Where the Council's money came from: rates, licences, debentures and the sale of the power station, 1854–1932

The short answer. The International Settlement was run on three taxes and a shop. The taxes were a land tax on the assessed value of every lot, a house rate on the assessed rent of every building, foreign and Chinese, and a wharfage due on goods landed, with a growing list of licence fees behind them. The shop was the electricity department, bought for 66,100 taels in 1893, which by 1928 was handing the Council 2.7 million taels a year and in 1929 was sold for 81 million. The budget went from $25,000 in 1854 to 394,000 taels in 1887, 2.9 million in 1913, 9.6 million in 1925 and 15 million in 1932, and the police took between a fifth and two-fifths of it in every year. The Council borrowed the rest from its own residents, by debenture, at five to eight per cent: 330,000 taels in 1893, 46 million in 1928. Who paid was the question underneath the Settlement’s politics, and the Council answered it, once, in 1927: Chinese residents paid about 55 per cent of the taxes and had lent about 6 per cent of the debt.

The three taxes

The first municipal budget of 1854, Pott records, “amounted to a total of $25,000, of which $14,000 was to be expended upon the Police”, and the land renters that October voted “18–15” to borrow $12,500 for police barracks. The pattern was set: the police came first, and the town borrowed from its own merchants. The Land Regulations gave the Council three sources. The land tax, “on Land 4/10th of one per cent. per annum on the assessed value” in 1880, was levied on the renters of every lot according to a valuation the Council itself made. The general municipal rate was a percentage of the assessed rent of every house, “8 per cent” for “Houses occupied by Foreigners” and “10 per cent” for houses occupied by Chinese in 1880, and still 8 and 10 in 1893, a difference the Council justified by the cost of policing the Chinese quarters and never quite explained. Wharfage dues on goods landed were capped by the 1854 regulations at “one-tenth of one per cent. of the value of the goods”, and until 1897 were paid by the daotai as a fixed commutation that “furnished only 1.56 per cent. of the total Municipal revenues”; from 1897 the Maritime Customs collected them alongside the duty and the Council took the dues on foreign trade and half of those on native trade, which raised the yield from 69,900 taels in 1898 to 135,762 in 1899. Licence fees, on everything from rickshaws to opium houses, were the fourth leg; they are the subject of another article.

In 1880 the land tax brought 26,862 taels, the foreign house rate 34,538, the Chinese house rate 70,569 and licences 58,214. In 1887 the figures were 54,043, 43,104, 88,290 and 96,495, with 44,617 in wharfage dues and the daotai’s 10,178 on top; receipts were “fully Tls. 14,500 over the Budget estimates”, and the Council spent 394,321 taels, 78,645 of it on police, about 81,581 on roads, bridges and drains, 26,499 on health, 24,809 on street lighting, 35,387 into the sinking fund and 1,871 on education. In 1893 receipts were 517,791 taels. The thing to notice in these early tables is the Chinese house rate: it was twice the foreign one in 1880 and nearly three times it in 1893, when Chinese houses paid 121,087 taels and foreign ones 47,572. From the start, the Settlement’s buildings were mostly Chinese, and so were its rates.

1893: the Council goes into business

The Council’s one commercial venture began as a rescue. In 1893 the ratepayers authorised the purchase of the failing Shanghai Electric Company’s plant “at a cost of Tls. 66,100”, and the Council raised “Tls. 80,000 bearing interest at 5½%” for it, “159 Debentures at Tls. 101 each”, the story told in the article on the power station. By 1905 the electricity department was selling 216,982 taels of current a year on 680,000 taels of loans and still showing a small loss; by 1913 it was paying the general funds 26,515 taels in interest; by 1925 it was contributing 900,000 taels a year, raised to 1,200,000 for 1926; in 1928 it handed over 1,200,000 plus “Tls. 1,500,000 transferred from the 1927 profits”, its net revenue having gone from 2,292,554 taels in 1927 to 3,165,301 in 1928 on sales of 12.6 million. The ratepayers had authorised in 1920 “borrowing up to Tls. 4,800,000, of which Tls. 2,800,000 was to be used for the expansion of the Electricity Department”, raising the Council’s debt to 18,847,500 taels, against a department Pott valued at 12,870,000. It was, by the late 1920s, the most profitable thing the Settlement owned, and the Council sold it.

