who charged that the Bridge would be a hazard to navigation and would handicap to shipping industry. “The bridge clearance would prevent world’s great ships from entering San Francisco harbor” they claimed. Yet, the General Steamship Corporation said ferries running across shipping lanes were a more serious navigational menace, and Dollar Steamship Lines, Inc. felt the “clearances are quite satisfactory.”

A vicious widespread word-of mouth campaign ensued and included slanderous statements including: An enemy fleet could demolish the bridge and bottle-up the US fleet. The bridge could not be built. It would not stand. It was vulnerable to earthquakes. The floor of the Golden Gate Strait would not support the weight of the San Francisco pier and tower. The entire project was a hoax and sham. Only fools would buy bonds of a bridge certain to fall. Taxpayers would suffer and have to continue paying to finance the fiasco.

To the Rescue

Unions, civic, trade and booster organizations step up their campaigns in support of the bond measure. The Redwood Empire Association promoted tourism in the northern California counties. California State Automobile Association knew the bridge would encourage auto sales. San Francisco’s Chamber of Commerce agreed that the bridge could solve unemployment problems.

Bond Measure Passes

On November 4, 1930, voters within the Golden Gate Bridge and Highway District’s six member counties (San Francisco, Marin, Sonoma, Del Norte, and portions of Napa and Mendocino) went to the polls on the question of whether to put up their homes, their farms and their business properties as collateral for a $35 million bond issue to finance the construction of the Golden Gate Bridge (Bridge). For some, the timing of the bond election was considered economically reckless as it would create bonded indebtedness during the Great Depression. Others said bridge construction represented the economic relief needed from the Great Depression. After the vote, it was clear the people believed in Chief Engineer Joseph Strauss’ vision – 145,057 voted in favor and 46,954 against it.

To celebrate, every store in Marin County closed at 3 PM on November 12, 1930, as Marvelous Marin club staged a parade with floats and fireworks. Santa Rosa celebrated with a bond fire.

Bonds Paid Off

The last of the construction bonds was retired in 1971, with $35 million in principal and nearly $39 million in interest being paid entirely from Bridge tolls. With the exception of the Sausalito Lateral approach road (Alexander Avenue today) which was built as a federal WPA project, there was no state or federal funds involved in building the Golden Gate Bridge.

Additional Background on the Bridge Bonds from the Golden Gate Bridge, Report of the Chief Engineer 1937

The Golden Gate Bridge and Highway Act (1928) provided that funds to build the Golden Gate Bridge may be raised in the preliminary stages by taxation. Accordingly, a tax rate of 3 cents per $100 was levied on all taxable property within the Golden Gate Bridge and Highway District (District) on July 24, 1929 for preliminary expenses, and an additional 2 cents was levied in July 1930, making a total of 5 cents, yielding about $465,000. The assessed value of all District property for taxation purposes was a little under one billion dollars.

The estimated construction cost projected by Strauss’ team was $27 million. Based on this, the District’s Board of Directors concluded that the proceeds of a $35 million bond issue would be ample to meet this construction cost plus provide allowance for administration, engineering, and other financial costs. It was accordingly decided that the project should be presented to the voters of the District.

Opposition organized against the bond measure under the Citizens’ Committee Against the Golden Gate Bridge Bonds (Committee). The opposition was comprised of businessmen, professionals, taxpayers who were convinced that the Bridge was not feasible, and impossible really. The Committee had an office and staff in San Francisco, and campaigned against the bonds. Debates were staged at various locations, radio was used widely, and much more. District Board members were subjected to a constant campaign designed to shake their confidence. Articles in local as well as eastern press spread the story throughout the country until the general public came to generally believe that the Bridge could not be built and that it would not be built.

The District Board of Directors established a Bureau of Information (Bureau) to counter the opposition. The Bureau was able to secure endorsement of the project by 100 separate civic organizations and as a result, the votes of the District on November 4, 1930, by a majority of well over 2/3 required by law voted approval of the issuance of $35 million face value of Golden Gate Bridge and Highway District bonds.

With the opposition still opposing the bonds, as they claimed the cost projection was not accurate and that the Bridge would cost far more, the Board of Directors, towards the end of the bond campaign, pledged to the voters that the cost would not exceed $35 million, they also felt that the voters were entitled to a sum that would reflect the total cost.

Litigation followed. Questions were raised by investment bankers, the prospective bidders for the District bonds, and clarification was sought as to the District’s power to tax. Clarification was essential before the bonds could be marketed. The California Supreme Court ruled favorably for the District, and District officials hoped that the project had taken its last legal hurdle and that they could now sell their bonds, award contracts and proceed with the building of the Bridge. However, more litigation developed from Del Norte Company and the Garland Company (in San Francisco), two tax-paying corporations. They filed on November 28, 1931 requesting an injunction form the federal district court prohibiting the District from selling any of its bonds. The District won this battle in 1932, but the opposition appealed, and then withdrew and the case terminated July 1932.

Just as steps were being taken to proceed with the letting of the construction contracts, a new source of delay arose. The Bankamerica Company, heading a syndicate to finance the District, had bid 92.3 for the first offering of bonds, making the effective rate of interest 5.25%. In the opinion of the District’s legal advisors in New York (which, by the way, conflicted with the local legal opinion) this rate exceeded the permissible rate, since the Board of Directors had asked the electors votes for approval of 5% bonds, not 5.25%. Although this was nothing more than a technicality, it was decided that only a court trial could remove the doubt as to the legality of the bonds. The District’s funds by that time had become exhausted and the District, although victorious in every legal encounter, feared to levy a new tax to carry on in the face of this new and unexpected obstacle. Furthermore, litigation would consume valuable time and indefinitely postpone the start of construction.

In 1932, realizing the seriousness of this situation, Chief Engineer Joseph Strauss along with a strong committee of Board members and officials, presented the District problem to Amadeo P. Gianni, chairman of the Board of Bank of America. A.P. Gianni pledged his bank’s support, and through the work of Will Moorish, the Bank President at that time, and local bond houses, a new bond syndicate headed by Bank of America was formed.

Notwithstanding an unfavorable bond market, this new syndicate agreed, pending a test of the legality of the interest rate, to itself purchase the first block of bonds - $3 million of the District bonds at 96.23 cents, giving the bonds an even and legal yield of 5% interest, in accordance with the interpretation of the New York counsel. In addition, the new bond syndicate, pending determination of this technical question that had been raised, advanced $184,000 against $200,000 of the District’s unvalidated bonds which provide funds urgently needed for current expenses. The consummation of the project was thus assured and the District was in a position to proceed with construction. Bank of America also committed to, itself, buy another $3 million in bonds at 5% on March 1.