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Author:
Clark, Harlow C.
Title:
Service at cost plans
Place:
New York
Date:
1920
.A
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Clark, Harlow 0.
Service at cost plans; an identical analysis of statutes, '
ordinances, agreements and commission orders in effect
or proposed, together with a discussion of the essentials
ot local transportation franchises. By Harlow C. Clark .
' •• ^' .2.^^^' ^' ^'^ American electric railway asso-
ciation, 1920.
vi, 3-315 p. 24''".
Reprinted in part from the Aera magazine.
1. Service at cost (Public utilities) 2. Street-railroads-Finance.
Library of Congress ^,^^ HD2763.C5 20-11022 j
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LIBRARY
School of Business
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SERVICE AT COST PLANS
An Identical Analysis of Statutes, Ordinances,
Agreements and Commission Orders in
Effect, or Proposed, together with
a Discussion of the Essentials
of Local Transportation
Franchises.
By HARLOW C. CLARK
Editor of Aera
Published by
AMERICAN ELECTRIC RAILWAY ASSOCIATION
' 8 WEST 40TH STREET
NEW YORK, N. Y.
1930
o
O
irt
CONTENTS.
FOREWORD
Page
3
9
Copyright, 1920 by
American Electric Railway Association
S^O^^
CHAPTER ONE — The Essentials op a Franchise
The Relation of Local Transportation Service to Community Life
and Community Development — Elements of The Electric Railway
Problem — What Is Required to Attract and Retain Private Enter-
prise in the Public Service — What the Public Seeks from Private
Enterprise.
CHAPTER TWO — Public Utility Capital
Normal Capital Requirements of Local Transportation Enterprises
— Present Time Requirements — From Whence to be Obtained —
l<\inctions of Investment Bankers, Holding and Management Corpo-
rations — The Ultimate Investor — Conditions Under Which He Will
Loan His Capital.
CHAPTER THREE — Risk of Supercession 13
Risks to Which Local Transportation Investment is Liable —
Supercession — How It Can Be Eliminated — The Advantages of a
Transportation " System " Conducted by a Single Agency Unre-
stricted as to the Character of the Vehicle Used — Motor Transport
as an Auxiliary to Electric Rrailways.
CHAPTER FOUR — Risk of Termination 17
Risks to Which Local Transportation Investment is Liable — Ter-
mination of Right to Conduct Business Without Provision for Re-
covery of Investment — Franchises as a Protection to Investment —
Effect of Term, or Period — Necessity of Amortization when Period
Is Short — Importance of Credit — Protection of Public Interest
with Long Term Franchises — The Indeterminate Permit Considered.
CHAPTER FIVE — Risk op Attrition 23
Risks to Which Local Transportation Investment is Liable —
Attrition of Physical Property — Must Be Compensated from Reve-
Mie — Am Operating Cost and Not a Charge Against Profits — Can-
not be Provided For Through Current Maintenance — Necessity for
Adequate Reserves — Public's Interest Protected by Such Reserves —
The Position of the Industry upon Depreciation.
CHAPTER SIX — The Investor's Requirements 27
Return — Investor's Power to Prescribe Return — His Three Pri-
mary Requirements — The Cost of Money — Its Effect upon the Cost
of Service — Assurance of Return Dependent upon Revenue — Sources
of Revenue — Public Contributions and Public Imposts — What the
Community Owes the Car Rider — Public Subsidies.
ill
IV
Contents
CHAPTER SEVEN - The Pbovision of Revenue gg
Return -Revenue from Upeiation - Price Dependent Upon Cost
-- Elements of Ooi^t- Power of Ent^rpri^ to Control -A ece^aity oi
Automatic Adjustment — Delay in Adjustment and Its Etlect —
Determination of Proper Rate Not Difficult - Fare Systems and
RateB of Fare -The Prevention ol Frequent Fluctuations in Kates.
CHAPTER EIGHT — Management and Contbol ^^
Management as Distinct from Capital a Necessity U>' the EnteV-
prise — Its Nature— Cannot Be Obtained wiUiout Reward — Its
Relati.«i to the Car Rider — Provision ot Incentive - Regulation
juwl Management - Theory of Regulation - stale and Local Regu-
lation-Importance of Public Co-operation— Supervision versus
Management -Authority and Responsibility Inseparable - Limi-
tation of Public's Right to Demand Service - Control over Oper-
ation — Maintenance — Finances — Arbitration.
CHAPTER NINE — Existing Plans Considered 53
Six Essential Principles Governing Relations Between Communi-
ties and Private Enterprise Engaged in Local Transportation Service
— Extent to Which They Are Applied in Existing or Proposed Serv-
ice At Cost Plans — Inclusive and Exclusive Rights — Indeterminate
Permits — Provisions for Proper Maintenance — Assurance of Re-
turn — Flexibility in Rate of Return — Reward for Management.
SERVICE AT COST PLANS IN EFFECT.
iNTBODUCnON «-
67
General Conditions.
Life _
Renewal -^
Forfeiture -t*
* 1 4
Public Pubchase.
By the City
When purchase can be made yg
Terms of purchase yg
By Licensee of City
When purchase can be made 34
Terms of purchase gg
Contbol.
Corporate autonomy g*
Of service
Within municipality g|
Outside of municipality : ^^
Of construction, maintenance and repairs 95
Of extensions, betterments and permanent improvements
Defiyiitions go
Within municipality jqq
Outside of mundcipality ] jofi
Contents
SERVICE AT COST PLANS IN EFFECT — Continued.
Contbol — Continued.
Of oapitalization, finances and accounts PAGE
Ordinary expenses 107
Securities 109
Bookkeeping Ill
Of methods and practices 113
Use of tracks and facilities by other companies 115
Machinery of control
Power, where lodged 118
Administration 121
Powers and duties of administrative body 125
Arbitration
Machinery for 141
Powers of arbitration authorities 140
Penalties 156
Expenses of arbitration 158
Retuen
Initial value 159
Added value 162
Deductions from value 167
Rate of return, normal 171
Additional allowances 174
Assurances of return 175
Cost op Service
Definition of 178
Allowances
OperaJting 187
Maintenance
Definition 189
How fixed 191
Depreciation 195
Special tax and impost features 199
Fares
Schedules of 20.3
How fixed 212
Transportation op Freight, Express, etc 223
Special Provisions 225
SERVICE AT COST PLANS NOT IN EFFECT.
Introduction , 229
General Conditions.
Life 231
Renewal 232
Forfeiture 232
Public Pubchase.
By the City
When purchaee can be made 284
Terms of purchase 286
^ Contents
SERVICE AT COST PLANS NOT IN EFFECT — Continued
PUBUC PuBCHASE — Continued.
By Licensee of City ^^^^
When purchase can be made 238
Terms of purchase 239
Control.
Corporate autonomy 240
Of service
Within municipality 241
Outside of municipality 242
Of extensions, betterments and permanent improvements
Definitions 243
Within municipality 244
Outside of municipality 250
Of capitalization, finances and accounts.
Ordinary expenses 250
Securities 251
Bookkeeping 255
Of methods and practices 258
Use of tracks and facilities by other companies 2«0
Machinery of control
Power, where lodged ^62
Admanistration 263
Powers and duties of administrative body 267
Arbitration
Machinery for 273
Powers of arbitration authorities 276
Penalties 276
Expenses of arbitration 277
Retubn
Initial value 277
Added value 279
Deduction® from value 281
Rate of return, normal 285
Additional allowances 286
Assurance of return 286
Cost of Service.
Definition of 287
Allowances
Operating 293
Maintenance
Definition 293
How fixed 294
Depreciation 205
Special tax and import features 298
Fabbs
Schedules of 301
How fixed , , 3Q4
DmrspQBTAnoir or FUeiort, Eznomsi wo 310
BncuL Pionsioifs , ! ! 812
FOREWORD
It is essential to the continuance of private enterprise in local
transportation service that the credit of the companies engaged
in the undertaking he re-established on such a basis as will
attract the new capital necessary for the growth, development and
expansion of the facilities through which the service is furnished.
This problem of readjustment is acute in practically all Ameri-
can cities and communities, and is receiving the attention of the
National and various State and local governments as well as busi-
ness and civic organizations. As a means of readjustment and for
the purpose of assuring to the utilities such revenues as will restore
their credit, while protecting the public from excessive charges,
a number of communities have provided for the conduct of these
utilities under so-called " service at cost " plans, while a number
of other communities have such plans under consideration.
It is in order that the public and the operators of local trans-
portation utilities may have in convenient form the principles and
the details of the various cost of service plans, both those which
are now effective and those which have been prepared but which
for various reasons have not become operative, that the following
study was undertaken.
It consists, first, of a consideration of the fundamentals which
must, if private capital is to be secured, underlie any expression
of legal right to conduct a local transportation utility and the pro-
visions of statutes, ordinances or commission orders governing the
relations between such utilities and the communities; second, an
analysis of the various measures with the idea of ascertaining the
,
^ FOBKWOED
extent to whicli such principles have been applied ; third, an identi-
cal analysis of the cost of service plans now in effect, similar
provisions being grouped together in order that the provisions
covering any particular point may be quickly ascertained, and,
fourth, a similar analysis of service at cost plans proposed but not
effective.
The section covering plans already in effect is a regrouping of
material that has from time to time apj^ared in Aera. The
remainder of the text is new. Although pu])lishod by tlie Associa-
tion, the author and not the Association or any of its committees
is responsible for the opinions expressed.
CHAPTER ONE
The Essentials of a Franchise
The Relation of Local Transportation Service to Community Life and
Community Development — Elements of The Electric Railway Problem —
What Is Required to Attract and Retain Private Enterprise in the Public
Service — What the Public Seeks from Private Enterprise. •
With the exception of water and sewers, local transportation is,
for eitios of any considerable size, the most essential of all public
utilities. The widely spreading city, with its segregation of busi-
ness from residential districts in order that each may in point of
character and development best serve its own purpose and best
meet the common need as to health, comfort and convenience, is
jorsible only by reason of local transportation. Its extent and
character determines the manner in which communities develop.
Without rapid transit, cities like New York, Chicago, Boston and
Philadelphia are impossible. Deprived of it, they would split up
into smaller, self-contained communities, or congestion greater
fliiiii anything now known would ensue.
A Transpartation System the Requisite.— A transportation
" system," and not merely the provision of transportation units,
is one of the primary requisites of a community. The social func-
tion of local transportation is its most important function. The
system must extend, expand and improve in pace with community
requirements and in conformity with a considered plan and not
at haphazard.
Cities develop as their local transportation facilities develop.
Urban population conforms to transportation lines, as the growth
of nations has followed the path, first of their waterways, then
of their highways and finally of their railroads.
" City planning " which involves city development along lines
which furnish to the public the maximum of healthful living con-
ditions, comfort, convenience and business facilities, must always
depend upon the provisions of adequate local transportation.
AVhat all communities require is the co-ordination into a single
system of all means of transportation, each to perform that part
of the service for which each is the best suited. Rapid transit in
subways or on elevated structures, surface transportation on tracks
M.
Sekvice At Cost Agreements
or on rubber tires, are facilities which can best serve in co-opera-
tion, and not in competition, with each other. To properly serve
communities, all of these means of transportation should be directed
and controlled by a central agency, which has in mind, not the
promotion of the interests of any one of them, but the furnishing
of the best means of intercommunication to the community as a
whole.
In a growing city there is no such thing as a completed local
transportation system. As the city grows so must its transportation
system grow. The capital requirements for new construction for
the electric railways of the United States indicate this continuing
growth in a normal period. They are well over $200,000,000 a
year. This is about $5 for each man, woman and child classi-
fied by the Census Bureau as a unit of the urban population. For
a group of 30 utilities, 25 of which were electric railways, the
expenditures for new construction for the pre-war period 1902 to
1913, as reported to the Federal Electric Railways Commission by
Mr. Henry G. Bradlee of Stone and Webster, were $37 for each
$100 of gross revenue. Between 1900 and 1910 the urban popula-
tion of the United States increased more than 38 per cent. In
some way, the local transportation needs of these additional city
dwellers must be taken care of.
The Beal Electric Eailway Problem. — It is this expansion of
local transportation facilities to meet urban requirements that
constitute the real electric railway problem as it affects the com-
munities. Unless, and this involves a reversal of present tendencies
little likely to occur, the growth of cities is halted, and population
drifts to the country, the future social and business habits, mode
of life, and to a certain extent the morals of the people of the
United States, de[)end upon the manner in which local transporta-
tion facilities meet local transportation needs.
It is the business of communities to provide for their inhabit-
ants the best possible living conditions, the greatest degiee of
comfort and the largest extent of convenience, both for the trans-
action of their business and for the conduct of their private lives.
Neither health, comfort or convenience is compatible with con-
gestion, and congestion can be prevented only if adequate local
transportation be provided.
Service At Cost Agreements 7
Today, only the cities of ITew York, Chicago, Boston and, to a
very limited extent, Philadelphia, have any system of rapid transit.
There is need for such a system in many other cities and as urban
population increases this need will increase. Today, few, if any,
cities have entirely adequate systems of surface transportation and
these conditions, both as to rapid transit and as to surface trans-
portation, have been greatly aggravated by the practically total
cessation of new construction during and after the war. In almost
every community there is a present insistent demand for an ex-
tensive construction and rehabilitation and for improvement in
the facilities with which the personal service is being furnished.
Irrespective of whether it be provided by means of electrically
propelled vehicles or by motor buses, every urban community
requires a transportation system which will: —
First, expand and develop so as to permit the growth and
development of the City along lines that will eliminate and
prevent congestion, allow living conditions conducive to health,
sanitation and comfort, prevent inflated real estate values,
and afford the maximum of convenience in the transaction of
business.
Second, furnish safe, adequate and convenient service,
based in the first instances on consideration of social needs,
and,
Third, operate at as low a cost as is consistent with the
service furnished.
Such a system may be secured in two ways. First, through its
provision directly by the community, and second, through its pro-
vision for the community by private enterprise. It is with this
latter method that we are concerned. The question of public o^vn-
ership and operation of utilities is a question of policy involving
considerations which need not be here discussed. There is no
likelihood of its immediate adoption by any considerable number of
communities. There is, however, present and pressing need for the
improvement of local transportation facilities, which must be
accomplished through public use of private enterprise,
o
Seevice At Cost Agebements
II
What is Required of Private Enterprise What the communi-
ties require has been aptly summarized as " the best possible serv-
ice at the lowest possible cost." If this is to be furnished by private
enterprise, then the demand of the public upon such private enter-
prise is for
First — Capital, and,
Second — Management.
Fnder what conditions can these two essentials be best obtained ?
That is the question that most directly concerns the communities,
and until it be answered no conception of a correct and equitable
basis of relationship between the communities and private enter-
prise working in their behalf can be secured. As between the
interests of the public and of private enterprise, there can in the
long nm be neither divergence nor conflict, since, in spite of legal
protection, there can be no successful conduct of an enterprise
furnishing a public service, 'using the public streets, and dependent
in almost every detail of its operation upon public consent and
support, without public co-operation. The public interest is
undoubtedly paramount and when this conflicts with private enter-
prise, experience has frequently proved that it is the latter which
must give way. ^Nevertheless, it will be fouud upon examination
that full prot^tion to private enterprise is one of the fundamentals
which must underlie any agreement or arrangement by which
private enterprise is enrolled in the public service upon terms
most advantageous to the public itself.
It is, therefore, proposed to discuss in the following pages the
conditions which should properly control, in contracts providing
for public use —
(a) Private Capital
(b) Private Management.