Rates, 10 to 16 per cent

The rate rose with the century. The 1905 schedule had the land tax at “5/10ths of one per cent.” with an increment of a third, and the “General Municipal Rate at 10 per cent.” on both foreign and Chinese houses, the old differential gone, with 5 per cent on houses “beyond Settlement limits” under the waterworks agreement of that year. “The General Municipal Rate was raised from 10 to 12 per cent in 1908,” the Council recalled in 1913, when the surplus had fallen below its agreed minimum of 200,000 taels; in 1913 the land tax was “6/10ths of one per cent.” less 15 per cent, the rate 12 per cent inside and 6 outside. By 1925 the land tax was seven-tenths and the rate 14 per cent, the outside “Special Rate” 12. The rise to 16 per cent in 1927, with the Settlement under a state of emergency and the Mixed Court just handed back, was the one that produced a tax revolt. Chinese ratepayers had already, in 1919, “taken the stand that they would not pay these rates unless representation on the Council was granted”, and in 1927, Pott says, “the same arguments were” made again against the rise “from 14 to 16 per cent”. The 1927 budget “containing provision for the 2 per cent. rate increase was duly submitted and approved” on 13 April 1927, and the Council explained in July that the Mixed Court’s rendition alone had added “approximately Tls. 150,000 a year” to the ratepayers’ burden. By 1932 the rate was back to 14 and the special rate to 12, and the chairman was warning that “increased Municipal taxation will have to be faced in the near future”.

The wharfage dues were the tax the Council could never raise, because raising them needed a bye-law, a bye-law needed a special meeting, and a special meeting needed a quorum. The proposal to make them “three per cent. of the five per cent. ad valorem Customs duty” “failed to pass in 1921, for want of a quorum”, and failed again every year to 1925, as the article on the franchise tells; in 1925 the dues brought 464,627 taels against an estimate of 500,000, and in 1932, at “1 per cent. of the Customs duty levied”, only 261,112, “due to the effect on imports of the State of Emergency and to the coming into effect of a revised method of apportioning these receipts between the three Local Authorities”.

The budget, year by year

The Council’s comparative statements let the budget be read across fifty years.

Year	Ordinary income (taels)	Expenditure	Police	Public works	Health	Education	Interest and redemption
1887	about 388,000	394,321	78,645	about 81,581	26,499	1,871	71,376
1905	1,780,415	1,295,886	341,953	451,124	64,142	21,670	180,847
1913	2,858,006	2,484,283	900,583	about 606,000	178,957	69,314	258,061
1925	9,619,977	9,488,483	2,372,857	2,388,640	711,469	505,947	1,499,576
1932	15,169,553	15,024,859	6,500,039	3,689,189	1,372,940	1,440,433 (separate budget)	net credit 206,137

The police line is the one to watch. In 1887 the police took a fifth of what the Council spent; in 1913, “31.51 per cent” of its income; in 1925 a quarter, with the public works department for once spending more; in 1932, after the fighting in Hongkou and with the Settlement’s force at its largest, 43 per cent. The Council said so itself in 1913, when “Police Force Pay and Allowances” reached 661,838 taels. Education was half of one per cent in 1887, 1.7 per cent in 1905, 5.3 in 1925, and by 1932 had its own budget of 1,384,090 taels, “the equivalent of a 1.74 per cent rate”. Interest and redemption, which were 18 per cent of spending in 1905 and 16 per cent in 1925, vanished in 1932 into a net credit of 206,137 taels, “the large credits to Interest Account that resulted from the sale of the Electricity Department”.

The income side moved from rates to business. In 1913 the “undertakings” line was 69,155 taels, of which 33,638 was the tramway company’s royalty; in 1925 it was 1,173,171, of which 900,000 was the electricity department’s contribution and 45,636 the dividend on the Council’s waterworks shares; in 1932 it was 1,273,591, 770,247 of it the Shanghai Power Company’s royalty of five per cent on its gross receipts. The land tax grew fastest of all, from 399,786 taels in 1905 to 2,177,069 in 1925 and 3,868,911 in 1932, because the assessed value of the Settlement’s land rose faster than its buildings, which is the story of the Bund and Nanking Road.

