Financing Government During Reconstruction: The County of Montgomery (Alabama) and their Revenue (Tax) Anticipation Notes of 1867

Immediately after the Civil War (April 1865) states, cities and counties throughout Alabama found themselves bankrupt and without a major source of revenue. Confederate andAlabama paper money that circulated during the war was now worthless. Even if there was some "money", shortages of manufactured goods, medical supplies as well as food droveprices beyond reach by most residents. Food was scarce due to the absence of the men who would have tilled and planted the crops and much of the existing food supply had beendiverted to the military. It was estimated that as a result of these shortages, "a typical Southern family's food bill was $6.65 per month at the time of secession and $400 amonth in 1864."

While the tax base in many areas of the South was destroyed during the war, such destruction was minimized in the City of Montgomery. Local businessman, John Robert Powell, andothers "...joined the Mayor and a group of leading citizens who rode out to meet the enemy and presented (Union) General Wilson the unconditional surrender of the city." This actof surrender, as well as the good behavior of the Union troops in Montgomery, is credited with allowing the city to escape major war damage.

How to Pay for the Reconstruction
With no tax base and support from the Federal government slow to arrive with adequate assistance, finding ways to raise local government revenues was a difficult task. A partialsolution, adopted by many cities and counties, was to pay their obligations with post-dated notes. These "Post Notes" as they were called, stated (often obscurely) a redemptionpromise sometime in the future (e.g., six months). For example, the County of Montgomery issued $1 notes payable in one year, and $2 and $5 notes payable in five years. It was"anticipated" that by the due dates of these notes, the economic condition of the state would have improved to the point where revenues would allow the redemption of these notes.Since none of these notes paid interest there was little incentive to hold on to them. The fact that the notes were "receivable in payment of county dues" may have made themacceptable and they may have circulated like "money" by local residents.

"Revenue Anticipation Notes"
Today, these notes might be compared to "Revenue Anticipation Notes" or even "Tax Anticipation Notes". The private sector engaged in such financing during the time leading up tothe Civil War through the use of what were called "Post Notes" by the issuer.

The notes from the County of Montgomery do not use the words "Post Notes" but the term would clearly apply. They were printed by the American Bank Note Company. Henry Clayappears on the $1, Daniel Webster on the $2 notes while the $5 contains the image of John C. Calhoun. All of the notes carry the printed issue date of February 22, 1867.

For more information on the Society of Paper Money Collectors, see:
https://www.spmc.org/