CAPITAL
CHAPTER TWO
PubHc Utility Capital
Normal Capital Requirements of Local Transportation Enterprises —
Present Time Requirements — From Whence to be Obtained — Functions of
Investment Bankers, Holding and Management Corporations — The Ultimate
Investor — Conditions Under Which He Will Loan His Capital.
Capital, as the word is used in connection with public utility
enterprises, consists of the money, or its equivalent, invested to
create the entei-prise, and of the money, or its equivalent, invested
to expand, extend and improve it. It constitutes the money, or
value, which is entitled to a return.*
A local transportation utility, prescribed as to its rate of return
and so deprived of the power to accumulate capital from earnings,
has but one source from which it may derive capital, i.e., the
investor.
The capital required to inaugurate a transportation utility in
the case of such utilities as serve gi-owing communities is but the
beginning of a continuing and continuous demand for new invest-
ment. Extensions, betterments and permanent improvements, all
require expenditure of money, which, because no surplus over and
above what has been decided to be a fair return is permitted, must
be new capital. The extent of the demand for new capital has
already been referred to. It is again shown by statistics of certain
properties, whose security issues are and have been for the period
covered, imder strict regulation, so that all question of improper
accounting or improper expenditure is removed. Thus in 1890,
the capital liabilities of the 48 electric railways then operat-
ing in Massachusetts were $25,011,989, in 1915 they were, for
53 companies, $221,543,802, an increase of $195,931,813, or 765
per cent, which is an average for the 25 years of $7,837,172
a year. This shows an increase in capital investment from 15.5
cents per passenger carried to 29.1 cents per passenger carried,
or nearly 100 per cent. It does not include the very considerable
[9]
10
Service At Cost Ageeements
Service At Cost AoREEME'iyTS
11
•I
I
\
investment by the city of Boston in subways. (Statistics hosed on
the report of the Street Railway Investigation Commission, created
hy the Massachusetts Legislature 1917. Pages 145 tmd 166).
In 1907 the construction and equipment account of the railways
reporting to the New York State Public Service Commission of
the Second IKstrict showed as of June 30, 1907, a balance of
$179,262,445. On I>ecember 31, 1918, the balance stood at
$240,690,179, an increase of $61,427,734, or 32 plus per cent,
making a yearly average of $6,466,076. (Statistics based on
reports of New York Public Service Commission^ Second District,
1907 and 1918.)
As an example of the new money required by a single company
the figures for the Cleveland Railway Co. are available. The
Capital Account of this company has been under the supervision
of the city of Cleveland, since the company began operation under
the Taylor gi-ant in 1910. As of December 31, 1910, it stood at
$21,638,100; on December 31, 1918, it was $34,211,400, an in-
crease of $12,573,300, or 58 plus per cent, being an average of
$1,571,662 a year. (Statistics based on wnnuod report of the
Cleveland Railway Co, 1918.)
For the United States, figures compiled by the United States
Bureau of the Census show that between 1902 and 1907 the net
capitalization (i,e., capital stock and funded debt, minus duplica-
tion and stocks and bonds of companies conducting other business)
of the electric railways of the country increased at the rate of
$256,498,000 a year. Between 1907 and 1912 it increased at the
rate of $168,700,000 and between 1912 and li917 at the rate of
$129,400,000.
The figures for 'Massachusetts, New York, Wisconsin, Cleve-
land or the United States do not, however, accurately reflect the
present capital needs of the local transportation utilities. For
some time before and during the war, they show the amount of new
capital that it has been possible to obtain, rather than new capital
actually needed, and the falling oflf in capital additions indicate
the reason for the failure of the railways t» provide the service
demanded by the public. Adequate service is limited by the pro-
vision of the facilities through which it is rendered, and these can
be provided only through the expenditure of new capital.
The three reasons why such facilities have not been furnished
during latter years are :
First, the reluctance of investors to provide capital.
Second, the limitations put upon capital expenditures of all
kinds, by the Government, as a war measure, and.
Third, the reluctance of the managements to undertake any
but absolutely necessary extensions, betterment and improve-
ments during the era of high prices that has for some time
obtained.
In consequence, there is now an accumulation of necessary major
expenditures, which will for some years to come increase the capi-
tal requirements of electric railways far above the normal. If
this normal be estimated at $200,000,000 a year for the country,
it is not too much to say that for the next five or ten years it will
be at least $300,000,000 a year.
From what source is this capital to come? It is evident that
there is but one ultimate source — the savings of the people, the
margin between their earnings and their expenditures.
" Wall Street," by which collective term there is expressed to
the mind of the average man or woman the investing i>ower of
the nation, is not an ultimate source of capital. It is merely a
part of the machinery by which money is collected for investment,
and through which it is distributed among the various enterprises
which seek capital. The function which it performs is that of
decreasing the cost, effort and time which is required to secure
capital.
In connection with public utilities, the term covers both invest-
ment bankers and so-called " holding " companies, neither of which
are final sources of investment. The investment banker buys
securities for the purpose of later selling them to the ultimate
investor. The holding company buys securities to serve as a basis
for its own securities which are later sold to the ultimate investor.
The distinction is obvious, the ultimate investor is he who buvs
securities for the purpose of obtaining the return thereon: the
investment banker and the holding company buys securities for
the profit — entirely legitimate — derived from its business of
12
Service At Cost AoREEMinras
Service At Cost Agreements
IS
f
f
selling them to the ultimate investor, and in the end the holders
of the securities of local transportation utilities, or of the securi-
ties protected by such investment will be found to be individuals,
whose thrift and industry has enabled them to accumulate 'savings.
In illustration, — 49 companies scattered throughout the United
States reported to the American Electric Eailway Association,
bonds outstanding to the par value of $240,347,825, in the hands
of 448,775 holders, or an average par value for each individual
of $535.92 ; 98 companies reported stock outstanding amounting
in par value to $440,867,745, distributed among 32,788 indi-
viduals, an average of $i;i.44(), /jar value, per individual ; 10
companies, four in Texas, two in Michigan, and one each in Minne-
sota, Wisconsin, Washington and Florida, report 1,273,870 shares
of stock outstanding in the hands of 23,952 holders, of whom
11,324 were men, 10,941 were women and 1,686 trustees of
fiduciary institutions, an average holding of 53 shares per indi-
vidual ; the life in«urance companies of the United States hold
eleetiic lailway securities to the book value of $116,592,670
{Letter of Mr. George W, Smith, Actuary, Association of Life
Insurance Presidents July 16, 1919) ; while in 1915 of a total of
outstanding bonds of Massachusetts electric railways amounting
to $87,717,700, $31,414,000 or more than 36 per cent were held
by savings banks and other fiduciary institutions.
These statistics are given not as a plea for these investors, but
solely to show that if local transportation securities are to be sold,
neithtn* the investment banker, nor the holding company, have it
within their |)ower to stipulate the terms and conditions upon
which the sale must rest, but that such power resides in the ultimate
investor alone, and that it is the requirements of these investors
that must be met if the new capital needed for local transporta-
tion is to }ye forthcoming.
The question as to the efficiency or economy of the present
system of disposing of utility securities through banking houses
and :j1)S( upturn by holding companies is alien to the present dis-
cussion, since, insofar as the teriiH and conditions of investment
are concerned, these but act as agents of the ultimate investor,
whose demands are the demands that must be satisfied, before he
will consent to loan his savings for the public service
It is then essential to determine what are the reasonable and nor-
mal requirements of the individual whose funds are sought, the
terms and conditions upon which he will lend his capital, and it
may be assumed that the two factors which will at all times and
under all conditions control, are,
First, The degree of safety, that is, the assurance of its
return undiminished at the expiration of the period of its
public use and
Second, Rate, and a-ssurance of return ; that is, the amount
which it shall be permitted to earn during its period of public
use, and the degree of certainty of return.
Third, The marketability of the securities offered.
Conclusions
Transportation utilities have hui one source of capital — the
investor,
A continuing supply of new capital is necessary to the develop-
ment of local transportation systems in pace with comnnttnity
requirements.
The terms upon which new capital may he obtained are dictated
by the investor and may not be controlled by either the community
or the utility.
The basic conditions upon which capital may he obtained are
that the safety of the investment and an equitable and fair rale
of return be assured.
CHAPTER THREE
Risk of Supercession
Risks to Which Local Transportation Investment is Liable — Supercession
— How It Can Be Eliminated — The Advantages of a Transportation " Sys-
tem " Conducted by a Single Agency Unrestricted as to the Character of
the Vehicle Used — Motor Transport as an Auxiliary to Electric Railways.
Money invested in local transportation is in danger of loss, par-
tial or total, from three causes :
First, The method of transportation which it is used to
provide may be superseded by some more efficient or econom-
ical method to an extent which will greatly decrease the
2
14
Service At Cost AgreemfxYts
value of the physical projjerty of the enterprise and at the
same time render its right to conduct l)usiness valueless;
Second, The right of the enterprise to conduct business and
to the use of the city streets for such purpose may be with-
drawn, without compensation for the loss sustained;
Third, The physical property which it provides may
become worn out or obsolete, in the public service, without
provision for its replacement having been made from revenue.
The first of these risks is equally liable to occur in the case of
public ownership and operation. It is not assumed by communities
which issue in payment for utilities purchased or cMistructed so-
ealled " public utility " bonds secured only by a lien upon the
property and earnings, and it can only be entirely assumed by the
public through the pledging of the public credit, either directly in
the case of money raised through issues of community bonds, or
indirectly, in the case of public guarantee of securities. It may be
mitigated through the amortization of the investment, or through
a grant to the utility of exclusive right to provide, local trans-
portation by any and all methods.
It is more than a mere theoretical risk. The development of
the motor bus, while it is extremely unlikely to furnish a substi-
tute for a " system " of electric railways, has at least shown that
under certain conditions and in certain localities service can be
provided by other means than electrically propelled cars on rails.
The unrestricted and unregulated use of such vehicles does, in
point of fact, at the present time, threaten the safety of electric
railway investment in many instances. It is not to be believed
that the improvement and evolution of the motor vehicle can be
arbitrarily prevented or to any extent hamjiered. If it can be
made more efficient and more economical than the electric car, then
it will undoubtedly supersede that means of transportation, as
the cable car superseded the horse car and was in turn superseded
by the electric car. Similarly, any other method of transporta-
tion, if better than electric railway transportation, will in the end
succeed it.
From this risk investment can be protected only if the right
of the enterprise to conduct business, be an exclusive right to
Service At Cost Ageeemexts
15
furnish a transportation system, by whatever means and methods
iire the cheapest and most efficient and if it be permitted to
amortize from earnings such losses as may arise from supercession.
The development of any new means of transportation, under
competition, will in the end prove more costly than will its develop-
ment as a part of or in conjunction with the existing transporta-
tion system. Competition as a means of regulating public utility
charges and service has been discarded by the public as expensive,
temporary, inconvenient and an ultimate deterrent of both good
service and low charges. Yet today in the case of motor transport,
competition is being encouraged and is resulting in the decreased
efficiency of transportation systems, whatever its effect may be
in respect of certain parts or phases of such system.
Thus, while the operation of motor buses in districts already
ser\t^d by street cars may add to the facilities furnished to those
particular sections of the communities, it deprives the street car
lines of earnings and so lessens the system's ability to furnish
service in other parts of the community, where because of lesser
density of traffic or for other reasons motor buses will not operata
It cannot be too strongly emphasized that the most pressing
need of comnumities is for a complete system of local transporta-
tion, and not for excess of service in particular localities. The
development of some particular unit of transportation does not
mean the development of a local transportation system. All
methods of transportation may have their proper place in such a
system but the interests of the communities require that they be
co-ordinated in such a manner that each shall perform the task
which it is best equipped to perform, and that none shall be devel-
oopcd at the expense of the complete system.
In Great Britain this principle has been recognized and made
effective. Mr. Walter Jackson in an article in the Electric Rail-
way Journal of February 28, 1920, states that motor buses are
being operated, in connection with tramways, as part of the same
system among other places, in cities of Birmingham, Liverpool,
Manchester, Sheffield, Leeds, Edinburgh, Barrow, Barnsley, Peter-
borough, Stoke-on-Trent, Greenock, Sheerness, East, Wrexham,
Beading and Swansea, while application for permission to operate
16
Service At Cost Ar.REEAfENTS
buses in connection with tramways has been made for Blackpool,
Cardiff, Erith, Coventry, Huddersfield, Lowestaft, Newcastle-on
Tyiie, Nottingham, Salford and Southampton. In the United
States, there are isolated instances where motor buses are oper-
ated by the same interests (but not by the same companies) as
those which operate the electric railway service, but there is
nowhere a rec(^ition of the principle, that if both means of
transportation are to be employed, they should be under a single
management, first and foremost for the purpose of providing a
complete system, and, second, in order that the investment in the
original enterprise may be protected.
If, theft, privately operated public utility enterprises be granted
the right to provide a complete and exclusive local transportation
system for the community, not only will the communities be
better and more efficiently served, but the risk of supercedence
Iwrne by the investment will be reduced.
The grant under which private enterprise is permitted to fur-
nish local transportation service should be both inclusive anrl
exclusive, and should cover a transportation system and not
merely a particular method of transportation.
Conclusions
Money invested in local transportation is in danger of total or
partial loss if the means of transportation it is used to provide
he superceded by some other more convenient or economical form.
This risk can be obviated only if the enterprise he given the
exclusive right to provide a transportation system, by whatever
means are the best and cheapest and is permitted to amortize from
earnings losses occasioned by supercession.
It is in the interest of the communities and the public that the
provision of a local transportation system embracing all means
of transportation be confided to one agent.
CHAPTER FOUR
Bisk of Termination
Risks to Wliich Local Transportation Investment Is Liable — Termination
of Right to Conduct Business Without Provision for Recovery of Invest-
ment — Franchises as a Protection to Investment — Effect of Term, or Period
— Necessity of Amortization when Period Is Short — Importance of Credit —
Protection of Public Interest with Long Term Franchises — The Indetermi-
nate Permit Considered.
The second of the risks to which capital invested in electric
railways is liable is that its right to conduct its business may be
terminated without provision being made against the loss that
nilist always be present when a going concern is converted into
a mere aggregation of physical assets — the difference between
a " business " capable of earning a return and the scrap value
of the physical property with which the business was conducted.
The foundation of the local transportation company's credit is
the expression of legal right, franchise, grant or agreement by
which it maintains tracks in the public streets and operates cars
thereon.
Money is obtained for these companies, not so much on the
strength of their physical assets, as upon their ability to earn a
return. Tracks, cars, power houses, wire and other apparatus
have a certain value as " scrap," but this " scrap value " in no
case equals the " value '' of the property which, for the investor,
must be based upon the utility's earning power.
The risk of having the " value " of the property converted from
that inherent in a living business enterprise, to the "value" of
commodities like rails, ties, concrete, cars, wire, power houses^
etc., etc., is controlled by the period or terms of its grant.
L(»cal transportation franchises are, as to period, of three gen-
eral classes, perpetual, term, and indeterminate.
There is little use to discuss the perpetual franchise. There is
no likelihood of any community making such a grant in connec-
tion with service-at-cost and there is, perhaps even less likelihood
m view of recent experience, of any traction company accepting
117
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Sebvice At Cost Ageeemfats
Seevice At Cost Ageeemejsts
19
I
swell a franchise with the limitations as to fares and the require-
ments for service extending indefinitely, such as it would inevi-
tably contain. In the present period of readjustment, the out-
standing requirement of any plan for regulating the relations
between local transportation companies and the cities is flexibility.
The rigidity that must necessarily be present in any grant in per-
petuity, if the interests of either the communities or the investors
are to be protected, would operate to prevent the evolution of
the transportation system in the way which will best serve both
parties.
