UC-NRLF 111 HD REPORT OF SPECIAL COMMITTEE ON GOVERNMENT OWNERSHIP AND OPERATION OF PUBLIC UTILITIES January 23, 1919 GIFT OF * Asanriatton of 5faw f 0rk REPORT OF SPECIAL COMMITTEE ON GOVERNMENT OWNERSHIP AND OPERATION OF PUBLIC UTILITIES LIBRARY OF CONGRESS CARD A19-178 January 23, 1919 , THE Board of Directors of the Merchants' Association of New York, at a meeting held January 23d, 1919, considered, and by unanimous vote approved the fol- lowing report from the Special Committee on Government Ownership and Operation of Public Utilities, and adopted the following preambles and resolutions : Whereas: This Board at its meeting Nov. 15, 1916, adopted the following preambles and resolutions : Whereas, The Newlands Commission, created by Senate Joint ^Resolution No. 60, is about to investigate, among other things, ' ' the comparative worth and efficiency of governmental regulation and control [of public utilities] as compared with governmental ownership and operation " and Whereas, The fundamental principles of our form of government require; That the members of legislative bodies and all principal executive officials be periodically subject to change; That the number of members of legislative bodies be large and that representation be sectional; That legislative bodies, by means of laws passed by them, direct and control in minute details the acts of executive officials; That the discretionary power of such officials be restricted to the narrowest possible limits; That no outlays of public monies be made except as expressly authorized by law; and Whereas, By reason of these conditions inseparable from our form of gov- ernment, governmental operation of economic undertakings, whether Federal, State of Municipal, is characterized by: Extreme delay and inertia, vacillation, hesitancy and inconsistency in matters of policy; Wasteful outlays in response to sectional demands; 395 ;t)?7 Insufficient provision of funds when needed for necessary purposes ; Absence of close and harmonious co-operation between the legis lative directorate and the executive officials; Insecurity of tenure in the higher places and lack of self -interest as an incentive; Frequent change of higher officials and the injection into office of new and untried men; Unsuitable methods of selecting executive officials whereby such officials are not often properly qualified by expert knowledge, previ- ous training, experience or proved capacity; Hampering conditions imposed by law upon executives whereby they are deprived of necessary control of operation and of their subordinates; and Whereas, From these conditions naturally result imperfect co-ordination, lack of qualified management, bad operating methods, and general waste and inefficiency; both the methods and the results being dia- metrically opposite to those which prevail in properly managed business undertakings, which latter are governed solely by economic considera- tions, and require for their success close and friendly relations between the directorate and the officials; the prompt provision of funds as required by the economic needs of the business; high capacity, long experience and special training on the part of the executive officials, assured tenure during efficiency, self-interest, and the possession by such officials of a very large degree of discretion as to outlays and operating details; Now, therefore, be it Eesolved, By The Merchants' Association of New York that governmental methods in the conduct of business affairs are inherently defective by reason of the fundamental restrictions imposed by our form of govern- ment; and that such methods are often inefficient and wasteful and therefore unsuited to the conduct of business undertakings; And be it further Eesolved, That The Merchants' Association of New York is opposed to government ownership and operation of railroads, telephones, tele- graphs, and other public utilities, believing that such utilities are far more effectively operated under private ownership, subject to public regulation, than would be possible under governmental ownership and operation, and that it would be a national calamity to subject these instruments, indispensable to the welfare of the whole country to the hampering, inefficient and wasteful methods inseparable from govern- mental undertakings. and, Whereas: This Board later appointed a Special Committee to review the question of government ownership and operation of public utilities, particularly with reference to new conditions arising from the war; and to report whether or not such new conditions justify and require a modification of the Association's previous policy of opposition to the undertaking by governmental agencies of economic activities; and Whereas: Such Special Committee, after a careful and de- tailed study of the subject, has reported that it does not find any changes of conditions, resulting from the war which warrant or require the previous position of the Association, in opposition to government ownership and operation, to be modified; Therefore Be It Resolved: That the report of the Association's Special Com- mittee, dated January n, 1919, be and hereby is ap- proved and its recommendations adopted ; and Be It Fur- ther Resolved: That The Merchants' Association of New York reaffirms its resolutions of November 15, 1916, (cited above) opposing government ownership and operation of public utilities. New York, January 23, 1919. S. C. MEAD, Secretary. REPORT BY SPECIAL COMMITTEE ON GOVERNMENT OWNER- SHIP AND OPERATION OF PUBLIC UTILITIES JANUARY n, 1919. To the Board of Directors, The Merchants' Association of New York. THIS Committee has been requested to review the ques- tion of government ownership and operation of public utilities, particularly with reference to new conditions arising from the war; and report whether or not in our opin- ion such new conditions justify and require a modification of the Association's previous policy of opposition to the under- taking by governmental agencies of economic activities. The Federal Government by virtue of war powers delegated by Congress to the President has taken possession of and is now operating All steam railroads All express service Many coastwise steamships The Cape Cod Canal The Erie Canal and all other canals in the States of New York and New Jersey All telegraph service All telephone service except farmers' lines The ocean cable service. A resolution now pending in Congress proposes the perma- nent retention and operation by the Federal Government of these utilities, and also practical domination by the Govern- ment of the ocean-carrying trade (so far as American ships are concerned), through government ownership and operation of shipping; and further proposes government ownership of the sources of coal and oil, and distribution by the Govern- ment of those natural products. Movements for state or municipal ownership and opera- tion of local public utilities are in progress in various quarters. These in general contemplate the ownership and operation by' municipalities of street railways, electric light and power plants, gas plants and telephone plants. Thus it is proposed that private enterprises be excluded from the fields of transportation, communication, light, heat, and power, and that the functions belonging to those fields hereafter be performed by immediate governmental agencies. Except under war conditions the sole plea that can be ad- vanced to justify the operation by governments of public utilities is that governments can provide better service at less cost to the public than can private operators that is to say, the assumption that government operation is more efficient and less costly than private operation. We do not believe that this contention can be sustained. On the contrary we contend that the operations of govern- ments in the economic field and particularly under American conditions are generally characterized by inefficient manage- ment and excessive cost; so that under government operation the public would get poorer service and pay more for it than under private operation suitably regulated by public authority. The cause of inefficient management and excessive cost when governments undertake economic activities is simple. All the activities of any government are necessarily carried cS on by political machinery and that machinery is wholly un- suited to the economic field. The fields of politics and economics are dissimilar and sep- arate. The field of politics (meaning thereby the art of government) is mainly the regulation of conduct and the pro- tection of rights. The field of economics is the production and utilization of material things. The principles, the methods and the machinery of political administration are wholly dif- ferent from those of economic activities and not adapted nor adaptable to the latter. The differences are fundamental