1925: the strike and the books

May Thirtieth cost the Council less than it feared. “Difficulty was experienced during the September Quarter in the collection of Chinese rates,” the commissioner of revenue reported, but “no actual loss of revenue is to be recorded”; the ordinary budget closed with a surplus of 131,494 taels against the 210,700 estimated, general charges having overrun by 353,318 taels, of which “Emergency Measures (1925) sundry expenses 246,021”, camps and barricades, capitation grants to the volunteers and transport, and 35,812 for the judicial inquiry. The extraordinary budget, which carried the capital works, showed a deficit of 2,548,739 taels, carried into 1926, and the 1926 budget was balanced by raising the electricity department’s contribution “from Tls. 900,000, in 1925, to Tls. 1,200,000”. The Council’s response to a political crisis, in its own accounts, was to take more from its power station.

Who paid: the Council’s answer of 1927

The Chinese demand of June 1925 was for seats on the Council “in proportion to the amount contributed by them to Municipal Revenue”, and for two years the two sides traded percentages. On 15 July 1927, with the rate going to 16 per cent and Chinese ratepayers refusing to pay, the Council published its arithmetic. Of an estimated revenue of 9,698,350 taels, “the Chinese contribute approximately 55 per cent. and the Foreigners 45 per cent.”: Chinese land tax 1,053,600 against foreign 1,526,400, licences 963,527 against 453,823, wharfage 130,000 against 520,000, house rates the larger share Chinese. The statement was written to rebut the claim “that 70 per cent. or more of the taxes” were Chinese, and it added a per-head figure that cut the other way: “each foreigner pays about Tls. 145 annually”, against “about Tls. 6-6/10 paid by each Chinese”. And it answered the question of who had lent the Settlement its capital. Of some 45,000,000 taels of debentures outstanding at 30 June 1927, after deducting about 3,000,000 held by Chinese government concerns, “not more than about Tls. 2,600,000 of the balance has been subscribed by Chinese, against about Tls. 39,400,000 by foreigners”. The Settlement’s rates were half Chinese and its debt was nineteen-twentieths foreign, and both numbers were used in the argument over seats.

The Council’s own tables, read back across fifty years, show the Chinese share of the house rate alone falling, not rising: about two-thirds in 1880 and 1887, 72 per cent in 1893, 62 in 1905, 57 in 1913, 53 in 1925 and 50 in 1932, as the foreign rate caught up and foreign office buildings came to be assessed at rents no Chinese shophouse could match. What rose was the Chinese share of licences and of the land tax, as Chinese owners bought into the Settlement’s land; the 1927 statement put Chinese land tax at 1,053,600 taels against 1,526,400 foreign, two-fifths.

The debt

The Council borrowed from the people it governed, by debenture, and the balance sheets list every loan. In 1880 it owed 77,800 taels on the loans of 1873, 1875 and 1878, and had just paid off 87 debentures of 1872; the 1878 loan “for Tls. 24,000 was paid off on the 30th June” 1887, when 150,000 taels of the loans of 1882–85 remained at seven per cent, and a new police-station loan was authorised “at the rate of not over seven per cent”. In 1893 the loans stood at 330,000 taels, at five to seven per cent; in 1905 at 1,481,700 for general purposes and 680,000 for electricity, at five to six; in 1913 at 2,556,700 for general purposes, “89.46 per cent of the year’s Ordinary Income”, and about 2,719,000 for electricity, with a sterling loan of £20,000 of the £50,000 at 4 per cent authorised in 1905 and secured on the Council’s waterworks shares. The Council’s debentures were a Shanghai investment: in 1913 it issued 156,300 taels of 6 per cents “at an average price (inclusive of brokerage) of Tls. 105.52”, above par, and a 5.5 per cent loan of 500,000 “placed at par”. “During the war period,” Pott says, “the Council found it difficult to float debentures”, and the rate it paid went to 7 per cent in 1918–20 and 8 in 1921. By the end of 1925 the silver loans outstanding were 39,498,800 taels, in twenty issues from the 6 per cents of 1907 to the 6 per cent loan of 1925 “redeemable on December 31, 1955”, plus £770,000 in sterling; the number of debenture holders had gone from 1,208 in 1918 to 8,497 in 1925, which is one measure of how far the Settlement’s middle class had bought its own government. In 1928 the Council floated “a 7 per cent. 10 year Silver Loan, at an issue price of 97½” and owed 46,335,700 taels in silver and £750,000 in sterling.