An examination of 131 franchises held by companies, in all
States of the Union except 12, and in Canada and the District of
Columbia, shows the wide divergence in the terms of such grants.
Thus, of the 121, 27 are in perpetuity, one is for 100 years, two
for 99 years, 31 for 50 years, four for 35 years, two for 34 years,
nine for 30 years, 26 for 25 years, eight for 20 years, while nine
were indeterminate as to period.
For all but 38 of these 121 companies, there then exists a risk
that "value" may be reduced from the value attached to a
" going " concern to the " value " attached to its physical prof,-
erty mly. This risk exists in all " term " franchises, and its
degree is marked by the length of the term. It can he eliminated
in " term " franchises, only if during the life of the franchises,
there be taken from the fares paid by the car riders to the com-
pany such an amount of cash as will equal the diffei-ence tlu*
value of the company as a " going " enterprise and the " scrap
value " of its physical property. This process must necessarily
include not only the amortization of the difference as it affects
the property existing on the date when the franchise became
effective, but every addition to the property subsequently made.
The impractieability of any such proc^css is obvious. For
instance, in the case of a 20-year franchise, the difference as it
affected the original investment (i. e., the investment at the time
the franchise took effect) would presumably be amortized in
20 installments and later investments would \ye amortized in
installments equal to the numW of years remaining to the fran-
chise, so that toward the end of the life of the franchise the amount
to be paid annually would be so great as to impose an impossible
burden upon the car rider.
There is, however, no good reason why, if vahie is at all times
kept behind investment, the car rider should be called upon to
bear any amortization charge of this character. The sole argu-
ment, therefore, is that by such amortization the investment upon
which return must be paid is reduced. The reduction, however,
is at the expense of the car rider, and means if cheaper fares
actually result, that the car rider of the present is assuming a
part of the cost of the rides to be given to the car rider of the
future. Equity demands that the present rider should assume
and pay for every cost of the service furnished him, and this cost
includes property worn out or rendered obsolescent in the service,
thus keeping property value in step with capital value as that
represents the amount upon which return is paid. It does not,
however, require that he should assume any expense, the purpose
of which is to enable service to be given to future car riders at
lower rates. Amortization of investment in this form is, there-
fore, simply a shifting of costs from one set of car riders to
another and only to the extent that such amortization charges can
be equitably distributed over the years, so that no one set of riders
shall be subject to unjust burden, may the practice be defended.
Amortization of investment for the purpose of purchase involves
another principle, which is unrelated to the question here dis-
cussed and affects more particularly the method by whicb public
utilities should be acquired.
The point here raised is that the risk of loss to investors
through the termination of tenn franchises can be obviated onlv
through amortization of part of the investment. This principle
was recognized in the earliest of the so-called service-at-cost fran-
chises, that in Cleveland. Under the laws of Ohio, no franchise
can l»e granted for a longer period than 25 years, and in order to
protect the company from the risk of loss occasioned by termi-
nation, the grant provides, when it has less than 15 years to nm,
that the company may charge the highest rate of fare provided,
that control of schedules shall pass from the city to the company
and that the surplus in excess of the cost of service shall be used
for the purpose of amortizing the investment. The principle
20'
Sekvice At (>)st AGEEEMiris^rs
Service At Cost Agbeemeats
»
tl
embodied in this provision is still more clearly set forth in the
Youngstown franchise, which, like the Cleveland franchise, pro-
vides for only a 25-year term. When this grant has less than
1 5 years to ran, it is provided that the company may charge such
a rate of fare as will provide a fund which, with interest com-
pounded at 7 per cent., will amortize the difference between
Capital Value and Salvage Value as they may stand at the termi-
nation of the franchise. The Westerville franchise has a pro-
vision similar to that of Cleveland.
With "term" franchises, whether they be short or long, the
credit of companies can be firmly established only if provision
for amortization is made, since without such provision, there
must necessarily come a time, whether it be 10, or whether it
be 90, years from the date when the agreement was entered into,
when the risk of loss through termination becomes so imminent
as to demoralize the entire financial structure of the enterprise.
Moreover, provisions like those in the Cleveland and the Youngs
town grants, while they serve to protect investment already made,
are insufficient to induce new investment during the later years
of the franchise period, since amortization would in all prob-
ability necessitate a higher fare than could be profitably collected.
It is sought in the franchises under discussion to miminize this
objection by providing for early renewals, and by the agreement
that in the event of such renewals, the amortization shall cease.
Such provisions are in reality admissions of the undesirability
of short term and have the tendency to keep the relations of the
community and the. company in ,a more or less constant state of
turmoil. For the period of franchise negotiations is in every
case an unprofitable one, both for the municipalities and the com-
panies. During its continuance and until a basis of relations
have been re-established, extensions and betterments cease, service
almost invariably deteriorates, hostility is engendered, co-operation
between public and company which is the basis of good service
suffers, and a question which should be answered from considera-
tions of good business sense alone becomes a political question.
The limitation of the term of franchise grants to be found
in the constitutional or statute law of many States express, first,
a reaction from the practice of granting franchises in j)erpetuity
ami, second, tho desire to pro:\nde a greater degree of control over
t!:c jjiiblic utilities than had before existed. Most of the limiting
I »i() visions were incorporated in the law during a period when such
. c'gulation of the utilities as existed was by virtue of franchise pro-
viLions. These provisions attempted to govern in detail question
(•r both ratos and sen-ice much in the manner of the plans and spec-
ilications accompanying a contract for the consti-uction of a build-
ing. Obviously no one had the wisdom or knowledge to draft an
instrument in which would properly accomplish this purpose over
any considerable time. Moreover, the popular conception of a
fianchise pictured it not as a mere authorization to perform a
pnblic service in the public interest, but a grant having a substan-
tial value because it pennitted the collection of an unlimited
amount of retuni from the jmblic, so long as its provisions as to rate
of fare and conditions of service were complied with. Under
t'irs(> conditions, it is not surprising that it was considered essen-
tial to the public interest that the franchise should be limited to a
short term in order that these terms could be frequently remolded
!o meet changing conditions.
These reasons for term franchises no longer exist. The regiila-
t on of public utilities is no longer a question of the provisions of
i'i(^ grant under which they are allowed to do business. The
machinery of regulation has l>een extended and expanded. By
Tmiting the return allowed, tlie '' value '' of the franchise, insofar
as it depends upon the permission given to collect profits from the
jiiblic, has been eliminated. Through the control of service and
• ' fares, by either State or municipal government, the necessity of
i ( quentlv revamping franchise provisions to meet new conditions
1ms Ix^en obviated, and the franchise grant has been recognized for
^ hat it now really is: namely, a peimit to conduct a public sen-ice
P imarily and controllingly in the public interest, and but second-
«^iily in the interest of those who furnish the capital for the
citorprise.
1 nder this concept, the nuijor interest of the public in the term
"»■ period is that it may be terminated, not at stated lengthy inter-
vals, but whenever the public interest requires its termination, and
smce it is inconceivable that the modem community can at any
«"
1
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Service At Cost AgreemexVTS
Service At (.*ost Aoeeemknts
time do without a l(x-al transiM>rtati»>u .system, the public interest
will rcNpiire terniiiiatioii of the franchise, only in the event that the
comnuinily desires to purchase and operate the system, or that it
desires that some other than the incumbent interests own and
o|Kn'ate it.
This is the princi|>le of the Indetenninate Permit, which is
for no stated t<uiu and which is revocable at any time that the
comnniiiity may elect to purchase, or to i)ermit its licensee to
purchast*, the propei-ty under terms which the grant itself pro-
vides. The benetits of the Indeterminate Permit may thus be
summed up:
Fit\sL It gives the community full power to remove a de-
li n<iucnt or objectionable company from the operation of its
street railway svstem, in the oidv two ways which guard
against an intcn-ruption of the service;
Srrmid, By removing the risk to the company of loss occa-
sioned by termination of its right to do business, it safeguards
the company's cnnlit, the preservation of which is essential if
needcHl extensions and improvemints are to be provided;
Third, Tt eliminates that twilight zone in the life of fran-
chises, which mark the period of negotiations for renewal,
during which service deteriorates, extensions and betterments
cease, and animositieMS are aroused.
Fourth, By providing a simple and easy method of public
purchase, it puts it within the jxnver of communities to at any
time own and ojK'rate their street railway systems and so
does away with one prevalent i>oint of controversy.
Conclusions
Capital iHVfstrd In locd tramiwrlaJion is liable to partidd loss
fhrouqh the {cnninniioii of iis right to conduct bimness, ivithoui
l,r,>visiuii for the laifmcni of the difference between tlie value of
(he enter prise <us a going concern, and tlie ''scrap" value of its
phtfsicaJ propertg. **
Thi,^ loKs eau Ije guarded against, if its right to condmt hminess
he termin^d}h' onJg fh rough jnirrhasr hy the community or a
licensee of the commanity at a price representing the value of the
enterprise as a going concern, or if provision he made, for
amortizing during the life of its grant, the difference between ifs
value as a going concern and the estimated scrap value of its physi-
cal property.
Tlie latter protection is costly to both the community and the
enterprise, results in inferior service and is detrimenial to all
interests. The former sufficiently safeguards the public interest by
providing means for ouMing delinquent companies, vhile insuring
a continuance of service.
CHAPTER FIVE
Risk of Attrition
Risks to Which Loral Transportation Investment is Liable — Attrition of
IMiysical Property — Must be Compensated for from Revenue— An Operatinjjf
Cost and Not a Charge Against Profits — Cannot be Provided For Through
Current Maintenance — Necessity for Adequate Reserves — Public's Interest
Protected by Such Reserves — The Position of the Industry upon Deprecia-
tion.
The attrition of the physieal pro|x^rty of an electric railway, or,
indeed, of any other pnblic utility is a continuing process. It takes
two forms, first, the actual wearing away through use, the action
of the elements, or by any other means which decreases its period
of useful life, and second, obsolescence, because of service units
being superceded by other service units which can more adequately
fulfill their function.
This risk of attrition is the third risk to which capital invested
in electric railways is subject and from which it must Ik? pro-
tected. Both the actual wearing away of the property and its
obsolescence constitutes a proper charge against the cost of the
service rendered and must be made good from the revenues col-
lected on account of such service. The investor is entitled to
have his full investment returned to him undiminished at the
ex|)iration of the period of public use. It is, therefore, evident
that there must be on hand at all times, either property to tlie
full value of the investment, or funds equal to the difference
br'tween the value of the physical property and the full value of
the investment
4>
r
See VICE At Cost Ageeemkjsts
Service At Cost Agreements
1
And because it is manifestly impossible, through the medium
of repairs, renewals and replacements, to keep any property up
to 100 per cent, of its perfect physiea-l condition, although it is
possible to keep it up to 100 per cent, of its perfect operating
condition and because obsolesence cannot usually in the case of
individual physical units, b© neutralized by gradual replacement,
but requires complete substitution at uncalculatable periods, the
nectssitv of accumulating reser\"c funds which will maintain the
balance between investment and value is at once apparent.
The principle is easy of comprehension. The wear and tear
and obsolescence of physical property provided by the funds of
the investor, takes place because of its public use. It is a lessen-
ing of the investment and if allow^ed to proceed would eventually
wijx? out practically all of the physical property back of the invest-
ment. In an industry unregulated as to return and capable of
earning sufficient profit, it can Ix) taken care of by reserving part
of accumulated profits. In a regulated enterprise such as a local
transportation company, when the return is in the last analysis
merely interest and not profit in the sense that profit is regarded
in uncontrolled industry, there is no margin for the absorption
of this attrition of propeity out of excess profits, and attrition
must consequently be considered and treated as an operating
expense and so provided for.
It is a charge w^hich has, in fact, no relation to profits. It is
necessary not only to presei-ve the integi'ity of the investment,
but to as well insure good and sufficient service. We have
referred to the amortization necessary to protect the enterprise
against loss through the termination of the right to do business
as a charge assessed against the present car rider in favor of the
future car rider. Failure to currently provide for the attrition
of the property is, on the other hand, a bill drawn against future
car riders for the benefit of present car riders.
For this is true: That if there be in a single year wear of the
property to the extent say of 6 per centum of its value and such
wear is made good only to the extent of 2 per centum, then unless
the property is eventually to be entirely dissipated, the difference
between the 6 per centum loss and the 2 per centum replacement
must be made good from future contributions of car riders.
Wear cannot be made entirely good by current repairs and
replacements. Thus, the life of a rail may be 20 years, in each
of which a certain amount of wear and tear takes place. Yet
it is not until the last of the 20 years expires that actual
replacement is made. To assess the entire cost of this replace-
ment upon the car rider of the year in which a new rail is sub-
stituted for the old rail is to burden him with a charge which in
equity should be borne equally by the riders of the other nineteen
years. Or, as to obsolescence — a power plant by reason of
impiovenients in the design of power generating apparatus
becomes obsolete and must be replaced. Unless there shall have
been accumulated during the period of use of the old plant, a
fund which represents its deterioration, not only physical, but
functional as well, the entire cost of replacement is borne by the
cjir rider of the period in which the replacement is made.
The distribution of this charge for property attrition as between
current, repairs, renewal and replacements, and contributions to
a- resei-ve fund, constitutes a practical engineering problem to
be determined by actual experience under various conditions. It
should be borne in mind, however, that although the actual opera-
tion of the transportation system may not be affected to an appre-
ciable extent where there be adequate maintenance without a
reserve fund, yet both the integrity of the property and the inter-
est of the car rider is materially affected, since in the first instance
there cannot possibly be on hand at all times value to the full
extent of the investment and in the second instance there is bound
to be inequity in the distribution of this charge as between past,
present and future users of the service.
No attempt is being made to here discuss the intricate details
of " maintenance " and " depreciation." What is being consid-
ered are the reasonable requirements of the investor for the pro-
tection of his investment in a local transportation system and it
is evident that protection is not afforded if the value back of the
investment is decreased through attrition. Only when this attri-
tion is fully compensated by provision from revenue for adequate
mamtenance and the accumulation of such a reserve as will repre-
sent the amount by which maintenance fails to keep property at
full investment value, is such protection forthcoming.
i
26
Service At Cost Agreements
The effect upon the imhlic interest of failure to provide ade-
quate niaiiiteiiaiu'e and a sufficient resca-ve, is particularly evident
in the e:Lse of conununities which may exercise their option either
to purcha.^e or allow a licensee to purchase. The purchase price is
in many such cases based on the capital value of the company
without revaluation. If full value is not behind capital value, pur-
chase by the city at such a price and under such conditions, means
that the future users of the service, arc paying for property which
has been ^lissipatcd in the service of past users of the service, and
purchase by a licensee, means that the licenst^e is receiving less in
value tlian he pays for. If, on the other hand, revaluation is pro-
vided as a means of determining pnrclias(» price, then a large part
of the invc^stnient is confiscated.
The position of the industry generallly in regard to this question
of maintenance and depreciation, was expressed in the following
resohiti*m adopted by the American Electric Railway Asscn-iatioii
at a me«4ing held in Cleveland, on January 8, 1920:
Besohed: That the American Electric Railway Association
ieconnn(^n<ls to its MemlK^r C'ompanies that, wherever jjossi-
ble, they provide in their accounting practice, for the crea-
tion of adequate res<*rves to insure the property in advance of
actual replacenK'nt and abandonment, and that such reserves
shall be provided in exist of service franchises.
It is therefoi-e essentitd to the protection of capital invested in
local transportation, that adetjuate provision be made for main-
tenance j.iul that reserves be accumulated from earnings, to an
amount that represents tlie difference between the value of the
physical property, and the sum of the capital investment.