and cannot be reconciled. When, therefore, the machinery of political action is applied to economic undertakings it works badly and makes impossible the perfect co-ordination which can alone, in the economic field, produce efficiency and economy of operation. A brief comparison of the machinery of business with that of political action, will show clearly why political machinery does not and cannot work effectively in the field of economics. POLITICAL SELECTION PRODUCES A PERSONNEL POORLY QUALIFIED FOR ECONOMIC SERVICE. THE success of any economic undertaking depends in very large degree upon the ability and skill, the zeal and energy, and the soundness of judgment of the human agents employed therein. Ability and skill in a par- ticular field are the products of special and usually prolonged training; by far the most powerful motive of zeal and energy in the ordinary affairs of the world is self-interest as under- stood in its widest meaning; and intimate knowledge derived from experience is essential to sound judgment in business affairs. Every large business concern seeks to embody in its management and working organization Intimate knowledge Long experience Sound judgment Special ability and skill Zeal and energy. Having secured these qualities it seeks to retain and expand them by making the self-interest and ambition of officials and employees a dominant motive for loyal devotion to the welfare of the business. The motive of self-interest and ambition is brought into play by the free opportunity of advancement always open to special ability and zeal, and by the assurance of permanent tenure to those who are efficient. These requisites are always lacking in a considerable degree, and often entirely, in an organization created by political methods to perform an economic function. No business, whether public or private, can be operated effi- ciently and without great waste, under the constant injection at the top of new, untried and often unfit executives and man- agers; nor with the rank and file deprived, by lack of oppor- tunity for advancement, of the incentive to zeal and energy. Frequent change and unfitness in the higher ranks, and lack of opportunity and zeal in the lower ranks are dominant and inevitable features of political management. Political ex- pediency is nearly always the determining consideration in appointments to the higher places. Those places are the re- wards of political service; and the appointees, while perhaps proficient politicians, are seldom proficient business executives. Their immediate subordinates are likewise appointed for politi- cal reasons, and fitness is a secondary consideration. Thus the executives of a purely business function under political control are often without business experience or ca- pacity; they are usually without the long experience, the inti- 10 mate knowledge, and the special ability and skill indispensable to highly efficient administration; and their official acts are often directed by political motives opposed to the proper con- duct of the business undertaking. These initial defects due to political methods of selection and inseparable from political control, are magnified and per- petuated by the changes which follow every election. Because of these frequent changes, executive officials seldom remain in office long enough to acquire the experience and learn the sound methods necessary to efficiency and economy. At fre- quent intervals the executive heads are all, or nearly all, sup- planted by new appointees, likewise without the qualifications necessary to fitness; and whatever progress toward sound ad- ministration may have been recently made is likely to be nulli- fied by changes in methods which almost always follow changes in officials. Lack of opportunity in the lower ranks of the public service has a deadening influence upon the the zeal and energy of the entire body of minor officials and the clerical staff. The higher offices with their larger salaries, being usually bestowed as rewards for political services, are seldom open to minor offi- cials and clerks, however capable, and however meritorious their services. Therefore, they cannot rise beyond a modest minor position. As there is little opportunity to rise, and therefore no sufficient reward for ability and initiative, for exceptional diligence, application and devotion to duty, the motive of self-interest and ambition is destroyed, and only the minimum of service is given. The conditions of incompetent administration at the head, and perfunctory service in the lower ranks, is fatal to eco- nomic efficiency. The administrative heads, knowing little of the business, are not capable of devising and installing really efficient methods. They are therefore content to let the old ii methods continue as the easiest way of getting along. The lower officials have neither the incentive nor the power to depart from methods in which they have long been trained and to which they have become wedded by long usage; in fact, any attempt at change is usually resented and resisted. Hence the business proceeds almost wholly by force of long-entrenched routine, impervious and hostile to new methods, ignorant or unregardful of waste and inertia, hating reform, and deadly to the spirit of progress and efficiency. We have, then, at the top incompetent, temporary and fre- quently changed managing officials with an imperfect knowl- edge of their duties and without the training necessary to efficient management; frequent disorganization of the ma- chinery by the injection of new and relatively incompetent men ; and at the bottom a group of minor employees, without the opportunity for advancement which supplies the principal motive for zeal and energy. These are the conditions which dominate the public service and which make a high degree of efficiency impossible, particularly when applied to economic undertakings where perfect and continuous co-ordination, ex- perience and thorough knowledge are essential to effectiveness and economy. In the case of private operation we find continuously brought into play the qualities and the conditions which tend to maxi- mum business 'efficiency experience, knowledge, special training, and the zeal arising from opportunity and self- interest. On the other hand, in the case of public operation we find these essential qualities largely excluded, through the working of a principle of political selection suited to and inseparable from political action, but wholly unsuited and repugnant to business action, and tending greatly to impair efficiency and economy in its performance. 12 Thus because of the unsuitable principle of selection applied to business functions under public operation, and the frequent and constant changes in officials, the personnel selected by political methods is inevitably inferior to that selected by business methods. The conditions that produce this result cannot be changed so long as popular choice and frequent change of officials re- main fundamentals of our political system. It is true that government operation of public utilities was measurably successful in Germany. But the very reasons which, under the German system and being given the men- tality and traditions of the German people, made it fairly suc- cessful in that country, are the reasons why under our form of government, and with the spirit and traditions of the Amer- ican people, government ownership or operation would be bound to prove a failure and a grave social and economic detriment to the country. It should be understood that all that is being said in this report on the subject of government ownership or operation of public utilities is based upon the conditions which exist in America and which, at least in part, are necessarily incident to a government under free institutions. DISABILITIES OF EXECUTIVE OFFICIALS UNDER GOVERNMENT CONTROL. Y reason of the defective personnel arising from the causes set forth above, even an able executive could not conduct a business with high efficiency. There are numerous other causes of disability from which those having direction of a business undertaking under gov- ernment operation cannot escape and which make a high stand- ard of efficiency impossible. 