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interests in street railways in Cleveland are brought in as parties to a general settlement.
Elected to his office four times upon the street railway issue, the mayor has been defeated twice at referendum elections upon street railway franchises and since las failed of re-election. The reason for that first defeat of October 22, 1908, is now the subject of inquiry. Sixteen miles of railway were being operated by the holding company in 1907 when the mayor won his greatest victory. Between then and October, 1908, came the period of operation of all the railways by the holding company. In 1907 people were familiar with the holding company idea. In 1908 people were familiar with holding company practice. Soon after the holding company gained control of all the lines, the service was changed in various ways. Cars were less frequent;
car routes were rearranged; a few lines were Mayor Johnson abandoned. For a short time no transfers were and the
issued, and when again allowed, a transfer Referenda
charge of one cent was made. Although the city cash fare was three cents, a passenger crossing the city line paid five cents for his journey. All these were changes, and if only because they were changes, people felt inconvenienced and irritated. Moreover, since the changes were in the direction of economy, they aroused suspicion that the management doubted the adequacy of three-cent fare and even that the holding company was running behind. Irritated and suspicious minds were hospitable to facts injurious to the mayor and his administration.
It had been promised that the books of the mayor's Forest City Railway Company would be open to the public, yet it required an order of court to open those books. In its lease the holding company agreed to perform all contracts of the Cleveland Electric Railway Company covered by the lease. The holding company did not perform the contract which the railway company had made with its employees through their union. This caused the strike. In a campaign bulletin issued by the mayor in 1907 it was represented that “the low-fare company is asking dividends on $50,000 a mile; on actual cost.” Six months later the lines of that same low-fare company were sold by the mayor to the Cleveland Railway Company for $112,000 a mile, and six per cent. was to be paid on that sum. The same bulletin of 1907 contained this : “There will be no extra fare at the city limits. Some of the suburbs have contracts with the Cleveland Electric which provide that they shall have the same rate of fare as Cleveland. In all such cases three-cent fare will be the rate immediately.” In 1908 the mayor's holding company charged the suburban passenger five cents and the city passenger but three cents, irrespective of contracts between suburbs and the Cleveland Electric Railway Company.
These matters are recalled because they had their effect in the campaign and are, therefore, part of the explanation of the mayor's defeat when the security grant went down in 1908. In the last analysis the grant failed because the holding company did not succeed, and this is true even if there is room to think that the holding company might have done better in a longer test.
The voting down of the Schmidt grant in August, 1909, was the mayor's second defeat. In this fight he was embarrassed by developments which followed the failure of his holding company. The Depositors' Savings and Trust Company was a banking institution organized by the mayor in 1906 when the Forest City lines were being financed. When receivers were named for the holding company the bank promptly failed. While operating the railway system, the holding company maintained a free stock exchange and advertised it extensively in the newspapers. The advertisement said, "we have a free stock exchange which buys and sells Cleveland Railway stock at par and interest, so that a stockholder may realize upon his stock whenever he wishes to." The stock was spoken of as "a security that cannot be shaken," and this language also appeared—“as Mayor Johnson says, this stock is equal in security to a government bond.”
The advertisement was conspicuously displayed, with the mayor's picture at the top, followed by this sentence over the mayor's name—“When the security, the rate of interest, and the
free stock exchange are considered, no investJohnson's
ment that has ever been offered to the public is Advertisements
as safe and profitable as this." The failure of the holding company, of course, closed the free exchange. Some hundreds of people who had bought stock through the free exchange found worthless the holding company's promise to repurchase at the investor's will. They had their choice of keeping their stock, or selling at the open market price, which at one time was as low as 58. The effect was aggravated by public knowledge that just before the referendum election, a relative of the manager of the free stock exchange had sold fifty shares of stock at par and interest to the holding company through its exchange. The receivership proceedings disclosed that the mayor and the president of his holding company owned the stock of the Pay Enter Fare Box Company-a corporation capitalized at $10,000, which was experimenting with a fare-box device. The Fare Box Company had used $36,000 belonging to the holding company and had given no security for the debt. This transaction was notable from the facts that the holding company was held out as a trustee for the public, and further that if the fare-box enterprise made money the profits were to go, not to the holding company, but to the mayor and the president of the holding company, or their successors in interest as stockholders of the Fare Box Company.