Conclusions
li is esseiUud to the protection of capital mveMed in local
tramportatlmi thai losses because of wear and tear, oljsolescence
and supersession he made up from revenue.
Not only should the property he currently maintained so as to
he in the most efficient operaiing condition hut, in addition, there
should he currently reserved from revenues, sums sufficient to
Service At Cost Agreements
27
provide for future ren^ewah and replacements, so that at all times
the full value shall be represented, hy property or reserves.
Adequate maintenance and sufficient reserves are required In
the public Interest, since proper service depends U[>on nmlntenaivce,
while inadequate reserves put an Inequitable burden upon future
car riders.
CHAPTER SIX
The Investor 's Requirements
Return — Investor's Power to Prescribe Return — His Three Primary
Requirements — The Cost of Money — Its Effect upon the Cost of Service —
Assurance of Retum Dependent upon Revenue — Sources of Revenue — Public
Contributions and Public Imposts— What the Community Owfs the Car
Rider — Public Subsidies.
Assnred of the Integrity of the investment, that is, that money
put into the enterprise will not disappear or shrink in amount
during the period of its public use, the second consideration with
which the pi-ospective investor is confronted is as to the return
which the investment will make to him.
He is a free agent. ^N^ot even Government can compel him to
loan his capital, notwithstanding that the loan may be for govern-
mental or public purposes. Government may through its powers
of taxation impound income, but it may not requisition capital.
In the disposal of his accunmlated savings the investor may not
be controlled, and Government as well as private enterprise, must
met^t his requirements before either can secure for its use his
capital. Thus the United States Government, seeking loans for
war purix)ses and aided by the strong ap^x^al of patriotic duty,
was several times compelled to increase rate of interest paid in
order to secure the funds which it required.
Every enterprise, governmental or private, is a bidder for ciipi-
tal to be used for its own purposes, and for this reason the money
market is the most highly competitive mai-ket in the world. To
It must come National, State, County and Municipal governments,
as well as public utilities and all private enterprises which seek
W'O
Service At Cost Agreements
Service At Cost Agreembtnts
29
I
capital, and in it all are on the same footing as regards tlie
indueeiiients which they have to otier. These are
F*irst, Safety.
Second. Assurance of return.
Third, Rate of return.
The rate of return is dependent upon the factors of safety and
assuranw. To the degree that the risk of loss or interruption of
return enters into the investment, the rate of return demanded or
expect (hI will vary. Money for speculative purposes, where the
risk of its 1«ksh is gi'eiit and wliere the prospecit of return depends
ujMiii ciri lunstances not easily forecast, insists upon a high rede of
return. Money guarded against loss and assured of its retui*n is
eonttnit with a lower rate. These are financial fundamentals,
illustrated hy the low rate paid U[x>n the securities of the United
Statt^s (iovernnicnt, and the large profits reap(?d in successful
enterprises of a s|HM'iilative nature. They must he kept in mind
in this discussiim kn-ause the cost of money, which includes not
only the return pa-id, but the terms upon which it is obtained, is
an important element in the cost of providing electi'ic railway
service and so bears directly upon the relations between the public
and the compimies furnishing that service?.
The cost of money is reflected in two principal ways: first, in
the rate of return demanded and second, in the price obtained for
the setmrities of the enterprise. In reality the second is but a
retlex of the first, since if the rate of return be fixed upon par-
value, it, the rate, is increased or decreased as the actual price
paid for the security, is more or less than par value. The money
market is a constantly changing market and it is impracticable
to frequently alter interest on securities to meet its demands.
The constHjuence is that variations in the cost of money is indi-
cated not so much by the rate of interest which these securities
bear, as by the price wdiich may be obtained for them. This is
plainly shown by a merely casual study of the lx>nd sales on the
New York Stock Exchange. Between January 1, 1920 and April
12, 1920, but twenty-seven of the 397 issues of bonds dealt with on
this exchange reached par. The rest w^ere bought and sold at prices
having the widest possible range, although the rate of interest
niwMi par value was the same throughout the entire period.
The cost of money, whether it be reflected in the rate of return
necessary to secure it, or the price at which the securities can be
disposed of is one of the important costs in the operation of a local
transportation system. In 1917, when the last census of electric
railways was taken by the United States, thirty jx>r centum of all
charges against the conduct of the enterprise were charges on
acc<nint of capital — interest on funded debt, I'entals, dividends
and sur2>lus. The imjK>rtance of obtaining capital upon the most
favorable terms is plainly indicated by this statement, and the
most favorable terms can be obtained only when, in addition to
assurance that the integrity of the investment will bo preserved,
there is assurance that return will be constant and that it will be
at a satisfactory rate.
For capital invested in local transportation, or for that matter,
invested in any other enterprise, there can be assurance of n^tum
only if there ho assuranco of adequate revenue, and adequate reve-
nue, in the case of local transportation, can be secured only from
earnings — the money collected from the users of the sei'vice — or
from public contributions.
The idea of public contribution towards the cost of providing
local transportation service was unheard of a few years ago.
Today it is being constantly put forward, not by the representa-
tives of the companies, but by the representatives of the public,
who, impressed with the social importance of the service furnished,
are urging that its cost be distributed against all who benefit and
not alone upon its users. As has l)een Ix^fore pointed out, local
transportation permits the development of communities in the way
In^st calculated to promote health, comfort, convenience and morals.
This is a function that benefits every member of the community,
irresjxictive of the extent to which he or she may use the service.
It is a tangible, actual asset, which in part can be expressed in
dollars and cents. In Toledo, for instance, the street car service
was suspended for twenty-seven days. John N. Willys, the presi-
dent of Toledo's largest industry, estimated the loss to the city's
business, and this apart from the loss sustained by the car riders,
at $50,000 a day, The merchants lost trade, the amusement enter*
§
» I
M
11
30
Sekvice At Cost Agreemejnts
I
prises lost patronage, manufacturers reported substantial and costly
interference with their operations, the real estate dealers a practi-
cal cessation of trading, and so on through a long list, which
showed that the interests of aJl classes of business were vitally
affected.
According to the report of the City Club of New York City,
the increase in value of property in the Borough of Manhattail
benefited by Ae construction of the Broadway subway, readjusted
so as to eliminate the normal rise in value, amounted between the
years 1900 and 1907, to more than six times the cost of its con-
struction while between 1903 and 1912, the assessed value of prop-
erty in the Borough of the Bronx, increased from $226,596,647
to $616,521,378, an increase, due practically in its entirety, to
the building of the Bi-onx extension of the subway. A similar
increase in real estate values will be found to follow the opening of
new transportation lines in any growing city and the experience of
New York is cited only because physical conditions in that city
are such, that its astounding growth would not have been possible
ftt all, had it not been for the development of its transportation
system.
It is unnecessary to give further instances of the benefits con-
ferred by local transportation systems upon others than the users
of the service it furnishes. It is evident that there is no greater
factor in the social life of communities. Yet, there has been no
recognition of the obligation owing to this utility by the commun-
ity as a whole, but on the contrary the operation of the local trans-
portation system has in ihe great majority of cases been seized
upon as an excuse for the imposition of additional burdens of tax-
ation upon that particular part of the public which uses its sei-vice.
The following recital of a part of the taxes and imposts which have
been and are now being imposed upon electric railways, illustrates
the extent to which the Federal, State and local governments are
using these utilities as convenient bearers of the public burden of
taxation :
By the Federal Government — Income and excess profit
taxes.
\ By State Governments — Income, realty, personal prop.
: erty and franchise taxes.
Service At Cost Ageeemej^ts
31
By Local Commimities — Franchise, property, gross re-
ceipt, school, park, pole, car, wire and rail taxes; paving
construction, paving maintenance, street cleaning, snow and
ice removal, street sprinkling, free current for community
purposes, bridge and viaduct construction and maintenance,
free transportation for community employes, payment of
traffic police.
In 1917 according to the United States Bureau of the Census,
10.11 per centum of the operating expenses of the electric rail-
ways of the country were made up of taxes. " Taxes " under this
classification does not include what have before been referred to
as " imposts." For 214 companies, such imposts, according to
figures compiled by the American Electric Railway Association,
amounted to $20,442,000 in a single year, as compared to " taxes "
for the same year of $40,761,000, or more than one-half. Nor
is this all, since a large portion of the imposts require capital
expenditures, which must be added to the capital burden of the
utilities, and upon which interest must be paid as in the case of
other capital. This interest charge on account of expenditures for
purely governmental purposes is not insignificant. The engineers
employed by the special Commission appointed by the Rhode
Island Legislature to investigate the affairs of the Rhode Island
Company, reported in 1918 that of the $33,275,184 representing
the reproduction value of the Company's property, $2,666,622
represented pavement constructed for the communities by the Com-
pany. Thus some eight per centum, of the annual interest charges
to be earned from the fares of the car riders of this company were
made necessary by public requirements which had little if any-
thing to do with the efficiency of the system as a transportation
medium.
A conservative estimate of the charges imposed by government
on the conduct of an electric railway is that they constitute at
least ten per cent of the total cost of operation including pay-
ments on account of capital, so that from each five cent fare,
government takes one-half cent, out of each six cent fare it takes
.60 cent, out of each seven cent fare .70 cent, out of each eight
cent fare .80 cent, out of each nine cent fare .09, and out of each
ten cent fare, one full cent.
32
Sekvice At Cost AoreemFxNts
Service At Cost Agreements
33
i
Contrast the treatment thus accorded the users of local trans-
portation service with that received by the users of municipally
operated water utilities, which differs only in degree from local
transportation as a public necessity. The car rider pays rates,
increased by the addition of all the various taxes and imposts
enumerated, or is given servico the extent and character of which
is affected by them, while the latter is not only not compelled to
assume this burden, but in many instances is relieved of charges
which should properly be included as a cost of the service he
receives, through their assumption by other departments of
government
For the use of its street by the car riders, the communities exact
large charges in the form of both taxes and imposts, while for an
even greater use and occupancy by the users of other vehicles,
they make no charge, or at the best a small charge as in the case
of certain fees and licenses paid by motor vehicles and their
drivers. For the accomodation of 30, 40, 60 or 100 persons, as
the case may be, the street car occupies for such time as it may
take it to progress from one end of its route to the other, a portion
of the street in which it provides and maintains itsi own track,
and so interferes with other traffic only for the time that it is
actually in transit. On the other hand, the automobile for the
accomodation of from one to six persons, not only takes up almost
as much of the roadway while in transit, but makes use of it for
stwage purposes for long periods of time and so adds greatly to
the congestion, and as a consequence of its operation actually
destroys and wears out the pavement for the construction and
maintenance of which the car rider pays.
In 1915, a traffic count of persons entering and leaving the
business district of the city of Denver, showeil that of 260,181
other than pedestrians, 201,794 entered and left by street car,
while 58,387 were transported by other vehicles. This figure is
fairly indicative of the use of the streets by riders in vehicles
and shows that of these 77.5 per cent were car ridei-s. Yet public
expenditures for street improvement on account of the car rider
are charged to him and paid either through increased fare or
deteriorated service, while not only is he taxed as a part of the
general public for the improvements made in the interest of th©
remaining 22.5 per cent, but in addition he is taxed as a car rider
for these improvements, and conveniences.
These taxes and imposts are relics of past regulation of profits
under franchise contracts which fixed the rate of fare to be charged
and which put no limit upon the total return to be earned. They
were imposed in the belief that they were paid by the owners of
the property and not by the car rider. They can be logically
justified only if the transportation be regarded as a private enter-
prise using the public thoroughfare for private gain. They can-
not be justified if the utility be considered as performing a service
for the public at the lowest cost consistent with good service. With
fares regulated by the cost of the service — and under all modem
forms of regulation, whether by State or local commissions or
under flexible fare ordinances it is so regulated — these very sub-
stantial costs are placed directly upon the user of the service and
are reflected either in the fares paid or in the character of the
service furnished.
The idea that a transportation utility is a private business
enterprise the profits of which should be clipped for the public
benefit, together with disregard of its social and community func-
tions, has led in some instances to an even further extension of its
use as a medium for the collection of revenue for* the public
treasury. Profit sharing as between the utility and the com-
munities has been incorporated in some franchises and is very
frequently urged as a measure in the public interest. Money so
gained by tlie communities is taken from the car rider and should
be regarded as an additional tax upon this single class of the
public.
The profit sharing plan as an incentive to efficiency and economy
on the part of the operators of a public utility has much to com-
mend it, but the sharing should be between the operators and their
patrons and not the communities. The person who makes use of
the streets through the medium of a street car, should be com-
pelled to assume no charge that is not assessed against those who
use the streets through the medium of any other kind of
conveyance.
This principle is fast coming into general recc^ition. The
State Trustees (public officers), who operate the Boston Elevated
S4
Service At Cost Agreements
■
Bailway Company, in a recent report declared that subways are
^^ nothing more than highways under the surface " and that the
public owes the same duty to furnish a highway for the street
car rider that it owes to the pedestrian or other traveler." Judge
Fielder Sanders, Street Kailroad Commissioner for the city of
Cleveland, has taken a similar position in regard to subway con-
struction m the Ohio city and has stated that in his opinion the
patrons of the street railway system should bear only such expenses
m connection with subway construction and maintenance as is
represented by the decreased cost of operation in subways as com-
pared with the operation upon the surface. The Public Service
Commission of the State of Washington has assumed a position
even further advanced and in its decision upon the application
of the Portland Railway, Light & Power Company for an
increased fare, decided March 15, 1^20, recommended that the
City of Portland relieve the company of paving construction,
paving maintenance, bridge rentals, franchise taxes, car license
fees and the free transportation of city employes and that it
purchase the tracks of the company and thereafter mpply the
track upon which the cars of the ccmipany operaie.
This relief from taxation and impost can not be' considered as
a subsidization of local transportation service. It serves merely
to put^the car rider on the same footing, a^ regards the facilities
furnished him by the community, as is any other user of the
streets. As a matter of equity and justice, the community might
well carry the matter further and itself assume such part of the
cost of service as represents benefits received by it from the service
as distinct from the benefits which the car rider receives The
difficulty of correctly assessing such benefits presents an obstacle
but not, however, an insurmountable one. The city of Chicago'
did propose in connection with the construction of citv owned sub-
ways, that the cost should in part, be borne by the property bene-
litad, the assessment to foUow much the same form used in assess-
ing the benefit of street openings.
Two forms of public contributions are now provided by the laws
of Massachusetts, the first through the temporary assumption by
the State of deficits in the cost of service to be later repaid from
the earnings of the company; the second, direct payments by the
Service At Cost AGRfiEMBftTtS
35
communities for the purpose of keeping down the rate of fare.
In neither case, however, is the proposed relief anything more
than an emergency measure. In the first instance it constitutes
merely the loaning of the State's credit and funds for the purpose
of improving the credit of the enterprise and is not a direct
recognition of the community's obligation to the service. In the
second instance, the basis of payment is the difference between
pre-war and post-war costs, so that it must be considered as a
temporary expedient to meet a particular emergency and not the
recognition of a general principle.
The interest of the investor both in relief from public charges
and in the contributions towards the cost of the service, is as to
the degree of surety given to his investment. The matter of assess-
ments against the car rider through the medium of the transporta-
tion company, as well as the extent to which the public shall con-
tribute to the cost of service is primarily a question between the
car rider and the general community. It affects the investor
only as it gives or fails to give assurance that adequate revenues
will be forthcoming from which his return can be paid. As thei
cost of the service reaches a point where fares become so high as
to prevent riding, the ability of the company to earn adequate
revenue is affected and the necessity arises of relieving the enter-
prise from charges which make high fares necessary, or of calling
ujx)!! the general community to bear that part of the cost of
service which may be equitably charged to it because of the
benfits which it receives.