13 The managing official of a government undertaking is in- variably hampered by undue and severe limitation of his dis- cretion. He can do only those things which he is expressly authorized by law to do ; he cannot exercise any power outside the limits prescribed by the law and is, therefore, to a large degree deprived of the power of initiative, a quality indis- pensable to high executive efficiency in business matters. The successful management of any large business undertak- ing requires that the utmost freedom of action be granted to the executive. It is assumed as a condition of his employment that his experience, training and special skill will enable him to exercise a wide discretion so wisely as to promote the wel- fare of the business. The check upon him is mainly his sense of responsibility for desirable results, and he is commonly left free, whenever circumstances require, to take such action, within the general policy of the business, as his judgment dictates. Hence his initiative is given full play and he is enabled, whenever occasion requires quick action, to do what- ever is necessary to be done. A political appointee, on the contrary, even when the need for action is immediate, can seldom move without special authorization, and such authorization is often, even frequently, a matter of many months, and sometimes of years, during which time the interests of the business undertaking may suffer severely by inability of the executive to apply needed reme- dies. A case in point is the present condition of New York Harbor. Our commerce is suffering severely for lack of press- ingly-needed new piers. The Dock Commissioner has re- peatedly made urgent representations but his initiative has been paralyzed by the inertia of the controlling Board. Such an executive has no sufficient control of the organiza- tion under him. He cannot control appointments (except of his immediate subordinates and not always those), nor 14 methods of operation. His organization is frequently divided by law into rigidly fixed Bureaus, with prescribed procedure which cannot be materially varied from. He is obliged to take the personnel which is handed him, however low its stand- ards of performance and however rigid and inelastic the methods. He cannot fix salaries nor use his discretion in the promotion of deserving subordinates and the placing of men in the positions best suited to their capacities. Nor has he necessary power as to outlays. The funds needed for effective operation are usually limited by budget allowances based upon estimates made long previously, before the actual needs are fully known. Even in the first instance, appropriating bodies are extremely reluctant to grant the full demands which the executive thinks necessary to the proper conduct of the busi- ness; and are still more reluctant, in case of an insufficiency of funds, to make additional appropriations, without which the function cannot effectively be performed. Hence the execu- tive is unable promptly to do that without which the business must suffer. These conditions do not prevail in well-managed private business undertakings. The executive practically always has granted him all the discretion necessary to enable him to select and maintain a fully efficient personnel. He also has a large and usually controlling influence in promptly obtaining what- ever funds will conduce to the effective and economical con- duct of the business. For the reasons cited, executive officials under government control are precluded from full efficiency, and the business is subjected to the ineconomy, the waste, and the absolute loss which is inseparable from inertia and delay in business under- takings, where promptitude and immediate outlay are neces- sary. REASONS WHY THE FINANCIAL NEEDS OF A PUBLIC BUSINESS UNDERTAKING ARE USUALLY NOT PROMPTLY OR SUFFICIENTLY MET. IN the case of a business undertaking under private control and good management, funds for improvements which will conduce to economy are promptly provided. In the case of public operation, the pleas of executive offi- cials are seldom considered upon their merits alone. Fre- quently the most convincing demonstration of the soundness of the proposed outlay fails to secure the much-needed appro- priation. The appropriating bodies are compelled always to regard the tax rate and its effect upon voters. The total amount at their disposal is, therefore, restricted by this para- mount political consideration. The aggregate amount must be apportioned among the various departments with reference to their respective needs, and those outlays always include a considerable number of superfluous and extravagant factors which cannot be dispensed with, for political reasons. Hence, the ultimate amount allowed for any particular function is determined not by its absolute needs, but by the competition for appropriations amongst all of the departments. For that reason, the amounts finally granted are frequently insufficient for the proper conduct of at least some of the departments. This condition bears most heavily upon departments which / operate physical plants, in the case of which considerable ex- NC penditures for extensions, betterments and maintenance are necessary to effective performance. An appropriating body can most readily keep down the public outlays by withholding appropriations for the purposes indicated. It is generally argued that there is no hurry about the matter; that the ex- tensions and betterments can be deferred for two or three years, and that there is no need to spend much money for 16 maintenance until the plants have become definitely unserv- iceable. Hence, the instances are extremely rare where under public control sufficient capital investments and outlays for maintenance are made to keep the plant up to its proper operating efficiency and to enable it fully to provide the serv- ice contemplated. The delays in the matter of appropriations which may be promptly needed are almost always made greater by the need for concurrent action by separate bodies having concurrent jurisdiction. The tendency of the reviewing body is to reduce appropriations already insufficient, in order that it may gain the political prestige of advocating and compelling so-called economy. The effect of such gallery plays is, of course, to render impossible the proper performance of the function to be supported. There are other influences of great potency which tend to limit the appropriations without which the public business cannot effectively be carried on. When any considerable new outlays are contemplated, particularly for such a public enter- prise as providing electricity, gas, or street-railway service, those outlays are invariably the subject of prolonged and fre- quently bitter public discussion, usually with violent opposition by a considerable part of the community. This opposition is directed to, keeping down the public outlays without much regard either to the real needs of the business enterprise, or to the fact that the proposed outlays would really result in very material economies of operation and decided improve- ment of service to the public. The issue thus becomes political and the question is, therefore, decided from the political rather than the economic standpoint. The result of this condition, under which political forces rather than sound business reasons prevail, is that public serv- ice plants publicly operated are frequently starved by reason of the failure or refusal of the public officials to approve the outlays, without which a high degree of efficiency can not be maintained nor adequate service supplied. WASTEFUL DISTRIBUTION OF CAPITAL OUTLAYS* LONG experience by this nation in the distribution of money for public improvements has demonstrated be- yond any question that the outlays for that purpose are largely determined by political influence, and but little by economic utility. Seven hundred million dollars have already been spent by the United States Government for the improve- ment of internal waterways. Some of the improvements effected are of reasonable utility and would have considerable value as integral parts of a complete system, but there is no complete system; and most of the money has been expended for unrelated local improvements, entirely unwarranted by the possible benefits. The latter class of expenditures are brought about solely through the operation of political in- fluence in response to sectional demands. Those outlays are largely in effect an economic waste, inasmuch as they are practically non-productive. The enormous federal outlays for public buildings have likewise largely been distributed through the influence of sec- tional demand backed by political influence. A large part of the outlays for public buildings represents useless extrava- gance in the form of hundreds of expensive and ornate public buildings scattered in unimportant towns and villages. They are in large part needless for the public business and involve an enormous and continuing annual outlay for their upkeep. These illustrations indicate the methods and motives which govern the distribution of federal money for public purposes. 