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If I can add anything to the discussion it would be probably with reference to the recent experiences of Massachusetts in connection with public service corporations, and the way they have been controlled in that state. Speaking first of the Boston Consolidated Gas Company, which is a consolidation of eight previous companies doing business in and about Boston:
This company by a special act of the legislature carried Boston's Recent through in considerable part through the exertions of Experiences the Public Franchise League of Massachusetts, this com
pany has been taken completely out of politics by the establishment of a sliding scale, whereby as the price of gas is reduced by the company voluntarily, the rate of dividend is permitted to increase; starting with the price of gas at 90 cts. per M. and a rate of dividend of 7 per ct., the Sliding Scale Act permits an increase of i per ct. in the dividend for each 5 cts. reduction in the price of gas.
This act has done away with any alleged necessity for the corporation to be in politics in order to protect itself against raids on its treasury or uncalled-for reductions in the price of gas. The question of what the price shall be or what the dividend shall be is taken out of the city council, and out of the state legislature practically altogether.
Another corporation which I might mention in which important control has been recently established is the New England Telephone & Telegraph Company, which by recent statutes has been put under the Massachusetts Highway Commission, in the same way that the gas companies and
electric light companies throughout the state are under Boston's Tele- the control of the Massachusetts Gas and Electric Light phone Situation Commission.
as the Highway Commission attempted to deal with the demands of telephone users for reductions in rates, and tried to establish to its own satisfaction what would be fair rates both to the telephone users and to the company, it found itself seriously handicapped in such an endeavor by the lack of information available. It was found necessary finally to have a thoroughgoing appraisal made of all the property of the company throughout the State of Massachusetts, and this was continued by the company itself to its property in other states. Now for the first time the Highway Commission is in possession of information establishing a fair valuation of the company's property upon which a reasonable return to the shareholders might be based, after proper allowances have been made for all classes of expenses, including depreciation and other reserves.
This brings the commission immediately against very serious questions relating to depreciation in telephone company apparatus and plant.
It happened that some three years ago I made an investigation for the telephone company into its condition and methods of accounting, with especial reference to costs of maintenance of plant, covering both ordinary repairs, reconstruction, and depreciation. At that time the New England Company classified as all of the Bell companies did its main
tenance charges under the same heads that it classified its operation charges; namely, under “labor," "materials," "supplies,” “general expenses,” etc. This classification had no relation whatever to the various classes of assets which were being maintained by the expenditures so classified; and in order to get at any sufficient sources of information it was evident that the whole scheme of accounting for maintenance, in the New England Company and the other companies would have to be completely rearranged, so that the maintenance charges and the allowances for depreciation should be classified in accordance with the various plant accounts, such as underground conduits,” “aerial wires," submarine cables,” “exchange plant” including switch-boards, etc., etc. This reorganization in these departments of the accounts has now been brought about in all of the Bell companies, so I am informed; and it is therefore possible for the first time to make proper allowances for depreciation covering obsolescence and deterioration in excess of ordinary repairs, which will bear true accounting relations to the various classes of assets; and thereby it becomes possib'e to provide by means of a series of depreciation reserves against impairment of the capital invested in the plant; these provisions coming from income by means of regular monthly charges which become an element of expense on the one hand, and are credited to the series of depreciation reserves on the other hand. Against these depreciation reserves are charged the actual costs of renewals, replacements, and reconstructions, as they occur. In this way it is immediately apparent, and will be apparent over a series of years, whether the provisions for depreciation are in excess of the actual cost of making depreciation good, or whether they are deficient; and in which class of assets they are deficient.
The very great importance of scientific provisions for depreciation is thus made evident in this class of public service corporations; and in my own opinion such provisions will be found to be equally important in all other classes of public service corporations; particularly in the street railway and electric light plants where deterioration goes on rapidly, and where obsolescence of machinery frequently occurs owing to the rapid development in the state of the art.
Following behind the electrical concerns come the gas companies, in which depreciation is not so vital a feature, and yet is fundamentally important when the question comes of establishing rates which shall be fair to the consumer and fair to the corporations; and behind the gas companies come the water works, private, or municipal, in which similar provisions for depreciation are equally as necessary as in the public utilities previously mentioned, but in which the rate of depreciation is markedly less.
Mr. John NOLEN, Cambridge, Mass.: Let me say a brief word with reference to the important relation of one public utility, the street railway to city planning in two particulars; first, the question of thoroughfares. If you look at our cities, more especially if you live in them, you will realize the inconvenience and waste that we all suffer because of
the failure to control and regulate the city street railPublic Utilities way. As a matter of fact there is between citizens and City
of a town or city and the street railway company, as Planning a rule, a strict feeling of hostility, and no inclination
to work out for the convenience of the city its numerous problems. The result is that our street railways are very inconveniently located and inadequately provided for.
I have seen city after city, not only large cities, but the small cities, where there seemed no hope of getting a solution of this housing problem, because there was no means of regulating and controlling the direction in which the street railway company would develop land. The re sult is that you find, for example, in a little city like Madison, Wis., within ten minutes of the heart of the city higher land values than you would find in a corresponding community of Massachusetts. Why is it? There is a beautiful country there which cannot be reached and cannot be tapped, because there is no power or authority to say where the street railway shall go.