Conclusions
Moite of return depends in large measure upon assurance of
return, which is only present if the revenues of the enterprise he
sufficient,
Revenue of local transportation enterprises comes from two prin-
cipal sources, the user of the service and public contributions.
Taxes, imposts and other public charges, are ultimately paid hy
the car rider, either directly through the fare charged, or indirectly
in decreased service.
Local transportation enterprises perform a social and commun-
ity service, in addition to that performed for the direct user of the
36
Service At Cost Agreemeotds
service, which justifies, if mcessarij, the assumption of some part
of the cost of servwe hj the community as a whole, amd Tnakes
specif taxation ami the levying of specif imposts upon these
enterprises unjustifiable.
CHAPTER SEVEN
The Provisioii of Bevenne
Return — Revenue from Operation — Price Dependent Upon Cost — Ele-
ments of Cost — Power of Enterprise to Control — Necessity of Automatic
Adjustment — Delay in Adjustment and Its Effect — Determination of Proper
Rate Not Difficult — Fare Systems and Rates of Fare — The Prevention of
Frequent Fluctuations in Rates.
It is to the fares received from -the car rider that local trans-
portation systems must look for the gre^iter part of their revenue
and it is therefore with the assurance that these will be sufficient
to cover the expense of the business that the prospective
investor is chiefly concerned. There can be no doubt as to the
correct principle to be applied. It has been developed through the
economic experience of the world through all time. The price
of any commodity, whether it be material or service must be based
upon its cost and changes in priw^ must respond to changes in
cost The costs of conducting an electric railway enterprise may
be thus grouped :
Ftrst, the cost of operation, i. e., those charges whicJi arise
because of actual operation of the cars, including the main-
tenance of the physical property, both through current repairs
and renewals and through reservations against wear and
obsoleseeinee ;
Second, the cost arising through taxes and imix)sts, which
include all .of the various charges levied against the enter-
prise by government ;
Third, the cost of capital, including the return paid for its
use and such items as discount on securities which arise from
the expense of securing investment
Service At Cost Agreemknts
87
All of these elements of cost are variable. Not one of them
can be estimated for any considerable period. Each is cotntroUed
by circumstances over which neither the entei*prise nor the com-
munity has extensive control. They are affected not only by the
purchasing power of the dollar, but by the particular conditions
surrounding the conduct of each enterprise. Thus, cost of opera-
tion varies with geographical conditions, the proximity of fuel
supply, the availability of hydro-electric power, the prevailing rate
of wages, the topographical lay-out of the community, the service
requirements of the public, and numerous other factors. The cost
arising from taxes and imposts varies according to the policy of
government in its treatment of the enterprise. The cost of money
varies with the attractiveness of the investment and the general
conditions of the money market.
The price of the commodity sold, transportation, must invari-
ably in the end be governed by these costs, otherwise the enter-
prise must cease. Economic law dictates that either the fare
received shall be sufficient to cover the cost, or the service decreased
so as to come within the price. There is no escape from this
conclusion.
It is therefore evident that assurance of return can only be given
the investor if there be provided some method by which price can
be quickly and automatically adjusted to meet the cost of the serv-
ice upon which it is based. Attempts to adjust it through contracts
fixing rate of fare have failed, because it has not been possible to
accurately, or even approximately, determine in advance and for
any considerable period the cost upon which the fare should in
justice both to the public and the enterprise be based. Attempts
to adjust it through the determination of legislative bodies, or
through commissions to which the powers of legislative bodies have
been delegated, have been almost equally futile, because the
process is so cumbersome and slow and so subject to interference
from causes alien to the issues that loss to the enterprise almost
invariably follows.
Belay in adjusting price to cost prevents continuity of return
and so decreases the rate of return. It is for this reason that the
process of rate readjustment through the usual utilities conunission
38
Sekvice At Cost AoEEEMirijrrs
Service At Cost Agreemitnts
39
procedure is not sufficiently responsive to meet the requirements
either of service or of investment. By this method rates are
increased or decreased not in step with the variations in cost of
service, but long after such increases or decreases have occurred,
and in the case of increases there is almost invariably a long
period during which the enterprise has insufficient revenuei,
either to provide the service which should be furnished, ox to pay
the return to which the investment is entitled.
Yet the determination of the correct price for the 'commodity
furnished by transportation utilities presents no difficulties. The
elements that go to make up cost are perfectly well known. The
calculation of such costs is a matter of accounting, the principles
of which have come to be universally recognized. Under a system
of regulation, such as now exists in almost every State and every
community, the methods and practices of ojx^ration are, or can
be, controlled by the representatives of the public, the taxes and
imposts are dictated by the public and the return to be allowed
is a matter of the prevailing cost of money.
The price is therefore not a matter to be based upon judgment,
but is a matter to be based upon fact, and as such can be
automaitcally adjusted to at all times meet cost.
The province of judgment lies outside the question of price. Its
business is to deal with the efficiency and economy of operation
and with the system of fare charges through which the price of
the commodity is collected. To ascertain the total amount of
revenue which must be obtained to pay the cost of service is a
question of arithmetic; to determine the system of charges by
which this revenue shall be obtained is a question of judgment
There is today no general agreement upon any particular system
of local transportation fares. Flat rates, distance tariffs, zone
systems, charges for transfers, commutation rates, rates varying
with the class of service rendered, and a number of other forms,
each have their advocates and each is in effect upon certain prop-
erties. The problem is to find that system of charges which will
induce the greatest riding at the same time that it produce*
sufficient revenue. The answer cannot come from academic dis-
cussion but must be reached through experimentation. The in-
dustry has passed out of the area of a fixed flat five-cent rate into
a period of readjustment of fare charges to meet changed condi-
tions. No man or body of men can now say as to any particular
system that it is the best under all conditions and for all com-
munities. There must in the interest of everyone concerned be
given wide latitude to those in charge of or in authority over the
enterprise in working out a solution. For that reason it is undesir-
able at the same time that it is unnecessary, in providing for the
automatic adjustment of price to cost, to go further in fixing
fares than to stipulate that they shall be sufficient to provide tlie
cost of the service. So far as the investor is concerned the object
sought will bo attained if the revenue produced is adequate, while
the interest of the public will be protected if the return to the
investor be limited by the considerations which have been set forth.
It is manifestly undesirable that in any form of rate adjust-
ment there should be frequent fluctuations. The use made of
local transportation, and consequently the revenue derived there-
from, is affected by numerous temporary changes which have a
marked effect upon it. Weather conditions, community events
which attract added riding and other factors, all bear upon revenue
collected, so that were price, absolutely and at all times, to follow
cost, almost daily changes in fare would be necessary. Frequent
changes involve more or less expense and inconvenience. Such
variations can be absorbed in the same way in which they are
taken care of in unregulated business, — through the operations of
reserves. In other words, as price fluctuation is prevented in an
ordinary commercial business, through payments to cost from
surplus, so it can be prevented in Uie business of local transporta-
tion by payments from a fund set aside and dedicated to that
purpose.
Through the operation of such reserves, fare increases occur
only at such periods, as give plain evidence that the increase or
decrease is necessary because of more or less permanent causes
and not merely passing and temporary variations in revenue.
Moreover, they insure sufficient funds to at all times provide that
the quality and extent of the service prescribed will.be maintained
and that the return to the investor will be paid when it is due and
will not be interrupted.
Service At Cost Agreemettts
Service At Cost Agreemfnts
41
I
1
1
Assurance of return, upon which the rate of return which must
be paid to attract capital for public utility enterprise depends,
can be obtained, first through automatic regulation of price in
accordance with cost, and second by the assumption of the com-
munities of such sufficient portion of the cost of the service, as will
make possible a rate of fare that will encourage, and not discourage,
riding.
Conclusions
The main assurance of return upon capital medin local trans-
portaiion must come from the provision of sufficient revenue
derived from charges levied against the users of the service.
Such charges should, therefore, he aiUomatically adjusted to
provide the fuM cost of the service, including a fair return to
capiial.
The interests of the puhlie wMl he protected, if in this auto-
matic adjustment of priee to cost tlie mmn consideration he tlie
provision of sufficient revenue, leaving the system of clwrges to
the dete7*mimUion of the maiuigement, acting urith tlie approval
of the reguJaiory authorities.
It is essential to efficiency that provision he made against too
frequent fluctuation in the raies of fare, while at the same time a
continuous return he assured.
CHAPTER EIGHT
Management and Control
Management as Distinct from Capital a Necessity to the Enterprise — Ita
Nature — Cannot Be Obtained without Reward — Its Relation to the Car
Rider — Provision of Incentive — Regulation and Management — Theory of
Regulation — State and Local Regulation — Importance of Public Co-Oper-
ation—Supervision versus Management — Authority and Responsibility In-
separable—Prescription of Public's Right to Demand Service — Control over
Operation — Maintenance — Finances — Arbitration.
We have discussed the conditions under which private capital
may best in the public interest be attracted into the conduct of
local transportation. Capital is, however, but one of the two
things which is essential to the successful operation of the enter-
prise. Management is equally important Indeed, the argument
most frequently advanced in support of private operation of public
utilities is that private management is better than public manage-
ment, not that private capital can bo secured more cheaply.
If a community's object be merely to secure certain sums of
money for public utility purposes, there is ordinarily no need of
attracting private enterprise to the business. The money may be
more readily and more cheaply obtained by pledging the com-
munity's credit. But experience has shown that the money once
obtained, its expenditure to provide the service desired, and the
conduct of that service after the facilities to produce it are pro-
vided, cannot in the first instance be made, and in the second in-
stance be carried on as cheaply and efficiently by the communities
directly, as by private enterprise enlisted in the community's
seiTice.
Management is moro than mere direction or supervision. It
includes business wisdom, foresight, initiative, vision, the ability
to plan for the future as well as to provide for the present. Upon
it depends the success or failure of all enterprise. To be success-
ful it must bring experience, training, knowledge and executive
ability to its assistance. The attributes which make for good
management are those which are the most ardently sought for and
the most amply rewarded in the commercial world, and it is idlo
to think that they can be obtained for public service unless they
are similarly rewarded.
The return which mere capital demands is in the nature of
interest, such as it may obtain if it be loaned, as to a bank, or upon
a real estate mortgage, or to State or municipal government. If
in addition to the furnishing of money upon good security the
public requisitions management of the same kind that creates,
builds up and expands private enterprise, it must furnish incentive
as expressed in the return which management as distinct from,
yet attached to capital, may secure in other fields of activity.
The efficiency of management in private enterprise is in all but
exceptional cases reflected in the profits secured and its award
come from those profits. They constitute the yardstick by which
efficiency is measured and at the same time are its reward. In
the present imperfect state of human development there is no other
practical incentive to industrial effort and industrial efficiency
42
Sekvice At Cost Aokeements
than the hope of pecuniary profit, and any attempt to conduct
an important enterprise, without a recognition of the fact that its
successful operation, insofar as that success relies upon the quali-
ties which make for good management, depend upon the incentive
• in the way of profit, is unquestionably doomed to failure.
Kestricted merely to wages, capital and management are bound
to perform a routine job and no more. The responsibility of the
enterprise is not theirs and will not be assumed voluntarily. It
is only when reward depends upon the manner in which the task
is performed that the best efforts of the performers can be secured.
It is initiative, it is energy, it is vision, that the community wants
from management, and for these qualities it must pay.
Therefore, in addition to the return which capital as such must
have if it is to be secured *for the business of local transporta-
tion, there is the return which management must be given, and
this return must be, not a fixed stipend to be paid irrespective
of the service furnished, but a share in the revenue produced',
depending in amount upon the degree to which the prime quali-
ties of management are exercised.
Good management creates a benefit to the car rider. It should
be exerted in his interest and the profits which it creates should
be shared as between the car rider and the management in such
proportion as will provide a sufficient incentive to bring out the
best qualities of management. If the general community receives
a portion of the profits, it is, in theory and in fact, a contribution
levied upon the car rider and not warranted by any privileges
granted or task performed, in connection with the service, by the
community.
The failure to provide incentive to management has been ur^^ed
as a fundamental weakness of the earlier service at cost agreements.
Such failure is, however, an omission which can readily be cor-
rected and it cannot be too strongly urged that reward for manage-
ment is a proper and very necessary element in the cost of service,
which must be paid from the revenue collected if the best service
is to be provided.
The right of government to control and regulate public utilities
is beyond question. Within the restrictions imposed by the Four-
teenth Amendment to the Constitution of the United States which
n
Service At Cost Agreeme-xXts
43
forbids the taking of property without due process of law, govern-
ment may prescribe both rates and service and the manner in
which money shall be secured for public utility purposes.
Such power of regulation in the case of intra-State utilities is
possible under the police powers of the Statb, and is to be exercised
for the benefit of the people of the entire commonwealth. Unless
specifically delegated by the constitution of the State to the com-
munities, this power is vested in the State Legislature, to be
exercised by the Legislature directly or by del^ation. These
principles have been firmly established by the decisions of the
Supreme Court of the United States, and have been recentlv re-
affirmed in a number of decisions directly affecting local trans-
portation companies.
The theory as to local transportation lines especially is easily
understandable. The highways of a State are in truth its arteries
of communication. The co-ordination of the various units forming
the State is impossible without them. The State must therefore
control them as a measure to secure its own existence, for other-
wise that communication and close relationship between its various
parts would be at the mercy of local communities. The streets
of a city are a part of the State's highways and the power of the
State over them is as complete as are its powers over the roads
and highways outside of cities and such authority as communities
exercise over their streets are, except where by the State Constitu-
tion police powers have been delegated to cities, as in the case of
Colorado, only such as the Constitution or the Legislature has
specifically granted to them and are at all times subject to the
superior power possessed by the Legislature acting for the entire
people of the State.
As a matter of convenience, however, the delegation of the Legis-
lature's power of regulation to some better equipped and more
readily responsive body is essential to proper administration.
Whether this delegation of power be directly to the communities,
or to a State commission acting for the Legislature, and possessed
of legislative, judicial and executive power is a question that
should be determined by practical considerations, among which
there may be cited these :
44
Service At Cost Agreemeats
f
' !'
I
Firsi, Efficiency — Can a State commission, removed
from the influonco of local prejudices, local jealousies and
local ambitions, and necessai*ily better equipped in the way
of a supervising staif of experts, better regulate the practical
operation of a local transportation system, than can a city
officer, or officers, although the latter may be in more direct
touch with the sj>ecific local needs and conditions 'i
Second, Popular Confidence — Can a State commission
secure the same degree of public co-operation, an important
element in the operation of a transportation system, as can
local officers?
Third, Equity — Considering that practically all local
transportation lines operate as a unit in one or more com-
• munities, can control of such operation bt^ givcMi to one com-
munity to the (exclusion of another, and if such control be
divided among several communities will the n^ulting con-
flict not be sufficient to interfere with the most efficient con-
duct of the lines in any of the communities ?
As directly aifecting the companies operating the transportation
system the important consideration in relation to the method in
which control shall be exercised is as to the degree which public
co-operation may be secured. Good operation cannot be had, fares
cannot be maintained at a desirably low level, and service cannot
be properly provided, unless both the car rider and the local pub-
lice authorities co-oi^erate with management. The measure of the
co-operation forthcoming will always depend upon the extent to
which the problems of operation are understood by the car rider
and the local public. The close relation between cost of service
and the latitude for efficient operation permitted by the conunuui-
ties is evident to any student of electric railway problems. Sched-
ule speed, for example, is one of the most important factors in the
cost of service and depends to a very large degree upon traffic
regulation, which in turn is in the hands of local authorities. This
and other important operating economies are dependent not upon
any powers which a State commission may exercise, but upon the
action of either the car rider or the local authorities. An import-
ant objective of local transportation management must to secure
Service At Cost Agreements
45
local co-operation, so that in considering the relative advan-
tages of State or local control, the extent to which each will bring
about co-operation must always be kept in mind.