18 No one familiar with political methods will doubt that in case of government ownership and operation of railroads, tele- phones and telegraphs, the outlays for extensions and better- ments will largely in a similar manner be decided by political influence and not by economic utility. The pressure of politi- cal considerations will often be determining. The sections which for any reason for the moment have a controlling political influence will be able to secure funds for the construc- tion of new lines, for the erection of extravagant stations, and unnecessary warehouses, grain elevators and terminals, while other sections whose political influence is at the moment less potent will be unable to secure votes for improvements not only economically justifiable but urgently needed, and even of national as well as of local benefit. A case in point is the persistent refusal of Congress to provide for the proper improvement of New York Harbor where half of the com- merce of the United States centers, while at the same time annually spending millions in scattered local improvements of very little utility. Similarly in the case of local public utilities, political con- siderations are likely to figure largely in the distribution of capital outlays. This is especially true of street railways which under political management might, and probably often would, as a result of political deals be extended by the test of votes instead of by the test of sound policy. An incentive is ever presented to legislators to defeat more-needed improvements, unless their demands for the more questionable improvements be conceded. Thus while under private ownership the amount of capital invested in profitless extensions is properly restricted by economic condi- tions, under public ownership the economic restrictions would have less force and would often be overborne by the political considerations. As a result, under public ownership, there 19 would be a constant tendency to overburden the utility with excessive and largely wasteful capital outlays, the loss from which must be borne by the profitable parts of the enterprise or, in many cases, directly from taxation. POLITICAL RESULTS AND DANGERS. THAT grave political dangers are inherent in any scheme of government ownership is obvious. The creation of a preferred class of self -perpetuating office holders, regulating in a considerable measure their own compensation and working conditions, would constitute a distinct political menace to the electorate and a burden upon the tax payers. The temptation to demagogues to take advantage of the power thus presented to serve selfish and class interests against the public interest would be constantly present, with the interests of the general public the farmer, distributor . and all other classes of labor outside of the public service opposed to those seeking disproportionate advantages for themselves within. Class conflicts of serious import would be unavoidable. Exactly such a situation arose in New South Wales with the nationalizing of its railroads. Railroad employees by rea- son of their organized political power so far over-reached in their demands that a widespread public reaction was created, resulting in the disfranchising of government railroad em- ployees, thus destroying entirely their political power by de- priving them of their voting power. Wage making for political rather than economic considera- tions is fraught with danger for all concerned. It is almost certain to be unfair to either the public or the wage-earner. It may be unfair to the public through unwarranted increases which place an undue tax upon production and distribution which would handicap agriculture, industry and commerce, 20 and prevent competition with other nations, or it may be unfair to the wage-earner through the political ascendency of those primarily interested in reducing the costs of transportation, who might refuse just compensation to those engaged in its service. Any other basis than that of sound economic law which of course, includes willing recognition of the just demands of wage-earners and enlightened and sympathetic consideration for their welfare and contentment in the rendering of such public service is certain to be unsatisfactory and inequitable. The importance of maintaining this form of service on a busi- ness basis to the producer, the shipper, the merchant and the general consumer can hardly be over-emphasized. Each has an important interest in the problem, and it may be reasonably assumed that in the event of any substantial injustice being done to any important class by arbitrary political action, vio- lent reactions and changes would follow here as they have elsewhere, to the constant unsettling of the situation. Another result of political management is found in the tendency toward needless and wasteful increases in the number of employees in the case of public utilities under governmental operation. The multiplication of needless offices and super- fluous employees is universal in every branch of government service. Under private control the object of the management is the unification and consolidation of functions, with an ade- quate but not excessive personnel, while in the case of public control the tendency is toward the creation of numerous addi- tional supervisory branches and bureaus entailing an increase of personnel. The useless subdivision and the increase in officials in pub- lic management is mainly due to political causes, the obvious motive being to provide additional places for political hench- 21 men. Because of these conditions the cost of performing the work is largely and wastefully increased. This condition is illustrated by the present govern- ment railroad control, under which more than eleven hundred new officials are employed in the central administration at Washington in addition to an even greater number distributed in the offices of the Regional Directors. All of these have been added to the previously existing forces of the railroads when under private control, whereby the aggregate expense of the present railroad administration has been increased by many millions of dollars annually, despite the widely heralded consolidation and unification whose purpose was to effect econcv ny. This phase of the subject is still further illuminated by the experience of the French governmental railroads cited some- what in detail below. WHAT EXPERIENCE OF GOVERNMENT OPERATION SHOWS* THE defects and abuses outlined above have manifested themselves wherever state operation has been applied. With the single exception of Prussia, state-owned railroads have been financial failures. In general their rates are higher and their service poorer than those of privately operated railroads. Despite high rates and generally poor service, the state-owned railroads of Australia, New Zealand, Austria, Italy and France have to pay part of their fixed charges out of general taxation. The railroads of the three states last named are monuments of financial mismanagement. A minor part of the Australian lines was built in response to political pressure, and its revenues barely pay operating ex- penses. Canada's Inter-Colonial Railway, estimated to cost 22 less than $40,000,000 actually cost more than $90,000,000. It likewise was built under political pressure. During forty years' existence it has seldom earned even operating expenses ; and every year during its history, the Canadian people have been taxed to meet its defiicit. The financial success of the Prussian railroads is due to high rates, which average about twice those of American rail- roads, despite the fact that the Prussian roads pay practically no taxes and that American wages are double those of Prussia. Moreover, the operating costs of the Prussian roads are seri- ously and wastefully swelled in the item of labor costs, by the excessive number of employees; where American railroads employ one hundred men the Prussians employ approximately one hundred and sixty-six an excess common everywhere under state operation. The French state-owned railroads embody all the abuses referred to above. The French Government took over the Western system January i, 1909. After five years of govern- ment operation, the gross revenue had increased by $6,556,- ooo. During the same period the operating expenses had increased by $13,090,000. In the last year of private opera- tion the net revenues were $13,757,000; in the fifth year of government operation, with a considerable increase in traffic, the net revenues were $7,223,000. Under private ownership in 1908, 67.8 per cent, of the gross revenue went to pay operat- ing costs; under government ownership, the operating costs in 1912 had increased to 89.4 per cent, of the gross revenue, an increase in four years of 21.6 points, equal to about 32 per cent, over previous costs. During the same period the operating ratio of the five private French companies increased only 8.1 points. The very disproportionate increase in the operating costs of the state railway was largely due to need- less employees and excessive wages. Where the private com- panics employed 174 persons, the state railway employed 235 persons; where the private