These matters necessarily hurt the mayor's cause, but even without them the Schmidt grant probably would have been voted down. To vote up the Schmidt grant was to give the mayor another club and prolong the fight. To vote it down was to approve the policy of giving the railway company a franchise on the Tayler plan which aimed at good service at cost. When in the spring the railway company offered to accept any franchise drawn by Judge Tayler, there remained nothing to fight for that ought to be fought for. In voting down the Schmidt grant, the people approved the principle of service at cost. Sustained good service at something less than cost is obviously impossible and approval of the Schmidt grant could have led to no better bargain than the railway company was ready to make and would have assured prolonged war in a community sorely needing repose. That the terms made possible by the mayor's figlit were formulated by Judge Tayler and not by the mayor was not a reason for rejecting those terms. The principle was the thing, not the man. The mayor's demand for another club after the
railway company accepted the Tayler plan is pointed to by his opponents as evidence of his desire for personal control of the railway system.
On the day following the municipal election of November 2d, a newspaper friendly to the mayor said:
Cleveland discharged Mayor Tom L. Johnson yesterday. For the fifth time he has asked re-employment to finish the job of street railway settlement.
This admits the failure of the effort to keep the street railway issue out of the campaign. There was no change of the public mind between the referendum campaign of mid-summer and the municipal campaign in the fall. People considered the street railway question unsettled, and desiring settlement, they removed
The public is the really important party, though the mayor and the railway president by their shouting and brandishing of arms held attention while the fight was going on. But to the public is most of the enduring and most of the paying and nearly all of the abiding result. What then does the public get and what does it pay, and is the thing bought worth the price?
For the purpose of discussion it is assumed that the direct and early result will be the enactment and acceptance of the ordi
nance now being completed by Judge Tayler. Johnson's
The ordinance fixes the initial fare at three Defeat and Its
cents with one cent for a transfer without reResults
bate. A scale of rates is provided, according to which the rate shall be changed as may be necessary to return the agreed interest, and no more, upon capital value. Every test made in Cleveland tends to show that three cents is not enough to pay interest on capital. It is probable, therefore, that before long the fare will go to the next higher rate. At that rate the cheapest journey possible will cost three and one-third cents, and for comparison that rate is taken as that which people will pay for a long period. It was said in 1901, and the newspapers printed it, that if given twenty-five year franchises the railway companies would accept a ticket rate of seven for a quarter, making the cost of the cheapest journey 3.57 cents.
statement was true, eight years of fighting have beaten down the fare 24 cents a journey. However, the companies did not formally propose a ticket rate of seven tickets for a quarter in 1901, and perhaps they would not have done so. Late in 1906 the railway company did formally propose a ticket rate of seven for a quarter, so that, as far as the rate of fare is concerned, it is proper to consider whether the last three years of strife are justified by a gain of .24 cents in the cost of the journey. The answer, of course, depends on what the war has cost the city, and that subject will be considered before the end of this discussion.
Included in the direct result is the establishment for Cleveland of the principle of service at cost. Whether that principle is the best for the public is fairly debatable, but it cannot be debated here. As carried out in the Tayler plan, it is acceptable for Cleveland in the circumstances now existing there. However, it probably would not be seriously contended that mere approval of this principle by the public makes the war worth while. The estimated cash benefit of the application of this principle of service at cost is .24 cents a journey, or $1.46 a year for the shop-girl making the round trip from home to work on each of the three hundred and five working days.
One writer says that Mayor Johnson " has aroused in Cleveland a civic sense. He has made the people realize that the
affairs of the city are their affairs.” If this is A Civic Sense
true, this civic sense is a result of the war, for Aroused
the mayor's activities and the war are almost identical. Cleveland was well reputed for civic sense for some years before 1901. It is true, though, that since that date there have been new currents of popular feeling and that the mayor is responsible for them. He pitched his tent upon the sand lots; pointed to the railway company; talked of “intrenched monopoly ”, “ special privileges ”, “ an arrogant corporation ”; promised " three-cent fare and universal transfers” and proclaimed the overwhelming power of the people. It was not service at cost —that is reasonable if not expedient—but “three-cent fare and universal transfers ", the feasibility of which in Cleveland no man knew or could know. Hatred and greed were stirred, then consciousness of power aroused. Unless there is a quick sense