1929: the sale

Then it sold the shop. “Under the terms of the Agreement dated August 8, 1929 for the sale of the Electricity Department”, approved by the ratepayers on 17 April 1929, the Riverside power station and the whole undertaking passed to the Shanghai Power Company, a subsidiary of the American and Foreign Power Company, for “the whole of the purchase price of Tls. 81,000,000”, paid in instalments with interest. By 1 February 1933 the company “has paid all instalments of principal amounting to Tls. 56,693,910, and interest amounting to Tls. 12,991,513.22, on due dates”, with 6,000,000 due in 1933 and the last 18,306,090 on 30 December 1933, unless the company chose to set it against three of the Council’s own loans, the 7 per cents of 1922 and 1928 and the 6 per cents of 1923, 14,520,000 taels in all. The Council’s schedule of what the 81 million bought is the clearest statement of its finances in the whole series: 47,597,784 taels “to loans redeemed and provision” for redemption in 1929–33, 29,616,126 to capital works that would otherwise have been borrowed for, 3,786,090 to a loan suspense account. The 8 per cent loans of 1921 were paid off in 1931. The silver debt fell from 46 million taels in 1928 to 32,107,500 at the end of 1932, in seven loans maturing between 1937 and 1956, and the Council issued no debentures at all in 1932, borrowing what it needed temporarily from the local banks. In place of a department that had paid it 2.7 million taels in a good year it had a royalty of five per cent on the company’s receipts, 770,247 taels in 1932, and interest on what was left of the price.

The 1932 budget shows the other side of that trade. “We were faced with an initial deficit of nearly Tls. 2,500,000,” the chairman told the ratepayers, because “our interest receipts are likely to be 5 lakhs below” as the sale money was spent, and the fighting in Hongkou had cut wharfage by 338,887 taels and brought “some 44,720 claims for abatement of rates and licence fees”, of which 390,590 taels were allowed. The Council balanced the budget without raising the rate, expected “a final deficit of nearly one and a quarter million taels” to be met from sales of surplus land, and ran an ordinary deficit of 53,480 taels and an extraordinary one of 1,316,600. The Settlement had sold its best asset to pay its debts and fund its works, and was back, three years later, to living on its rates.

What the sources disagree on

The 1880, 1887 and 1893 figures come from financial statements whose scans are damaged, and some lines have been repaired by cross-adding the Council’s own subtotals; they are given as the Council’s to the nearest tael but should be read as approximate. The 1913 public works total reads 606,613 in the scan and 606,113 by subtraction. Pott’s dates for the rise from 12 to 14 per cent are not given, and his wharfage ceiling of one-tenth of one per cent is the 1854 figure, not the 1932 “1 per cent of the duty”. No Council statement of the Chinese share of taxation for 1909 or 1925 could be found; the 1927 notification is the only one in these sources, and the shares computed here from the revenue tables are of the house rate alone, not of all revenue. The 1862 drainage loan, the Council’s first, appears in the 1870 drainage report but not in the financial series used here; the earliest loans the balance sheets show are those of 1872–78. The 1929 sale price and buyer are in the Council’s 1932 report and a search-result extract of the American diplomatic record; the Council’s own report for 1929 is not on the Internet Archive.

What to look for

The Council’s offices of 1922, on the block bounded by Jiangxi, Hankou, Henan and Fuzhou Roads, are where the rates were assessed and paid and the debentures issued; the building stands. The Riverside power station at Yangshupu, sold in 1929, generated electricity for the city until 2010 and its chimney is a landmark of the riverside walk. The Customs House on the Bund, rebuilt in 1927, is where the wharfage dues were collected with the duty after 1897. The land tax is the one survivor: the valuation of the Settlement’s lots that the Council made for it became the basis of the city’s property records.