companies paid $57.00 in wages, the State railway paid $97.00. The new appoint- ments were largely political. The heads were inexperienced and incompetent; the rank and file were disloyal and disaf- fected. Discipline went to the dogs; and the service became completely demoralized. The heavy increase in outlays did not produce better service but produced worse service. The excess cost did not go for improvements of the properties or for better methods; but for payment of excessive wages and for superfluous employees imposed by political influence. These were the results in democratic France of the applica- ation of political methods to an industrial enterprise. The telephone system in France has likewise been debased to the lowest level of inefficiency through the operation of political, in place of business management. Its equipment is inadequate, its management incapable, its discipline extremely poor, and its service detestably bad. In England the telephone system is state-owned, and op- erated by the Post Office Department. The service is unre- liable and subject to much delay. (In passing it may be said that the highly efficient telegraph service of England, for which the rates are very low, is provided at the cost of a heavy annual deficit, payable by taxation). The installation is in large part antiquated. It can be brought up to American standards only by extensive reconstruction at a cost of many million pounds ; and the funds required have been persistently refused by the Government. In America municipal ownership and operation have not as a rule resulted in either better service or lesser cost; on the contrary in many instances, after an initial period of good service and lessened charge to the public, the plants have usu- 24 ally gradually deteriorated until good service has become im- possible; and as deferred and concealed costs have developed the true costs have been found much greater than shown by the misleading and incomplete public accounts. In most cases / depreciation has been rapid by reason of insufficient appro- priations for maintenance, usually grudgingly given and often withheld, because of the political opposition to a high tax rate. A sinking fund for replacement has seldom been pro- vided, and in consequence when the plant has become obsolete a new capital investment has been required. At this juncture many communities have learned for the first time the true cost of their adventure in municipal ownership; and have realized that their service would have cost them less under capable private management, suitably controlled by the public, than under generally slack public management.* As a result of their disillusioning experience several hun- dred American municipalities have discontinued their attempts to save money by carrying on a business undertaking through the machinery of politics. f There are in America, apparent exceptions to the general rule of municipal inefficiency; but they are only apparent and not real. Seemingly excellent showings are frequently made. These usually cover only a short initial period. They gen- erally only cover obvious current costs, and omit important factors of future costs. Loss in taxes, interest on investment, , depreciation, amortization, extensions and betterments, rents and maintenance of public buildings whose costs are borne by other departments, are commonly ignored. By these omis- sions an apparently favorable financial showing is made; while a true accounting would show the reverse. Municipal operation has, however, been successful in var- * See Appen. B. p. 55 ; t See Appen. C. p. 69 ; See Appen. E. p. 77. 25 ious European municipalities, notably Glasgow, whose public utilities are managed with great efficiency and excellent finan- cial results. The same is true of certain German and Austrian cities. The reason for this success is simple. Politics in the Amer- ican sense does not enter into these municipal undertakings. In these places municipal activities are regarded solely as business matters to be managed by business methods. Elected officials are commonly highly qualified business men, whose sole concern is the efficient and economical management of the business affairs with which they are charged. To this they diligently devote their ability and training and apply the sound methods which experience has taught them to apply to their highly organized private affairs. Their managers and their subordinates are permanent officials, qualified by continuous service in their respective fields to perform their services with efficiency. Their tenure is secure. The changes are infre- quent and solely for sound business reasons. There is no general overturning after each election, as in America, with a consequent injection of inexperienced officials. There is no redistribution of offices as rewards for political service. Effective performance of the business function is the sole motive, and sound business methods are the sole methods em- ployed. In Germany, municipal officials are not only specially trained for the special business functions entrusted to them, but their tenure is practically permanent, and they are thus enabled to attain high proficiency. It is superfluous to say that contrary conditions prevail in American municipalities, where most offices are prizes of poli- tics, and incessant change with little regard to fitness is the rule. It is hopeless to expect the excellence of Glasgow under American conditions. 26 GOVERNMENT OWNERSHIP OF PLANT AND OPERATION BY CONTRACT. IT is often proposed that the public should itself construct and own the physical plants of public utilities, and secure their operation by contract with an operating company, in order to avoid the assumed evils of overcapitalization and secure a revenue for the public in the form of rentals or a share in the profits. It is further contended that this plan would avoid the evils of political control and secure the greater efficiency which is the result of private enterprise and business methods. These contentions have little weight. The practice of over- capitalization with its evils, whether actual or assumed, has been practically abolished by the operation of existing laws enforced through railroad and public service commissions. Except in possibly a few states, securities can no longer be issued except with the approval of regulatory public bodies. Before such approval is granted it must be shown that the funds to be raised are reasonably necessary for the purposes of the business. Those purposes must be specified in detail and application of the funds to any but the specified purposes is prohibited. The requirements as to accounting are such as to practically preclude the application of funds raised by the sale of securi- ties for any except the purposes approved. It is therefore un- necessary to resort to public ownership in order to prevent such evils as, it is commonly believed, result from overcapital- ization, so that in the respect indicated government ownership offers no advantage. Moreover, capitalization as evidenced by the volume of outstanding securities is now disregarded by regulatory bodies as a basis for rate-making, and rates are made with relation to a fair return on the value of the prop^ 27 erty actually and necessarily employed in the public service; and in the case of railroads with relation to competition. There are, in addition, serious objections to government ownership which seem to limit its utility and make the desir- ability of its general adoption questionable. Among these objections is the fact, as shown by the experience of nearly all state-owned railroads, that the cost of construction by govern- ments is usually materially greater than the cost of similar work by private enterprise. The Inter-Colonial Railroad of Canada affords a glaring instance of excessive cost. In its effect, the result of this greater cost is precisely the same as the effect of an over-issue of securities or stock watering. In both cases the capital charges are unduly high and the enter- prise is financially burdened to that extent. I As has been pointed out above, governments, whether state I or municipal, are always reluctant to make large capital in- vestments after the initial investment has been made. It is ' therefore difficult promptly to secure additional appropriations for extensions and betterments, which are frequently neces- [ sary for the efficient operation of the properties. Inefficient / service necessarily results from the failure to provide such appropriations. This is well illustrated in the case of the existing subways in this city. An unbearable congestion of traffic made measures of relief imperative. The only means possible at the time was an increase in the train capacity from seven to ten cars, which could not be effected without a corre- sponding lengthening of the station