So far as the principles under which regulation should be exer-
cised or concerned, they are equally applicable to both State and
local control. The method of detemiining fares, which has been
here discussed, is merely the theory under which State regulation
of rates has all along bcxjn exercised, cai'ried to its logical conclu-
sion and so framed as to substitute rule for judgment, eliminating
those elements, which tend in the first place to cause delay, and in
the second place, to cause uncertainty. The method of regulating
finances and sei-vice should be no different with local control than
they have been with State control.
The function of a political regulatory authority is supervision
and direction — not management. There is a clean-cut distinc-
tion between the two. It is the business of the public representa-
tives to prescribe the service to bo furnished in the first instance,
and in the second instance to see that the service so prescribed is
furnished. They should be fully qualified and equipped to per-
form these duties. The responsibility of furnishing the service
prescribed is a responsibility of management, whose business it is
to furnish it at the least cost and with the greatest degree of
efficiency. This is a technical task requiring special skill and
training. The responsibility to perform must be accompanied by
the authority to perform and when regulatory authorities assume
the functions of management, they not only deprive management
of authority, but they relieve it of responsibility. The successful
operation of a transportation utility is a more or less complex and
involved performance. It requires a high d^ree of executive
ability and judgment and it cannot be accomplished in detail by
prescribed rules and regulation. The details as well as the broader
policy which call for the exercise of judgment are those upon
which the success or failure of the enterprise depends. When
management is relieved of responsibility in connection with them,
through the assumption of authority by regulatory officers, then
the very purpose for which management is enlisted and rewarded
is defeated, and the entire operation of the utility might well be
assumed directly by the public.
11
4*1
46
Service At Cost Aubeeme"nts
Eegulation is etfectivc, when inaiuigeiiiuiit is liold resi>ousible
for the furnishing of prescribed service, and it is not effective
when authority, and hence responsibility, is removed from man-
agement.
Under a system which provides for the automatic determination
of fares the remaining function of regulation is, first, the prescrii>-
tion of service and the enforcement of the prescription, second,
the supervision and audit of the charges which make up the cost of
servica Theoretically, there is no reason why if fares be auto-
matically increased so as to provide revenue sufficient at all times
to cover the cost of service, the public, acting through the con-
stituted authorities, should not be permitted to prescribe service to
the extent and of the quality which it may desire. Practically,
however, an obstacle presents itself in the possibility that service
of such an extent and quality will be i>rescribed as to make it
impossible to meet the cost at any rate which can be collected.
There is unquestionably a rate of faros or system of fares for each
community, which will attract the greatest number of riders, while
providing the requisite reveinie to cover the cost of service. It is
this rate of fare which should logically determine the kind of
service to be furnished. To charge a higher rate is to discourage
the use of the facility, which is opposed to the public interest; to
charge a lower rate means either a deficit in revenue, or a reduc-
tion in the service below what the general public is through its
fares willing to pay for.
The prescription of service beyond the point where the neces-
sary fare supplies the maximum of riders and provides the full
cost of service puts into operation the law of diminishing return
and it is entirely possible to require service to an extent which
would make it impossible to collect its cost under any rate of fare,
since the falling off in the number of f ai*es would more than offset
the increase in the rate of fare.
If it were possible to ascertain the rate of fare descril^ed, i. e.,
the rate attracting the maximum number of riders consistent with
the payment of the cost of service, the prescription of service
would be a comparatively easy matter, and a stiindard could be set
up which would make the task of regulation simple. So many
factors are, however, involved, including the system of charges
Sebvice At Cost Ageeeme-nts
47
whether by distance, zones or under a flat rate, the merchandizing"
of the service, the changing habits of the communities, their
requirements as to rapid transit and other considerations, that here
again the element of judgment enters, and it is necessary for the
protection of the enterprise that there should be a limit put to the
powers of the communities to require service. This limit may well
be, so far as the interest of the enterprise is concerned, the ability
of the system to earn the cost of the service at the fare necessitated,
although in the general interest of the public another and much
more stringent rule might be required. Within the limits thus
fixed, it is entirely the province of the community to prescribe
service, and by service is meant not only that which may be pro-
vided with existing facilities, but also that which requires exten-
sions, betterments and permanent improvements, and it is the
plain duty of the enterprise to provide such service as may be so
prescribed.
Sinco the price which the public is required to pay for local
transportation is based upon the cost of furnishing the service, it
is no more than justice that the items of this cost should be under
the supervision and audit of the public's representatives. To
determine the form of such supervision, it is necessary to examine
more closely into the nature of the items of cost. These are
Operating cost.
Maintenance cost, including not only current maintenance,
but payments to reserves for future replacements and
' renewals ;
Public charges, including taxes and all imposts ;
The cost of money, including first, return, and second, the
expense of securing capital.
There need be no divergence of opinion as to definition in con-
nection with these items. Electric railway accounting has for a
number of years been upon a stable basis. The methods prescribed
by the Interstate Commerce Commission, are either in form or in
substance, in general use throughout the industry. The principles
of the Standard Classification of Accounts are universally recog-
nized as correct and may be applied to any operation with justice
to these concerned. The object of supervision is, therefore, to
48
Service At Cost AoBEEMir^rrs
I
check unnecessary or excessive expenditure and to prevent care-
lessness which may arise from the practical assurance that revenue
will be provided to pay any expenses incurred. The importance
of this form of regulation is in inverse ratio to the sufficiency of
provisions whereby the rewards of management depend upon the
results of operation. If careful, economical and efficient opera-
tion accrues to the benefit of the management as well as to the
community, then the necessity of supervision by the public authori-
ties is correspondingly diminished. The need of some .degree of
control, however, remains because it is as impoi-tant to the service
that operating expenditures should be ample as it is that they
should not be excessive.
Expenditures for operation, maintenance and depreciation
should have no effect upon the return upon the property. Kegu-
lation under so-called service at cost agreements is not regulation
upon a "cost plus" basis. In the latter case, return depends
upon the amount expended while in the former case the amount
invested determines return and the amount expended has no bear-
ing. This is an exceedingly important distinction, since the two
principles bear no relation whatever to each other and the objec-
tions that are urged against the " cost plus " method do not hold
as to service at cost.
Several methods of the supervision of the cost of operation are
possible. One involves the fixing of allowances for operating pur-
poses based upon operating units such as the car mile. This method
has the virtue of flexibility insofar as it permits expansion of the
total amount of service so long as unit costs are kept within the
stipulated unit allowance. It does not, however, provide for
changes in cost during the period for which it is fixed, and to th^s
extent is in itself, if strictly adhered to, a prescription of the
quality of the service, since the effort of management will natu-
rally be exerted to keep the service without the bounds of what can
be paid for by the allowance made. If these allowances be fixed bv
the terms of the grant under which the utility conducts business,
the result is the setting up of standards of operating cost, apt to
prove insufficient in periods of increasing expense and too great
in periods of decreasing expense.
!
Service At Cost Agreements
49
Another method provides for a budget system, whereby an esti-
mate of receipts and expenses covering a fixed period is submitted
by the utility for the approval of the public authorities, who have
the power to fix the amounts to be expended. In these cases, the
objection that with the total amount of expenditures fixed there
.can be no increase of service to meet contingencies unforeseen at
the time the budget was adopted, is overcome by provisions
whereby supplementary budgets may from time to time be pre-
sented, which if approved permit expansion in expenditure.
Still another form of supervision provides for the audit of all
expenses by the public authorities, who have the power to disallow
or reduce items, and so prevent their payment as a part of the
cost of servica All of these methods involve the exercise of judg-
ment on the part of the regulating authorities and present oppor-
tunities for disagreement, between the management and the regu-
latory officers.
Insofar as strictly operating costs, such as wages, the purchase
of materials, and similar items are concerned, the likelihood of dis-
agreement is not great. Such costs are matters of record and of
faet, and for this reason are susceptible of proof. The question
of the maintenance of the property, both through current repairs
and renewals and through the operation of reserve funds for future
replacements and renewals, is not so easy of adjustment. Here
judgment is the controlling factor, and electric railway practice
has not been sufficiently developed to permit the setting up of
standards recognized as authoritativa Two objects are sought to
be accomplished by maintenance. First, the keeping of the prop-
erty in efficient operating condition; second, the preservation of
the investment, by maintaining value either in property or funds
to the full value of the investment One hundred per cent condi-
tion is unnecessary to achieve the first object; 100 per cent con-
dition as represented either by the physical property, or by
reserve is essential to the second. As a part of the cost of service,
there must be collected an amount sufficient to accomplish this
purpose. The proportion of the amount that shall be currently
expended and the proportion that shall be accrued for future
expenditures is a matter of judgment and the difficulties connected
with its determination are many.
til
50
Sekvice At Cost AGBEEMin!rrs
Sekvice At Cost Agreements
111
I
Among the methods of determination, advocated or in practice,
the most prominent are first, the fixing of a maintenaace allow-
ance based upon the operating unit of the car mile, with the
accrual of the balance not currently expended as reserve against
future renewals and replacement, second, the fixing of a percent-
age of either gross revenues or investment value to be collected
as a cost of service and apportioned arbitrarily between current
maintenance and reserve, third, the setting aside of arbitrary
amounts for so-called depreciation and the fixing of current main-
tenance expenditures by the budget system. The business of
supervision in respect to costs occasioned by maintenance is to
see that the car rider pays his full share of the cost of the property
worn out in his use, but that he does not pay more than his share
for the benefit of future car rider, while the interest of the man-
agement is in the preservation of the property value which is
behind the investment it represents.
Those elements of the cost of service represented by taxes and
public imposts are outside of the control of the enterprise. Their
regulation is primarily a matter between the car rider and the
general public. If the community so determines, they must be
coUected as a cost of service without question and consequently
they may be disregarded in the present discussion.
The supervision of charges against service caused by payments
on account of return to capital may be based upon either of two
general theories: First, that the value upon which a return shall
be allowed and the rate of that return having been fixed, the pub-
lic interest requires only that any addition to that value shall
receive the approval of the public authorities, thus permitting the
enterprise to make use of any lawful method of financing and
giving to it the entire disposal of the return ; second, that strict
control and direction of all the methods of financing, including
the issuance of securities, as to their nature, the price sold, and
the return thereon, should be exercised by the public authorities.
The advantage of the first method of control is the freedom
allowed to the enterprise in readjusting its affairs to meet new
conditions caused by the revaluation of its property. Under this
plan neither the amount nor the character of the securities out-
standing concerns the public. They may be allowed to stand as
originally issued if this be considered advisable or desirable and
readjustment then takes place in the distribution of the total
return among the various classes of securities rather than in com-
plete financial reorganization so as to adjust the face value of
securities to the value upon which return is received. It further
permits, as to new capital issues, the adoption of that method of
financing which may be to them most attractive.
The second method has the advantage from the standpoint of
the enterprise of giving authority and stability to its securities.
Thai: they are issued with the consent and approval of the author-
ity upon whom the return depends undoubtedly gives them a
better standing in the financial market. Morever, it makes easier
the adoption of methods which gives flexibility to the rate of
return allowed. As has already been pointed out, the rate at
which money can be borrowed for any purpose is constantly
changing. Under a system of regulation by which the rate of
return is fixed for any considered period, variations in the cost
of new capital must be absorlxxl through the sums paid to the
enterprise on account of return. This is particularly important
as affecting charges against the cost of money, such as discount
on securities. t
Unless these charges be amortized from earnings, they increase
the rate of interest which must be continuously paid until the
securities are retired. This must be a prime factor in determin-
ing the rate of return allowed, and if absorbed through the allow-
ance permitted the enterprise should have a material effect upon
the rate. Indeed, it is to be doubted whether any community
would ever consent to a blanket rate of return high enough to
both absorb discount on securities and at the same time afford a
sufficient recompense for the capital invested.
Flexibility in the rate of return provided is as important to
the acquisition of new capital as is flexibility in the rate of fara
It is provided either in the interest rate or in the price at which
the securities are sold. The mere stipulation of a rate of interest
to bo allowed upon securities does not mean, even if they be dis-
posed of, that the rate stipulated is the rate which the enterprise
must pay for the money secured, since to the extent that they are
sold under par, the interest rate is increased.
m
Sebvice At Cost Agreemetnts
Service At Cost Aqreeme'xts
5S
It is^ therefore, important that security issues to provide new
capital should conform as to interest rate and terms with the
conditions of the money market at the time of their sale in order
that the funds may be acquired at the lowest cost. The nature
of the securities which command the largest sale sometimes
change with the changing conditions in the financial world, and
it is impossible to set hard and fast rules. These are some of
the reasons why the close regulation of the issuances of securities
is urged as a measure for the protection of the investment as well
as in the interest of the investment. It is to be again pointed
out that in the matter of this kind of r^ation the question of
judgment enters to a large extent.
Wherever r^ation rests upon judgment there is opportunity
for disagreement and disputa The regulatory authorities,
whether they be officers of the State or officers of the community,
must necessarily act with a bias towards the public standpoint.
Hence, the necessity in the interest of the enterprise, that
there should be some form of appeal from their decision.
They are not and should not be judicial officers. They must, to
a certain extent at least, be partisans, and with such almost
akolute control over the important question of service and finance,
might very well, through unreasonable requirements, destroy both
the integrity of the investment and prevent a fair and reasonable
return. It is essential, therefore, that appeal either to arbitra-
tion or to some judicial tribunal be provided. Without such
provision, the enterprise is completely at the mercy of the regu-
latory officers, who are charged with sufficient power to wreck
the enterprise, either through unwise decision ox with deliberate
intent.
Conclusions
^ Management as distinct from, yet attached ta, capital is essen-
Ual ta a heal transportation enterprise and can only he seawred
if it be aitacted by the hope of pecuniary profit.
The reward for management slwuld depend upon the efficiency
and economy exercised by U. If profits be considered tJie prod-
uct of good management, they should be shared as between the
car rider and management and not with the community.
Begulation is distinct from management, and when it attempts
to perforin the functions of management assumes responsibility
to the degree that it takes away authority.
The province of regulation is to prescribe service and to see
that this prescription is carried mot.
The right of com^mimities to prescribe service is limited only
by the ability of the enterprise to collect the cost of the service so
prescribed.
Right of appeal from orders of regulatory authorities, eUher
through arbitration or to the courts, is essential to tfie protection
of capital.
CHAPTER NINE
•
Existing Plans Considered
Six Esaential Principles Governing Relations Between Communities and
Private Enterprise Engaged in Local Transportation Service — Extent to
Which They Are Applied in Existing or Proposed Service At Cost Plans —
Inclusive and Exclusive Rights — Indeterminate Permits — Provisions for
Proper Maintenance — Assurance of Return — Flexibility in Rate of Return
— Reward for Management.
In the preceding pages, certain fundamentals have been out-
lined as being essential to the protection of capital invested in
local transportation enterprises and to the attraction of money
into this character of public service. It will be of interest to set
up these principles one by one and apply them to existing or pro-
posed service at cost agreements in order to ascertain the extent to
which they are in actual practice in the regulation of the relations
between communities and local transportation utilities as provided
by such agreements.
The first of the principles may be thus stated — -
The Protection of Capital Invested in Local Transporta-
tion Requires that it be Given an Inclusive and Exclusive
Bight to Furnish a Local Transportation System by What-
ever may be the Best Means.
