There are certain images that define America. The Statue of Liberty, Mount Rushmore, and of course, the Golden Gate Bridge. Spanning over 4,000 feet, the iconic Golden Gate Bridge, in its bright orange glory, is practically synonymous with the city of San Francisco itself. In fact, the American Society of Civil Engineers named it one of the Wonders of the Modern World. Most would recognize the Golden Gate Bridge as an engineering marvel that opened the doors to West Coast travel and bolstered the US economy in the process. What many don’t know is that the Golden Gate Bridge is a shining example of how municipal bonds helped build our great country. Let’s explore.
Funding a Bridge
Between 1910 and 1920, ferry traffic from San Francisco to Oakland, Berkeley and other areas north of the city increased by a whopping 700%. By the mid-1920s, ferries were the only means to transport an estimated 3,000 vehicles across the San Francisco Bay and the trip often included waits of three hours. It soon became clear that the region was in serious need of a bridge. But constructing that bridge meant more than just solving a series of engineering challenges and drawing up plans; it also meant finding a way to fund it.
At the time, the US was deep in the throes of the Great Depression. With the economy at a virtual standstill, funding a major undertaking like the Golden Gate Bridge — the longest US suspension bridge to date — was easier said than done. It was clear that public support was essential to making it happen.
In 1928, the Golden Gate Bridge and Highway District was born, consisting of San Francisco, Marin, Sonoma, Del Norte, and parts of Mendocino and Napa counties. Plans were drawn up and construction costs were estimated at $27 million (well over $1 billion in today’s dollars). The District’s Board of Directors felt it prudent to raise additional funds to cover administration and other potentially unknown fees.
Ultimately, financing was arranged via a $35 million municipal bond issue, which was approved by voters in counties affected by the bridge. Forty-year bonds were issued, paying 5% interest, to construct the bridge and render it operational. Despite the abysmal economic conditions plaguing the nation, locals were willing to offer up their homes, farms, and businesses as collateral, having faith that the bonds would be repaid with revenues collected from tolls. Bank of America, a San Francisco institution, agreed to initially purchase $6 million worth of bonds, allowing the construction of the bridge to begin. A. P. Giannini,the bank president at the time, was dedicated to the economic development of San Francisco and advocated the practice of banks serving as proponents of social development.
It took over four years to build the bridge, and construction was mostly a local effort. Contracts were granted to local companies and suppliers, thus strengthening the area’s economy from the get-go. At a time when employment was extremely difficult to come by, bay area residents suddenly had ample work opportunities. From the moment construction began on January 5, 1933, the Golden Gate Bridge not only had a positive financial impact, it provided an emotional boost by catalyzing local businesses and residents. Economic prosperity once again seemed attainable.
An Instant Money-Maker
On May 27, 1937, the Golden Gate Bridge was open to pedestrian traffic, and over 200,000 people crossed the bridge on foot. Vehicular traffic was permitted across the bridge the following day. Toll revenues quickly began rolling in on all fronts. The initial vehicular toll was 50 cents each way, or $1 roundtrip, with a 5-cent surcharge for vehicles carrying more than three passengers. But that wasn’t the only source of revenue. From May 1937 to December 1970, a pedestrian toll was also collected via a coin turnstile.
Since its inception, traffic on the Golden Gate Bridge has increased dramatically. By the mid-1960s, the bridge was handling 25 million crossings each year, and as of January of 2014, it was estimated that over 2 billion vehicles have traversed the Golden Gate Bridge. These days, over 40 million vehicles cross the Golden Gate Bridge annually.
The original toll for an automobile was $1.00 and has since increased to $7.00. Driven by this revenue, the muni bonds issued for construction were paid off in their entirety in 1971. The nearly $39 million in interest paid to bond buyers on top of the $35 million in principal that was repaid earned those bond buyers a return in excess of 100%!
You’ve Got to Have Faith
Had the public not been willing to finance the Golden Gate Bridge, there’s a good chance San Francisco wouldn’t be the same thriving, bustling city it is today. The Golden Gate Bridge, since its inception, has opened the doors to everything from commerce to tourism. Visitors to the US flock to the Golden Gate Bridge in its fog-enhanced splendor to witness this marvelous structure that has somehow managed to withstand damaging winds and earthquakes galore.
Perhaps the most spectacular feature of the Golden Gate Bridge is the fact that it was funded by local residents — people who managed to see past the bleakness that had swept the nation and get on board with the notion that all was not lost. At a time when the country was at its most desperate, municipal bonds built a bridge that made a world of a difference, and the nation never looked back.
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