City of Chattanooga Scrip

Scrip Issued by the City of Chattanooga

In 1853 Chattanooga Alderman, Dr. Gillespie suggested an interest bearing scrip which was traded until 1859 when the ordinance was repealed. Two low denomination scrip notes are known that indicate they were issued by the city of Chattanooga.

In 1867 after the Civil War, the city of Chattanooga was impoverished and money was scarce. Chattanooga had almost gotten back on its feet when the flood of 1867 hit. That disaster wiped out what little capital was left and hit Chattanooga with a lot of unexpected expenses. To avoid the political risk of raising taxes to pay for rebuilding the Board of Mayor and Alderman began to issue scrip / warrants against the municipal treasury. The city paid the scrip to anyone who did work for the city, and it was good for use to pay city taxes. Even though the treasury remained empty the scrip prospered as it circulated as currency. People began to lose faith in it and the value of the scrip sunk as low as 45 cents per $1 in 1873. The city was having to pay $2 per day in scrip to labor while private businesses paid $1 in cash.

After a period of time, store owners refused to accept the scrip for their goods. However, the money was still being redeemed at parity, for tax purposes, which led to the formation of speculators that bought up much of the scrip from workmen. The speculators would buy the currency at 50 cents then at city tax payment time sell it back to taxpayers for 90 cents on the dollar.

In 1874 the city adopted a resolution that aggressively collected taxes, limited and controlled expenditures, and created a uniform lithographed $1, $2 and $5 scrip.

Finally, in May 1876 the Tennessee State Supreme Court ruled that it was unconstitutional for municipal governments to issue scrip. The city, by then, had created a overwhelming debt.