No recognition of this principle is to be found in any of the
agreements or plans which we are discussing. These franchises
are not inclusive, by which is meant that they provide for but
54
Service At Cost AaKEEMirirrs
cme form of transportation, very largely for the reason that
up to the present time there has been no adequate realization of
the importance of the motor vehicle's part in local transportation,
nor of the fact that this part to be really effective must be that of
an auxiliary and adjunct to the electric railway. Only in the
Montreal franchise is recognition given to the motor bus. Here it
is required of the company that it shall operate buses at the
direction of the Montreal Tramway Commission, but only if such
operation entails no burden upon the cost of the service. In other
words, bus routes and lines established must be self-supporting.
Other agreements are silent as to transportation other than that
upon rails, although in most of them the possibility of a change
in motive power is recognized by provisions which empower the
communities to consent to the use of motive power other than
electricity.
The object of both the Chicago and Philadelphia agreements
was to secure for the respective cities a complete and unified
"system " of local transportation, for which purpose the operation
of rapid transit lines, both on elevated structures and in subways
to be built with the city's money and owned by the city, was pro-
vided for, while a similar object was set forth in the Dallas fran-^
chise, yet in no case was it considered of importance to include in
the basic instrument by which a unified system was to be secured
the operation of motor vehicles. Indeed, there are still many
States in which motor buses have not yet been formally recognized
as conmion carriers, subject to the statutes that control common
carriers. The danger of this omission in franchises, as it affects
investnient, is obvious. Controlled, regulated and restricted on
the ground that it is properly a non-competitive enterprise, the
street railway may be, and often is, faced with a form of competi-
tion peculiai'ly unfair and harmful because it is not subject to
the same control, regulation and restriction.
It is perhaps because of lack of complete control over their own
streets that more communities do not grant full rights to operate
street railway systems, but confine these rights to certain specified
lines and routes. Many State Constitutions and more State laws
require the consent of abutting property owners to the construction
Service At Cost AnREEMirNTs
55
of street railway tracks in their highways, thus removing from the
community the exclusive right to say where and when street rail-
way lines shall be built. Moreover, the idea or regulation through
competition is still alive, and the possibility of competing lines
built and operated by the city, or by an enterprise other than
that to which the franchise has been extended, is not lost sight of.
The right of the city to build and operate such lines is especially
reserved in the Youngstown franchise, while in Cleveland it is
provided that the City may, within a certain prescribed district,
compel the company to permit the use of its tracks by other comr
panics. The Massachusetts Acts do not extend the rights of the
companies. The two Denver ordinances aim simply to provide an
automatic form of rate regulation and other terms of the Com-
pany's franchises are unaffected thereby. In Minneapolis, Cin-
cinnati, Montreal and Westerville, the grant is for particular
route and streets to be added to at the pleasure of the City. Tn
Memphis, service at cost is provided for by an order of the Stato
Utilities Commission, which does not add to the franchise rights
of the Company.
The Protection of Capital Invested in Local Transporta-
tion Eequires that unless Provision be made for the Amort-
^*io» of the Difference Between its " Scrap " Value and
its Value as a Going Enterprise, its Right to Conduct Busi-
ness shall be Terminable only upon Purchase by the Com-
munity, or by a Licensee of the Community.
All Massachusetts street railways operate under a form of
indeterminate permit, not affected by the acts which are under'
discussion. The Dallas franchise is terminable only upon pur-
chase by the City or a licensee of the City, while the proposed
Chicago franchise was terminable upon City purchase alone. Tha
proposed Philadelphia agreement was for fifty years and that
effective in Montreal for thirty-five years. Under the Ohio law,
no franchise may be granted for a longer period than twenty-five
years and the Cleveland, Cincinnati, Youngstown and Wester-
ville grants were accordingly for this term. The proposed Min-
neapolis franchise was also a twenty-five year grant, while in
Denver and Memphis no new grants were involved.
56
Sekvice At Cost AoREEMinn^
In all of thjese term franchises, with the exception of that effect-
ive in Montreal, some provision is made for the amortization of
investment The provisions of the Cleveland, Youngstown and
Westerville grants are much alike, and provide that when the grant
has less than fifteen years to run, which makes them, unless
renewed, effective in their most essential features for ten years
only, control of rates and semce, as well as extensions, pass from
the community to the company, which is permitted to charge the
highest rate permitted by the grant in order that the difference
between Capital Value as stated in the grant and salvage value
may be amortized in the remaining fifteen years. The consequence
is that the grant is no sooner in effect than negotiations for its
renewal are under way, with resulting disturbance.
While the Cincinnati grant does not contain provisions of the
same character as those of the other Ohio franchises, it does pro-
vide for sinking funds, to take care both of initial capital and such
added capital as may be raised from the sale of bonds. The rejected
Philadelphia franchise had similar provisions, both as to the
property in the unified system owned by the company and that
owned by the city. In the later case, however, the provisions were
not as stringent.
In Minneapolis, an amortization fund was created, to be accu-
mulated by the payment into it of one-half of one per centum of
capital value each year, until an amount, defined by the grant as
the intangible value of the property was equalled. Thereafter the
amount to be paid into the fund was to be fixed by the city
council.
The third of the principles —
The Proteetioii of the Ihvestmeiiit from Attrition, i. e.,
its Wasting Away in the Public Service Without Replace-
ment, Requires Adequate Provision from Revenue Both for
Maintenance and for Reserves for Depreciation.
In Cleveland and Youngstown, a maintenance, depreciation
and renewal fund, is accumulated from a monthly allowance
based on the revenue car mileage of the system for the month,
and changing with the period of the year. Such of the Fund as
is not expended for current maintenance goes into a reserve for
Service At Cost Agkebmej^s
67
renewals and replacements, to be expended only with the approval
of the city authorities. No special provision is made for depre-
ciation, and as a matter of record there has during the life of the
Cleveland grant, either been a deficit in the fund, or an
inconsiderable balance.
In Cincinnati, the amount to be exijcnded for current main-
tenance, repairs and renewals is fixed in the annual budget and is
subject to the approval of the city authorities. In addition there
is accumulated a special fund to provide for depreciation. For
the first five years of the grant, the amount paid thereinto, shall
equal that formerly set aside by the company. After five years
the amount shall be that fixed by the State Public Utilities Com-
mission. The fund is to be used exclusively for replacements and
renewals. In the event of purchase by the city the amount then
in the Depreciation Fund shall be deducted from the purchase
price and becomes the property of the company.
By the terms of the Boston Elevated Act, the trustees operat-
ing the property are enjoined to " make such provision for depre-
ciation, obsolescence and rehabilitation, that, upon the expiration
of the period of public management and operation, the property
shall be in good operating condition." Depreciation and obso-
lescence are specified in the Act as items in the cost of service, but
the amount to be set aside therefor is left to the judgment of the
trustees. It wiU be noted that the language of the Act, provides
for nothing more than the maintenance of good " operating "
condition, something apart from the maintenance of full invest-
ment value, although by the practice in Massachusetts investment
value is recognized as that upon which a retui-n shall be paid.
In the act providing for cost of service for Massachusetts elec-
tric railways other than the Boston Elevated and the Massachusetts
Eastern current maintenance is included as a part of the cost of
service and, in addition, it is provided that there shall be set aside
such allowance for depreciation, obsolescence and losses in respect
to property sold, destroyed or abandoned as the Commission shall
from time to time decide upon.
In Montreal payments on account of " maintenance, renewals,
replacements and substitutions " are included as items in the cost
V i
58
Sebvice At Cost Agbeemitnts
of service. The allowance is fixed on the basis of revemie car
miles operated and paid into the maintenance and renewals fund,
from which is paid the cost of renewals and replacements. Money
is held in the fund until expended for renewals and replacements
or expended for additions, extensions and permanent improve-
ments, which when so paid for are not added to Capital Value.
The grant provides that the Tramway Commission shall make
such allowance as will keep the maintenance and renewals fund at
$500,000 or more, the initial value of the property being fixed at
$36,286,295.
In the Eastern Massachusetts Act, maintenance on the one
hand, and depreciation, obsolescence, rehabilitation and losses in
respect to property sold, are made separate items in the cost of
service, the allowance for each to be such as will, in the judgment
of the trustees, be sufficient.
" Maintenanco, current and deferred " are made items in the
cost of service by. the provisions of the Westerville grant, the
determination of the amount to set aside for the purpose being
left to the company subject to the approval of the commission.
In the Dallas franchise the provisions for maintenance and
depreciation reserves are elaborate. Current maintenance is pro-
vided for as an operating expense. In addition a repairs, main-
tenance and depreciation reserve is set up. When the highest rate
of fare permitted by the grant is in effect, it is provided that this
fund shall equal six per cent of property value. When any lower
rate of fare is in effect the normal amount shall be ten per centum
of property value. Ten per cent of monthly gross receipts are to
be paid into the fund as the second major item of cost of service,
and in addition, there shall be paid into the fund, such an amount
of the gross receipts remaining after the payment of other specified
items in the cost of service, as will bring tlie total for the year up
to eighteen per cent of annual gross receipts. Such payments
shall be cumulative until deficits shall be made good. Payments
into the reserve cease when the normal amount is reached. The
company shall receive no more than its minimum return \mtil the
amount in the reserve shall be at normal. This grant is peculiar
in that it makes the amount of depreciation depend upon the fare
Service At Cost Agbeemet^ts
59
m effect, although wear, tear and obsolescence is in no way depend-
ent upon rate of fare.
In the order of the State Public Utilities Commission affecting
Memphis ordinary maintenance is included as; an operating
expense. In addition, a Eenewal and Keplacement Keserve is
created to be used " for the sole purpose of providing renewals and
replacements (other than ordinary maintenance) due to ordinary
depreciation, obsolescence or abandonment." Expenditures from
the fund are under the direction of the Utilities Commission. The
fund was started with the amount that had been accumulated by
the company for depreciation previous to the taking effect of the
order, and there is paid into it three per cent per annum of the
value of " depreciable '' property (stated to be $7,600,000 in a
total Initial Value of $11,846,034) until there shall be aceunui-
lated $500,000. Thereafter when the balance in the fund is
between $300,000 and $500,000, the same rate shall prevail ; when
the balance is more than $500,000, it shall be reduced to two per
cent, and when it is less than $300,000, the rate shall be increased
to four per cent
In the defeated Chicago ordinance, the following distinction as
between maintenance and repairs, and renewals is established by
the language of the grant : " Kenewals are hereby defined to be
the replacement of any principal part of the local transportation
system, or its equipment or appurtenances (including pavement)
or subways." The trustees are enjoined to classify expenditures as
between maintenance and repairs, and renewals. An amount equal
to six per cent of gross receipts shall be spent for maintenance and
repairs, or if not so spent shall be set aside in a maintenance and
repairs fund to be later so spent. In addition, there shall be set
aside each month, an amount equal to eight per cent of the gross
receipts of the previous month, to be accumulated in a Renewals
and Depreciation Fund. From this latter fund shall be paid the
cost of all renewals, except such as are charged to Capital Account,
and the balance not expended shall constitute the reserve for depre-
ciation. The eight per cent allowance for the fund may be
increased when in the judgment of the trustees this seems desirable
and necessary.
(
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60
Service At Cost Aoreemitxts
1^
i
I
In the rejected Philadelphia ordinance the amount to be
expended for maintenance was left to the judgment of the com-
pany, subject to review by the Supervising Board. Three distinct
depreciation funds were also established, one to cover the property
of the city, one the property of the company used in connection
with the operation of the city system (Note: This property was
eventually to be purchased by the city), and the third, the
remainder of the Company's property. The amount to be sot aside
for the three funds was left to the judgment of the Supervising
Board, except that the accumulation of the fund to cover the city's
property was not to begin until ten years after the date when the
agreement became effective. The Company's Fund was to be
applied to payments for repairs, replacements and renewals other
than those paid directly out of gross revenues, expenditures from
the fund to be approved by the supervising board.
In the rejected Denver Service at Cost Ordinance, the amount to
be expended for current maintenance was to be fixed by the com-
pany in the annual budget subject to the approval of the city. In
addition a Renowals and Depreciation Reserve Fund, to provide for
"the replacement and renewal of tracks, cars, equipment, build-
ings and plant which hereafter shall become worn out, obsolete or
useless, and for the general depreciation of the property," was to
be provided, through sums taken from the revenues of the com-
pany. The amount to be set aside was to be " adequate and rea-
sonable " and determined by the Board of Tramway Control. As
a measure of adequacy the ordinance provided that for the initial
value of $20,867,750, a monthly allowance of $37,500, should be
deemed sufficient. In the Denver Elastic Six-cent fare ordinance
there were no provisions.
In the rejected Minneapolis ordinance, repairs, maintenance,
renewals and depreciation were all to be taken care of through the
operation of the Repair, Maintenance, Renewal and Depreciation
Fund. This was to be provided by the setting aside each month
of one-twelfth of 2.75 per cent of Capital Value, the rate to be
increased or decreased as the city council might determine. To tbe
fund, there was also to be added amounts received from the sale of
material or property sold, and from it was to be paid the cost of
Service At Cost AoREEME'^fTS
61
maintaining the property, and of renewals and replacements other
than those charged to Capital Account. The balance not so used
was to be maintained as a reserve.
The fourth of the principles —
Assurance of Return is Necessary to Attract Capital into
Local Transportation Enterprises Where Profits are Limited,
and has a Material Effect upon the Bate of Betum Necessary.
In the cost of service plans under consideration return is assured
in greatly varying degrees. Even the provisions for flexible fares
differ as to the assurance given. Thus while in Youngstown,
Cincinnati, Boston, Massachusetts General Act, Montreal, Eastern
Massachusetts, Memphis, Chicago, Denver and Minneapolis, fares
may be indeffnitely increased to meet the cost of service, in Cleve-
land, Westerville and Dallas, a top limit is fixed beyond which fares
may not be increased without an amendment to the ordinance,
and in Philadelphia the grant provided merely that the Supervis-
ing Board should, when a fare increase was necessary, file a tariff
with the State Public Service Commission, which should then act
as in all similar cases. The importance of assuring return by
provisions which permit a rate of fare sufficiently high to cover
the cost of service is shown* in the case of botli Cleveland and
Dallas, in the former of which it was necessary to amend the
grant to permit a fare high enough, and in the latter of which
a substantial deficit in the cost of service has been created because
there has been no amendment of the grant, and the highest fare
provided is insufficient.
Even with the possible rate of fare unlimited, there remains
the danger that the community, having the right to prescribe serv-
ice and require extensions, betterments and permanent improve-
ments, will impose a burden of cost upon the enterprise, which
cannot be taken care of, under any possible rate of fare. In the
plans effective in Cleveland, Youngstown, Cincinnati, the Mas-
sachusetts General Act, Montreal, Westerville, Dallas, Phila-
delphia and Denver, appeal from an order requiring service
is provided for, either to the courts or to a board of arbitration
erected according to the provisions of the agreement. In those
5
I'll
02
Service At Cost Aoreemkxts
Seeviok At Cost Agreements
m
\
provided for Boston, the Massachusetts Eastern, Chicago and
Minneapolis, no such provisions arc included.
Direct guarantee of return is made by the provisions of the Bos-
ton Elevated Act, where if there be a deficit in the cost of service,
it is made good from the State tretisuiy, and an assessment to cover
the amount is made against the communities served by the com-
pany, the funds thus advanced to be repaid when the revenue of the
company warrants. A similar provision as to a portion of the
new capital raised for rehabilitation is present in the Eastern
Massachusetts Act, while the rejected Minncaix)lis franchise pro-
vided, as to new capital, that the city might either make direct
loans to the company or guarantee the payment of interest on
and principal of securities issued with the city's approval. These
are the only sei-vice at cost plans in which provision is made for
putting the credit of the city behind the securities of the company
or assuring return to those who loan their money for this public
service.