platforms, at a cost of several million dollars. Although the need was imperative, several years of bickering and delay ensued before the needed funds were provided, due in part to disputes as to whether or not the operating company should, under its contract, pay the additional fixed charges involved by the new investments. While difficulties of this class would arise only infrequently 28 in the case of plants whose plan was practically complete at the outset, their recurrence in the case of such undertakings as railroads and telephones would be constant, and it is certain that the funds required for extensions and betterments would never be provided to the extent and with the promptitude neces- sary to fully efficient operation. Efficient operation and proper // service depend upon sufficiency of plant, and where the opera- \ rf tion is under one control and the construction under another, it is very unlikely that the views of the municipal owner will coincide with those of the operating contractor, when the question involved is that of large additional capital outlays. Hence, it is fairly certain that in the application of this plan, plant development will lag seriously behind the standard neces- sary for efficient service, even when the additional revenue to be derived would warrant the additional outlays. A further difficulty is the uneconomic allocation of outlays in response to sectional demands, which has been discussed above. Much uneconomic construction is certain to be under- taken as a result of political pressure. The result of such out- lays is to starve the rest of the system by diverting funds which otherwise would have been provided for reasonable and necessary improvements upon the main parts of the system, which improvements are essential to proper service. It is quite possible, however, that in occasional particular cases this partnership between the public as owners of the property and the operating company might be productive of benefit, but we doubt whether the plan would often be effective. SUMMARY AND CONCLUSIONS. The preceding review of governmental operation outlines the reasons why it is unsuited to economic undertaking. Some of these reasons have been more fully stated and illustrated in 29 a previous report of The Association, made in 1916.* The principle of political selection whose application is inevitable, produces an inferior personnel, lacking the experience and sound judgment necessary to the proper conduct of business affairs, with resulting inefficiency, waste and excessive cost. The financing of economic undertakings can seldom be properly provided for under government control for reasons stated above. By reason of inferior management and insuf- ficient financing, government properties are likely to be in- sufficiently maintained, be subject to excessive deterioration, and generally fall short of the standards essential to adequate service. While we are not unmindful of the defects that not infre- quently characterize the operation by cocporations, of public utilities, we do not believe that those defects can be cured by substituting another method which in every respect of efficiency is much below the standards that generally prevail under pri- vate management. In so far as the evils which are popularly assumed to exist in private management are found to exist in fact, other remedies than the substitution of methods abound- ing in greater evils should be found. We believe that the public can best be served by utilizing the efficiency, enterprise and energy of private corporations for the continued operation of public utilities, under such public control as shall protect the public in its right to efficient 1 service and fair rates; and at the same time assure to private capital invested in public utilities a fair return upon such capital. We do not find any change of conditions resulting from the war which warrant or require the previous position of the Association, in opposition to government ownership and op- eration, to be modified. * Copies of this report will be supplied by the Association, on request. 30 In our analysis of the question we have dealt mainly with principles which are of universal application and of continu- ing force; those principles apply without qualification to all of the varied classes of undertakings which it is proposed shall hereafter be operated by governmental bodies, and to all of those undertakings the disabilities we have outlined apply. The controlling consideration is that political control, oper- ating through political methods, is destructive of economic efficiency and therefore such political control should not be applied to undertakings of an essentially business nature. We therefore recommend, That The Merchants' Association of New York reaffirm its previous position in opposition to government ownership and operation of public utilities. We further recommend, That the Association endeavor, through the preparation and wide-spread circulation of suit- able printed statements, to inform the public of the reasons why public ownership and operation is no remedy for alleged existing evils and why it is harmful to the public welfare. Respectfully submitted, FRANK R. CHAMBERS, Chairman. Jos. FRENCH JOHNSON, OTTO H. KAHN, H. H. PORTER, FRANCIS H. SISSON, JAMES G. WHITE, Special Committee. Appendix A. MUNICIPAL LIGHTING IN MASSACHUSETTS. The laws of Massachusetts which regulate the operations of municipally owned public utilities are carefully framed to minimize financial misman- agement. They require that electric current shall not be sold at less than cost except with the written consent of the State Gas & Electric Commission. In * ' cost ' ' shall be included ' ' all operating expenses, interest on the investment in the plant, less assessments (for extensions), at the rate paid upon the bonds or serial notes * * * the requirements of the serial debt or the sinking fund * * * an( j a i so depreciation of the plant to be reckoned at not less than three per cent, per annum of its cost, and losses. ' ' Compliance with the requirements of the law as to cost accounting and distribution of outlays is general, and the accounts of the municipalities, as kept under the supervision of the Commission, therefore exhibit with fair accuracy nearly all the direct outlays, both present and deferred, which are incurred for the purpose of lighting; with the exception that loss of taxes is omitted from the official accounts. This item should of course be included to ascertain the actual cost of the lighting service. By reason of the restrictions of the law and its consistent enforcement by the State Gas & Electric Commission "the experiment of municipali- zation has been carried out under more favorable conditions in Massachu- setts than in any other State in the Union, and, perhaps than in any other place that we know about, not excepting England or Germany. ' ' Thus the financial mismanagement and the confused and misleading accounting which has been so frequent a cause of failure of public lighting plants in most States prevail only to a small degree in Massachusetts; and a conclusive demonstration of actual results, as shown by accurate cost accounting becomes possible. One of the most thorough and impartial studies ever made of the comparative results of municipal and private plants is that of Edmond Earle Lincoln, Ph. D.,* comprising an intensive investigation of 17 private And 18 municipal plants in Massachusetts. Mr. Lincoln's study is wholly without bias. It is a strictly scientific * THE EESULTS OF MUNICIPAL ELECTRIC LIGHTING IN MASSACHUSETTS : By Edmond Earle Lincoln, Ph. D., Instructor in Economics, Harvard University; Boston., 1918, Houghton Mifflin Co. We are indebted to the publishers for permission to use the extracts and tables in this appendix. 