DR. J. LoCKIE Wilson, Toronto, Canada: In going through the city yesterday I made inquiry as to the charges made by your street railway. I found that five cents was the regular charge to everybody in the city.
In the city of Toronto under the present system, from Toronto
5:30 until 8:30 a. m. and from 5 to 6:30 p. m. the
charge for eight tickets is twenty-five cents. For school children or those working along educational lines, the teachers or the children,—we like them to get to school as easily and comfortably as possible -- the rate is ten tickets for a quarter. So you can see that something is being done by that railway corporation in the city of Toronto to assist laboring men, to assist school teachers, and to assist those who go to work early in the morning, and who work very hard all through the day.
MR. PENDLETON: I would like to ask as to whether the city gets any percentage of the gross revenue?
Dr. Wilson : They do, a large percentage. Hundreds of thousands of dollars have been paid over in that way.
MR. PENDLETON : What is the percentage?
DR. WILSON: I think it is six, or ten per cent; I am not quite exactly sure about that, what percent it is, I know as a matter of fact that hundreds of thousands of dollars have been handed over by the street railway to the city of Toronto. I am quite sure too that when the eleven years have expired the citizens of Toronto will take over the street railway and run it themselves.
A Voice: I would like to ask Dr. Wilson whether under this arrange ment the street railway company has to pay a certain dividend ?
Dr. Wilson: I cannot give you the exact dividend, but I know it is one of the best paying street railway corporations in the Dominion of Canada.
MR. M. N. BAKER, Engineering News, New York: I presume that some of the members have been informed of some of the earlier history of street railway affairs in Toronto which may throw light on the peculiar state of affairs existing there and the very reasonable terms that are obtained. For a full understanding of the Toronto situation it might be stated, that on the expiration of the previous franchise ten years ago the city came into possession of the street railway system and in one way or another expended a considerable sum of money on its account. The city virtually leased the railway to the present company; so that the low fares and the turning over of a percentage of gross receipts are both to be considered, I am sure, as returns on an investment which the city has in the property. That makes a very great difference.
CHAIRMAN FISHER: The city of Toronto is not a large community geographically, and they provided only for the town itself. There were various suburban communities immediately beyond the city limits, and they soon found that the corporation which they had provided was to turn over this property at the end of a certain period, was acquiring separate and independent grants in the outlying territory, and using them to get an increased fare, and otherwise interfere with the service.
So far as I can understand they have not really worked out a fixed program as to what the terms are going to be when the city takes this thing over within the municipal limits. They have been trying to put in proper safeguards with regard to their accounting and other details, but they found that the corporation was making certain extensions and so forth, the result of which was that the situation became very unsatisfactory, and notwithstanding the liberal terms as to fares, and so forth, the community is overwhelmingly in favor of taking the street railway system over the next time if they get a chance. They let one opportunity go by. That is no different from the experience of other communities. I suppose on the question of fair service that the most favorable proposition ever made by any street railway was that made by the Detroit city railway a few years ago, which involves a three cent fare and includes very liberal provisions. Unfortunately for that proposition there were various provisions in it that were clearly faked and would work out to the advantage of the company if enacted in the law. There
fore the most favorable proposition ever made anywhere in the world as to fare and service was rejected. There are a great many things to be taken into consideration besides the mere question of fare. In Chicago the question of service we regard as a prime consideration, and we believe we are getting the best service of any municipality of anything like the size and character of our city in this country, if not anywhere in the world. We are getting it as the result of a prolonged and obstinate fight which the city of Chicago profits from.
I might say to the gentleman from Cambridge that the work being done by the street railway in our city is absolutely under the control of a board of engineers which passes on every payment and contract in a work in
volving a million and a half of money, which has been Chicago
going on for the past two years. No move can be
made without the approval of this board. The provisions require that the company shall make extensions whenever ordered by the municipality, and that the company shall not have the right to inquire into the reason for same. The city reserved the right to order additional expenses whenever the service may require it. There are other provisions of that same character, provisions for service and all that sort of thing; and the primary provision, which I regard as fundamental, and which is so regarded by everybody, is that the city of Chicago can at any time on six months' notice, at the expiration of the six months take over the property upon payment of the accrued capital account and the additions thereto--these additions being under the control of the board of engineers. The great benefit of this provision, as I see it, is not only in the power to improve existing conditions but they can at any time act when new conditions arise requiring it, without waiting eleven years, or eleven months, provided they have the financial ability to act. It cannot act without that, as you know [Applause).
WEDNESDAY NOON, NOVEMBER 17th. ROBERT S. BIN KERD, SECRETARY CITY CLUB OF New YORK, AND FORMERLY SECRETARY CITIZENS UNION OF New
YORK CITY, PRESIDING. ChairmAN BINKERD: The principal point of this conference was raised and discussed at the Pittsburgh meeting of the League in 1908. At that discussion I read a paper, in which I maintained that after thirteen years of comparative experience divided between attempts to secure municipal
reform by establishing separate city parties, and on the Municipal other hand by the method known as the municipal Voters' League voters' league type of organization, that the weight of
experience was decidedly in favor of the municipal voters' league type as an efficient method of work. I am of that opinion