33 and complete presentation of all the data relating to the equipment, ca- pacity, operation, physical and financial management and the financial results of each of the 35 plants. All the data relating to each group of plants are carefully classified and presented in comparative tabular form. Every variation and difference is analyzed with care and its cause fully developed. The basis is thus provided for an exact comparison and a sound conclusion as to the relative efficiency and true financial results of both municipal and private plants. To find private plants exactly comparable in all respects with the municipal plants, "it was necessary to choose the smallest and in many cases the more poorly managed companies" (p. 82); so that in some respects the basis of the comparison is to the disadvantage of the com- panies. The results of Dr. Lincoln's analysis show conclusively that the public of Massachusetts has not derived any appreciable benefit from municipal ownership and operation of electric lighting. The private com- panies sell current to consumers at a slightly less average rate than the municipalities sell it (Table 28). The saving in street lighting is nominal (Tables 37-41). The municipal plants do not serve the public as well as do the private plants. The former are not as well equipped as the private plants, do not extend their service as fully, and avoid the less attractive business. Dr. Lincoln thus sums up the results of his analyses (pp. 239, et seq.). "The results of our analyses in this Chapter seem to indicate that the municipal plants in general have simply held their own financially, even though, in some instances, it may have been at the customer's expense. The actual profit which they are at present making is practically negli- gible. * * * When put on a reasonably comparable basis, the financial showing made by the municipal plants is considerably less satisfactory than that made by the companies. The only financial gain accruing to the communities owning their plants, is that they apparently secure their street lighting at a slightly lower cost per kilowatt hour than would have otherwise been the case. This gain, however, is too small to be of any consequence when considered in connection with the facts as we now know them. ''Finally, so far as the financial aspects of operation are concerned, there seems to be little in the rates and less in the investment policy to cause us to feel optimistic on the subject of municipal ownership in the cases studied. Nor on the other hand, have they apparently made any conspicuous failures, except in one or two instances. (Hull and Wakefield). They simply seem to have had the pleasure of doing for themselves, with slight tangible returns, what might have been done, and perhaps better 34 done, by private enterprise. When we take into consideration the great loss which is certain to result when a number of the generating plants are junked and current is purchased from private concerns a tendency which is at present well defined both in the public and the smaller private plants the outlook is not reassuring." At the end of 1917, 28 out of 39 municpial plants were buying instead of generating current. A number of the municipalities scrapped their plants, with heavy loss. DETAILS OF THE MASSACHUSETTS TESTS. Dr. Lincoln's analyses are supported by 59 tables and 16 charts which fully exhibit every detail of each of the plants studied. Some of the salient facts derived from his tables are stated below. They are followed by several essential summaries which exhibit the averages of the two groups. Capital Investments: These are shown by Table 25. Dr. Lincoln analyzes the data with great care. He shows that the wide excess of the private plant investments (82.6%), is due in part to the fact that "the real estate investment, as reported by the public plants, does not in many cases repre- sent the true value of the property used. * * * Four of them report no land whatever, as it is owned by some other municipal department. One plant, Merrimac, reports neither building nor land. * * * If the value of the reported real estate, amounting to $857,368 and $356,629 respectively, is deducted in each group, as well as about $550,000 for underground construction and excess increase in new poles for the com- panies, the average investment per kilowatt capacity becomes $167 for the companies and $159 for the public plants, notwithstanding the fact that the distributing system of the former covers a much more extensive terri- tory. " (Lincoln, 167). "The public plants have apparently played reasonably safe; but, unless all signs fail, they have done so at a considerable sacrifice of that service which they might reasonably be expected to render. And this is probably the most decisive consideration in the argument for or against public ownership." (Lincoln, 170). "So far as we can secure the evidence, the greater increase in invest- ment of the private plants not merely has been fully accounted for, but they even seem to have gotten a good deal more for their money than have the municipalities. Aside from any theorizing, these appear to be the facts." (Lincoln, 171). Another factor (alluded to, but not fully developed by Dr. Lincoln) is the cost of extensions and connections, which in the case of the public, but not always of the private plants, are paid for by the consumer. These 35 capital investments may be omitted from the construction accounts of the public plants, and the true capital investment thus be correspondingly understated. In any event the cost of service to the consumer is increased by whatever amount he has to pay for the extensions without which he cannot get the service. Thus most of the difference in capitalization (which is assumed to result in excessive rates) is accounted for by omission of land values by the public plants, and by their inferior equipment. ' ' In view of the relations here set forth, which scarcely need further explanation after what has already been said about the physical equipment and the investment of the two groups, we might logically expect the rates charged by the companies for the same kind of service to be higher than the rates of the municipal plants, for they would need to secure a return on a relatively larger investment per customer. Had the increased investment been recklessly incurred, we could bring a serious charge against the com- panies. But, since the contrary is evidently the case, inasmuch as the addi- tions to plant account have been for the purpose of taking better care of the trade, it appears that the private plants are to be praised rather than condemned." (Lincoln, 173.) An examination of comparative rates follows. It shows that the higher capitalization of the companies did not cause rates higher than those charged by the municipalities. COMPARATIVE OPERATING COSTS AND EELATIVE EFFICIENCY. These are shown by Tables 26, 27 and 48. In every essential element of cost the showing is markedly against the municipal plants, indicating inferior management, and probably inferior equipment. The costs of pro- duction and distribution are strikingly excessive in the municipal plants. To manufacture current costs them an excess of 33 per cent, per kilowatt hour; to distribute current an excess of 20.7 per cent, per kilowatt hour. Their labor costs at station, per kilowatt hour are 53 per cent in excess of those of the private plants; their excess of fuel costs, per kilowatt hour, is 13.2 per cent. The combined costs of manufacturing and distribution, per kilowatt hour, are: Municipalities 2.611 cents Companies 2.024 cents Excess Cost, Municipalities 0.587 cents Excess Cost, Municipalities 29 per cent. / 36 Table 48 shows that the municipal plants delivered per employee 62,409 kilowatt hours, while the private plants delivered 82,008 kilowatt hours the labor efficiency of the municipal plants thus being 26 per cent below that of the private plants. This possibly indicates a " loading" of municipal payrolls through political influence, and certainly indicates inferior man- agement. Loss of current is another particular in which the municipalities make a bad showing. Dr. Lincoln shows (p. 100 et seq.) that whereas 18.5 per cent of the current produced by the companies was unaccounted for (lost in distribution), the loss of the municipal plant was 24.2 per cent, their loss thus exceeding that of the companies by 31 per cent. "This greater leakage of current is probably caused largely by bad engineering. It would appear that the distributing system had not been properly maintained and improved during the past few years." (Lincoln, 102.) This surmise is confirmed by the labor distribution tables, which show that the municipali- ties employ a disproportionately small number of linemen, although their station employees are excessive in number, as shown above. As to coal the companies used it more efficiently and bought it more cheaply than did the municipal plants. The cost per ton to the former was $4.15, to the latter $4.46 an excess of 7.4 per cent. Where the munici- palities consume 4.69 Ibs. the companies produce an equal result by the consumption of 4 Ibs. a saving of 15 per cent. Excluding taxes an item which is included in the companies' expenses, but omitted from those of the municipalities the operating expenses of the municipalities exceed those of the companies by 20 per cent. The rela- tive costs per kilowatt hour delivered, are: Companies, 3.144 cents; muni- cipalities, 3.766 cents. COMPARATIVE KATES, INCOME AND ITS DISPOSAL. Table 29 shows the maximum rates, prevailing in the towns in each group. These are modified by graded scales, discounts for quantity and discounts for prompt payment. Their chief significance is that they show the purpose of municipalities to collect from users rates substantially sim- ilar to those charged by private companies, and from those rates to meet operating expenses, the fixed charges imposed by law, and the costs of street lighting. Table 31 shows that rates equal to those of the private companies do not suffice to meet all the municipalities' charges; and that fully to meet them, higher rates would be required. Table 28 shows that the actual average rates collected by municipali- ties from consumers (excluding street lighting) was 5.786 cents per kilo- watt hour. The average company rate for similar class of service was 37 5.461 per kilowatt hour; so that the companies' rates to consumers were slightly less than those of the municipalities. The companies, on the other hand, although paying larger administra- tion costs, taxes, larger interest rates on a larger capitalization, and divi- dends, are able to provide better service, at rates to consumers no greater than those charged by the municipalities. The municipalities, however, ob- tain their street lighting at a slightly less rate than they would be obliged to pay to the companies. This apparent advantage largely disappears when tax losses (which are not included in charges against income) are reckoned. Tables 37 to 40, inclusive, show that when all elements of cost are included, the saving in street lighting is negligible. An additional cost factor not included in any of the various computa- tions is the payment by individual consumers of the cost of extensions and connections. There is no means of learning the amount of this factor, but it would in some degree offset an assumed saving in the cost of street lighting. Appendix A. TABLE 15. COMPARATIVE AVERAGES OP THE Two GROUPS OF PLANTS Companies Municipal (Holyoke out) I. Generating plants: Capacity (K.W.) of dynamos 1,366 951 Output (K.W.H.) 1,764,719 1,163,110 Disposal of current (percentage) : Commercial and domestic lighting. 30.6 31.0 Street lighting 14.3 24.3 Power 42.7 43.8 Other companies 12.4 0.9 Load factor ( arithm etical average. .. (14) 27.7 (13) 25.5 I weighted average (29.2) (23.5) Customers 1,377 1,063 (l,205)i (l,030)i Population of district served. 16,817 12,113 (14,354)i (ll,768)i Area of district served (sq. m.) 58.94 24.81 (30.67)i (21.39)i Density of population 285.3 488.2 (468.1)i (550.2)i Age of plants (years) 25.2 (18) 22.2 (18.3)t Companiet Municipal (Norwood out) II. Purchasing plants: Output (K.W.H.) 266,715 157,173 Disposal of current (percentage) : Commercial and domestic lighting. . 45.2 54.6 Street lighting 21.0 31.3 Power 31.3 13.9 Other companies 2.5 0.3 Customers 376 289 Population of district served 5,467 2,679 Area of district served (sq. m.) 25.06 19.60 (19.88)i Density of population 218.2 136.7 Age of plants (years) 15.4 8.0 (6.5) i Excluding foreign districts served. 2 Age under public ownership. 39 GO Tf< O* CO CO CO O* CO l> O O* GO t> *O'Co' CO O5 CO CO COCOlOCO CO COCOl>t> ^ *s rHOt>0< "ss^w^p s : :?'QOO r-iW5COCOCOCO t> CO GO tO rH rp rH CO Tft CO Oii iCO-^ O5Tj(COr-H 05 00 CO CO oo ^ r-l O5rHGOl>Ol>CO . . -t^V5l> CO O rH SO CO CO CO l> r . ^ O5iiCOOSO "* rH- J> 05 1> CO COOrHCOCO O5. -r-lC . . os rH . .rHOOCO s * CO CO GO t- CO C 0< l> t^ i>O5OO^ -i>O CO CO 05 rH Tj< CO CO CO * CO rH CO 10 rjt GO O 0* CC CO 05 CO CO 05 CO t~ CO CO 40 10 rf* O 5 CO" 1 !! ii HH TABLE 26. OPERATING EXPENSES PER K.W.H. DELIVERED (1914-1915) Class of expense CO Companies (cents) (S) Municipalities (cents) l Per cent by which (2) exceeds (1) Total 3.572 3.766 5.4 Taxes 0428 Salaries of officers 0.197 Total taxes deducted 3.144 3.766 20.0 Total taxes and salaries of officers out 2.947 3.766 24.0 Cost of distribution 0.648 0.782 20.7 Cost of manufacturing (per K.W.H. made) 1.376 1.829 33.0 Labor at station (per K.W.H. made) 0.408 0.626 53.0 Fuel of every kind (per K.W.H. made) (14) 0.808 (17) 0.915 13.2 Coal (per K.W.H. made) (12) 0.742 (15) 0.933 26.0 K.W.H. generated per plant 1,650,091 1,024,023 37.9 K.W.H. delivered per plant 1,437,544 881,914 38.8 K.W.H. delivered (street lighting out) 1,232,050 670,276 15.0 Operating expenses (dollars) $872,935 $562,643 35.5 Holyoke omitted here as elsewhere. TABLE 27. PERCENTAGE ANALYSIS OF EXPENSES (GENERATING PLANTS) Kind of expense Companies Municipalities Holyokt Amount Per cent of total Amount Per cent of total Per cent of total I. Operating expenses General analysis: Manufacture $386.109 30,239 158,465 153,755 39,776 104,591 44.4 3.5 18.2 17.6 4.5 12.0 $308,937i 35,491 117,794 65,428 25,596 55.8 6.4 21.3 11.9 4.6 70.7 16.9 11.5 1.7 Purchase of current Distribution Office expenses and management .... Miscellaneous Taxes Total Total taxes deducted. . II. Operating expenses , Detailed analysis (taxes out) Fuel $872,935 $768,344 $220,204 114,590 32,244 30,239 44,236 91,633 22,596 35,781 48,201 5,388 56,158 30,703 8,228 28,143 28.7 14.9 4.2 4.0 5.8 11.9 2.9 4.7 6.3 0.7 7.3 4.0 1.1 3.7 $553,246 $158,648 109.048 24,5631 35,491 21,366 74,094 22,328 40,750 3,167 20,285 19,507 1,120 22,879 28.7 19.7 4.4 6.4 3.9 13.4 4.0 7.4 0.6 3.7 3.5 0.2 4.1 49.8 16.2 3.7 5.1 10.3 1.3 7.7 3.8 1.2 "i.s Wages at station. . . Repairs at station. . Current purchased. Distribution wages. Repair of lines .... Distribution tools and equipment . . General salaries. . . . Salary of officers... Directors' allow- ances Salary of munici- pal light boards .. General office ex- penses Insurance Rent of offices All other expenses. . Total $768,344 $553,246 i Hull, new boiler, $9,397, omitted. TABLE 28. INCOME PER K.W.H. SOLD (HOLYOKE EXCLUDED) Item 1910 1915 Per cent decrease Com- panies (cents) Munici- palities (cents) Com- panies (cents) Munici- palities (cents) Com- panies Munic- ipali- tiet Total operating income Total operating income (street lighting out) 6.608 6.531 7.960 7.960 5.800 5.503 5.895 5.895 15.9 15.7 26.0 26.0 Total from sale of current 6.758 7.742 5.764 5.786 14.7 25.S Total from sale of current (street lighting out) Commercial light and powei 6.481 7.742 5.461 5.950 5.786 5.800 15.7 25.S Commercial lighting 1 Street lighting ii/774 7.675 11.077 10.062 7.575 10.305 i4.5 1.3 ' ' V.O (7.333)' (4.5)* Power 3.458 3.615 3.047 2'.583 11.9 ' 28.5 Sales to other companies. . . 2.700 3.000 2.418 4.294 10.4 +43.1 Net income 2.522 2.227 11.7 Net income (street lighting out) 0.985 i!691 1.332 0.957 +35.2 ' 'H.S Operating income (dollars) . . . $953,675 $1,417,235 +47.5 Operating income (street light- ing out) 757,293 443,423 1,152,594 671,761 +52.2 +51.5 Net income (dollars) 312,685 544,300 +74.0 Net income (street lighting out) 116,304 62^202 279,658 lobiiis + 140.8 +75 4 Operating ratio 67.2 61.6 8.3 Operating ratio (street lighting out) 84.5 86.0 75.0 83.7 11.2 2.7 "Commercial" lighting includes all other than street lighting. 2 Including only companies reporting at both dates. 43 i OOOO O i> O .OO O a O I* W5OOOOJ OCOO OS OOOOSiOS 1 ^ *> | S 1 O O . I-H O O OOO OOO .OO a. 05 O t* . O$ O O O O O O *O O O . Oi ^ O ^ pH ^-1 rH ^ j-H rH i-H rH r ( rH rH f-H ^a .sP a O -^^ -^^ ''"""^ '^N | 02 *o O ^ O O O ^ O ^""i O O ^ ^ *O O O O O O O O ^^ *O >-H rH* Oi ' - C5 I-H *X' 5 5 ~ *"* ^2" - 3- -.,-.8 ----- 3,- | O * 0< OO (N * O O O CN O O i | s 01 % r^SSi SSS r^ 2i2i2r3 E :::::::: ; ; ? : fi : : ^ P, ! c 3 % s ^ ^> bp fl ' S * 5 HH [ y* > Ui s i i I Hi ill ? 1 S S -2 go^'3 ^;S >}C jg g .g & 1 Q* W5 P3 a QOOOOWOOOOl>COOS5 ^Ot-^h H s W 5 ^ OOOOO^ .OOOtOOOO O5O5 | 25 co r-n d o GO ^ : d co od os d o d -^ ai i> *' a O CO O O O O 00 i> O O O OO OS OS O Q3 O O . 5 1 pq 5 rf O *O OOOOOOOOOOOO1>O OOOO 1 2 s ::::::: : : : % f P4 O "wj : : :i .2 1 s i ? 8 * * * ~ : *** .1 8 S fc c 2 "^ Illlllilllllll fill 44 TABLE 31. PERCENTAGE ANALYSIS OF CHARGES AGAINST INCOME Item Companies Municipalities l Holyoke Amount Per cent of total Amount Per cent of total Per cent of total Operating income $1,417,235 22,222 ... $671,761 2,957 ... Other income (pro- fit and loss items) . . Total $1,439,457 566,521 872,935 90,094 56,314 353,870 62.5 6.4 4.1 25.4 1.6 $674,718 112,075 562,643 62,143 92,306 24,596 55,797 8,096 70.0 7.7 11.4 3.0 6.9 1.0 67.3 7.6 15.7 9.2 0.2 Total available ("net") Charges against income: Operating expenses . . . Interest Depreciation Dividends Sinking fund pay- ments Note and Bond pay- ments All other charges Total 23,415 $1,396,628 42,829 100. $805,581 130,863 (deficit) 100. 100. Balance Holyoke omitted. 45 1 ft li{ 3 r-H 05 CO r- C 5 ^ * * Tf ^ O C O * e *! CO .-H 05 rH C J O 3 ^ < *O C5 GO C b 1 I* O5 O i- < r^ l> j C5 X O5 O O5 C 5 I 1 'a 1 1^1 O O rH X C C . c a. fe^->"l K GO c. O , OH 1 3 r^ co os Tf< -^ c i-H -rfi O5 CO i i C O5 CO * X CO C 5 M 8 O O O O5 r J> X X 05 ^ i B "e , "g X O5 O Tjf O r H < "3 K at k'o'l O O< rj* GO < r H GO s a i "* CO l> if" X * f 1 .- l . O *O O5 t> r- CD O< O X O5 H 9 s "o O X J> <3* CO C! 5 1 6-H X O5 3 TJ< O5 u 5 II 11 ; ! 1 j N I > '' GO c GO i> ^ X X 5 < -^ X r~t ^H t * C3 1 1 ^ i>- CD CO X T O* CO < X O r-l Tf< X 1-1 X i 5 8- 1 1 i GO 5 CD S X G X CO 5 ^f" i-t O 1 1 CD X X i>* Grt C* CO X O5 *O i i Q GO GO 5 CD X C 5 < 5 * 0*