Direct contributions by communities to the cost of service
are possible in Massachusetts, lK>th under the provisions of the
Massachusetts Eastern Act. and under a general statute which
provides that communities desiring to do so may levy taxes for
the purposes of raising contributions to the cost of service in order
to either reduce fares or to prevent an increase therein. In no
other case are there provisions for public contributions, although
in the rejected Philadelphia agreement the city reserved the right
to waive rental charges upon the subway and other facilities fur-
nished by it, on the theory that it could properly determine what
proportion of the interest and sinking fund charges should be
borne by the taxpayer and what proportion by the car rider.
In the matter of imposts and taxes, the relief afforded to the
Eastern Massachusetts Street Railway Company by the Cost of
Service Act, which provided that the cx>mpany should be relieved
from the construction and maintenance of streets, bridges and
structures in connection therewith and from obligations in con-
nection with the abolition of grade crossings and the underground-
ing of wires, has been further extended by an Act passed in 1920,
which relieves for a period of two years all street railway com-
panies from payment of the so-called Excise Tax which was in
lieu of payments on account of highway maintenance. The Cleve-
land franchise relieved th© company of the car license formerly
paid, and of its obligation to repave streets, although it is still
required to maintain pavement between its tracks and one foot
outside thereof. Cincinnati collects a " gross earnings " tax fixed
at $350,000 a year, which is in lieu of all paving taxes and assess-
ments. The Montreal franchise continues the use of the trans-
portation utility as a collector of revenue for public purposes.
Practically all of the former taxes are retained, and the city not
only collects a rental of $500,000 a year for the use of its streets,
but in addition appropriates for its own use 30 per cent, of the
profits arising from operation. The Westerville franchise neither
waived nor added to the taxes and imposts formerly paid by the
company. In Dallas the company was relieved by its franchise
of the payment of all taxes except ad valorem taxes and special
assessments for public improvements. Its obligation to pave,
repave and maintain pavement between its tracks and two feet
outside was continued. The Memphis order did not affect taxes
or imposts. The rejected Chicago ordinance relieved the com-
pany of its obligation to clean and sprinkle streets whenever the
cost of so doing necessitated an increase in fares. All other obliga-
tions were retained. The rejected Philadelphia agreement pro-
vided for the payment of a lump sum annually (starting at
$500,000 for the first 10 years and ending with $700,000 after
30 years) in lieu of all obligations on account of paving, repav-
ing, the maintenance of paving, snow and ice removal and all
licenses. No provisions for waiving this charge were made. The
Denver Service at Cost Ordinance relieved the company of the
payment of a former franchise tax, amounting to $60,000 a year,
and from its obligation to pave, repave, maintain pavement, con-
struct, reconstruct, maintain or improve bridges, viaducts and sub-
ways, except as to pavement or structures removed or damaged by
it. The rejected Minneapolis franchise permitted the city, in
order to reduce or to prevent an increase in fare, to waive require-
ments as to paving construction and maintenance, street cleaning,
sprinkling and oiling.
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64
Service At Cost Aobeemsnts
1
It
li
The fifth of the principles —
In Order to Meet the Changing Cost of Capital the Rate
of Betiim in Local Transportation Enterprise Should be
Flexible.
In the first of the cost of service agreements, that in effect in
Cleveland, the only flexibility of return provided was that upon
money obtained through the sale of bonds. When bonds are re-
funded it is provided that the return allowed shall cover the rate
of interest provided by the issue, plus such amount as will take
care of the discount if they be sold at a discount, the total rate of
return not to exceed 6 per cent. In the case of stock and floating
and other debt, the rate of return was originally fixed at 6 per
cent Because it proved to be impossible, under financial conditions
existing after the war, to secure new capital at this rate, the ques-
tion was in 1919 submitted to arbitration, and on the recommenda-
tion of the Arbitration Board the rate was increased to 7 per
cent, by an amendment to the franchise. The Youngstown agree-
ment provides for a 7 per cent, return upon Initial Capital, and
upon additional capital the rate fixed in the issue of stocks,
bonds or other evidences of indebtedness through which the new
capital is secured, such issues being subject to the approval of the
city and the rate to be no higher than the lowest at which the
money may be obtained. In the Cincinnati grant no raJte of return
for Initial Capital is provided, provision being made for certain
specified amounts. Securities issued after the taking effect of the
grant «hall, as to character, form, the interest thereon, and the
price at which sold, be subject to the approval of the city. The
Boston Elevated Act provides for a fixed return, beginning with
the taking effect of the grant at 5 pr cent, and ending, after
four years, at 6 per cent, upon common stock. Upon bonds and
preferred stock, the return is to be that fixed in the issue, the
State Trustees having the power to authorize for the company such
issues. Upon a special issue of preferred stock sold to provide
money for rehabilitation, the rate fixed at 7 per cent. Both the
Massachusetts Greneral Act and that applying to the Eastern Ma-s-
sachusetts Street Railway Company have provisions as to rate of
return similar to that of the Boston Elevated Act, except that the
Service At Cost Ageeemfjn'ts
05
rate of return upon common stock is fixed at 6 per cent, from
the time the acts become effective. The Montreal franchise, while
providing additional return through an " operating profit " and
by the division of surplus receipts, fixes the normal return upon
all capital, except that obtained during the war and for two years
aftei-wards, at 6 per cent. Upon the latter a 7 per cent return is
allowed. While there is no flexibility of return provided for in
the Westerville grant, the difference in the cost of money at
different times and under different circumstances is recognized.
Thus, the rate upon Initial Capital is fixed at 6 per cent., upon
New Capital at 8 per cent., and upon capital to be expended in
a certain village at 15 per cent. In Dallas, the rate of return
changes not with the cost of money but with the rate of fare in
effect, varying from 7 per cent., when tickets are sold at the rate
of 22 for $1, to 9 per cent when they are sold at eight for 25 cents.
In Memphis, the rate of return is flexible between a lower limit of
61/^ per cent, and an upper limit of 7% per cent, but here again
the flexibility is a device to secure managerial efficiency and the
rate depends upon the condition of the Fare Index Fund, and not
upon the cost of Capital. In the defeated Chicago ordinance, the
return upon Initial Capital was fixed. For new securities issued,
the return was to be fixed by the trustees for each issue. The same
provisions were included in the Philadelphia agreement, except
that new securities were to be issued by the company with the
approval of the city. In the Denver Service at Cost ordinance,
the return was fixed by the ordinance, increasing, in a period
of somewhat less than two years, from 51/^ to a 7 per cent
rate with additional allowances depending upon the rate
of fare in effect The proposed Denver Elastic Six-cent Fare
Ordinance did not attempt to fix the rate of return. In Minne-
apolis, the rate of Initial Capital was fixed, while upon New
Capital the company was to be allowed the rate of interest pro-
vided in the issue, as approved by the city, plus 1 per cent.,
except that the additional 1 per cent, was not to be allowed upon
money loaned to the company by the city, nor upon security issues
guaranteed by the city.
ii
66
8£BViCE At Cost Aubeemitnts
til
i(
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The sixth of the principles — ;
Reward for Good Blanagement is Essential as Return upon
Capital and should be Included as an Item in the Cost of
Service.
In the Cleveland, Youngstown, Boston, Massachusetts General,
Eastern Massachusetts, Westervillo, Chicago, Philadelphia, Den-
ver Elastic Six-cent Fare and Minneapolis plans, there is no pro-
vision by which good management is rewarded. In Cincinnati
surplus remaining after the cost of service is paid is divided
between the car rider and the company in accordance with the
rate o£ fare prevailing. For the company to benefit by this
pro\dsion, the rate of fare in effect must be six cents or less. In
Montreal, the company for keeping expenditures within 21^ per
cent, of the annual budget allowances, receives an " Operating
Profit " of one-eighth of 1 per cent, of the average Capital Value
for the year. In addition, surplus remaining from revenues after
the cost of the service has been paid, is divided 50 per cent, to
the Fare Eeduction Fund, 30 per cent, to the City and 20 per
cent, to the Company. In Dallas the rate of return varies with
tShe rate of fare in effect. If the fare be five cents, 22 tickets
for $1, the rate of return is 7 per cent. ; if the fare be five cents,
six tickets for 25 cents, it is 8 per cent. ; if the fare be ^vc cents,
seven tickets for 25 cents, it is sy^ per cent. ; if the fare be five
cents, eight tickets for 25 cents, it is 9 per cent. By the Memphis
order the company is assured of a minimum return of Qy^ per
cent. Deficits therein are cumulajtive and are paid from subse-
quent gross revenue before additions are made to the Fare Index
Fund. If in any month the balance in this Fund Ix? $60,000 or
more, the company receives a return of 714 per cent., unless it
be necessary to deplete the fund below $60,000 to make the pay-
ment. By the provisions of the Denver Service at Cost ordinance
the company was to receive additional allowances in rate of return
based upon the fare in effect. For any month in which a six-cent
fare was in effect it was to receive one-twelfth of one-fourth of
1 per cent. ; in any month during which a five and one-half cent
fare was effective, one-twelfth of one-half of 1 per cent. ; in any
month in which a five-cent fare was effective, one-twelfth of three-
quarters of 1 per cent, and when a fare of leas than five cents
was effective, ono-twelf th of 1 per cent
SERVICE AT COST PLANS IN EFFECT
An Identical Analysis of the Laws, Ordinances, Agreements
and Commission Orders under which Service at Cost is
in effect in Cleveland, Youngstown, Cincinnati, Boston,
Montreal, Westerville, Dallas, Memphis, the cities served
by the Eastern Massachusetts Street Railway Company,
and is available to all Massachusetts street railways.
" Service at cost " is a term that has come to be quite generally
applied to a plan for the conduct of electric railways as quasi-
private cntei-prises, by which fares arc made to automatically
respond to the cost of providing the sen-ice, and it is in this sense
that it is here applied.
It is only to the extent that the regulation is automatic that the
principle involved differs from that under which the rates of public
utilities are regulated by State or lo(*al commissions having juris-
diction over rates irrespective of franchise stipulations. As soon
as government put a limit upon the return which these enter-
prises could earn, the service at cost principle was bom, and
later developments of regulation have but expanded and refined
it. The primary object of all public utility regulation is to secure
for the public the required service at the lowest cost consistent
with the furnishing of such sei-vice. The right of the public,
through its duly constituted authorities, to prescribe the kind and
extent of the sei-vice to be furnished is undoubted, but it is accom-
panied by the duty to provide sufficient revenue to pay the cost of
providing the service prescribed.
The adjustment of these two basic elements of regulation so as
to bring them into harmony ; the construction of machinery for
regulation which will work with the least possible friction; the
adaptation of this artificial process of price regulation to bring
it into step with the economic laws which govern unregulated
industry, — these constitute the goal towards which the efforts^ pf
I67J
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6S
Service At Cost Agreemf.nts
W
those wprking for a better relationship between the public and the
utilities serving them should be directed.
To avoid waste, complexity and inefficiency in the operation of
local transportation systems, some quick, automatic, just and equi-
table method of making the price received for public utility service
responsive to its cost is essential. This the cost of service plans
here discussed attempt to do. The elements of this cost are
defined and agreed to. Included is the return to those whose
money is being used in the public service and the rewards to those
who furnish the managerial service that turns mere physical prop-
erty and legal rights and privileges into a live public enterprise.
Provision is made for the payment of the costs of service as defined,
either from revenue received from fares directly or indirectly
from the public treasury. Means and methods of determining
the total of the cost are provided by methods which safeguard the
public interest and, when the amount is so determined, the rev-
enue is increased or decreased in amount so as to cover all costs.
That is the theory of a service at cost plan.
Of those considered in the following pages, that now in effect
in Cleveland was the first. It became operative in 1910. It was
not until some seven years later that the same principles were
again applied, this time in Dallas, Texas, where in 1917, a some-
what similar grant became effective. Later in the same year, the
agreement covering the operation of the Westerville division of
the Columbus Railway, Power & Light Company went into effect.
Nineteen eighteen, saw the Boston Elevated, the Massachusetts
Eastern (then the Bay State), the Massachusetts General Acts, and
the Cincinnati and Montreal- franchises put into effect In 1919,
Youngstown entered into an agreement with the Mahoning &
Shenango Railway & Light Company for the operation of its
Youngstown lines under a service at cost plan, and in 1920, the
Tennessee Railroad and Public Utilities Commission promulgated
an order for service at cost for the Memphis Railway Company.
In the following pages the provisions of these various ordinances
are grouped under the following heads, in order that the student
of the subject may readily grasp the varying provisions covering
the same object;
Service At Cost Agkeemexts 69
A. GENERAL CONDITIONS —
1. Life: ,
2. Renewal:
3. Forfeiture:
B. MUNICIPAL PURCHASE —
1. By the City:
(a) When Purchase Can Be Made:
(b) Terms of Purchase:
2. By Licensee of City :
(a) When Purchase Can Be Made:
(b) Terms of Purchase:
C. CONTROL —
1. Corporate Autonomy:
2. Of Service :
(a) Within Municipality :
(b) Outside of Municipality :
3. Of Construction, Maintenance and Repairs:
4. Of Extensions, Betterments and Permanent Im-
provements :
(a) Definitions:
(b) Within Municipality:
(c) Outside of Municipality:
5. Of Capitalization, Financesimd Accounts:
(a) Ordinary Expenses:
(b) Securities:
(c) Bookkeeping:
6. Methods and Practices:
7. Use of TrfiLck and Facilities by Other Companies:
8. Machinery of Control:
(a) Power, Where Lodged :
(b) Administration:
(c) Powers md Duties of Administrative Body :
70
Sekvice At Cost Agbeemkjsts
a CONTROL — cow/mi^cd
d, ArhUraiion:
(a) Machinery For:
(b) Powers of Arbitration Authorities:
(c) Penalties:
(d) Expenses of Arbitration:
D. EMTURN —
1. Initial Value:
2. Added Valiie:
3. Deduclimis From Value:
4. Rate of Betwm, Normal:
5. Additional Allowatices:
6. Assurance of Return :
E. COST OF SERVICE —
1. Definition of:
2. Allowances:
(a) Operating:
(b) Maintenance:
(b-1) Definiiion:
(b-2) How Fixed:
(c) Depreciation:
3. Special Tax and Impost Features:
F. FARES —
1. Schedules of:
2. How Fixed :
G. TRANSPORTATION OF FREIGHT, EXPRESS,
ETC.—
H. SPECIAL PROVISIONS -^
Seevice At Cost AoREEME'iSTS
71
A. GENERAL CONDITIONS
1.— LIFE
Cleveland
The life of the franchise is 25 years. (Sec. 2.)
Note. — The grant, amended in some slight particulars was renewed for
25 years in April, 1919.
YoUNGSTOWN
The life of the franchise is 25 years. (Sec. 2.)
Cincinnati
In August, 1896, the Company was granted a fifty-year fran-
chise, which provided for revision at the end of twenty years. In
1916, the franchise was revised, but the new grant was declared
unconstitutional in some of its features and the present grant,
passed in 1918, takes the place of the 1916 revision. The
original franchise runs until 1946.
Boston
The period of public operation specified in chapter 159 of the
special acts of the Massachusetts Legislature of 1918 is ten years
from the date when the act took effect, but unless terminated by
the State continues indefinitely. (Sees. 1 and 12.)
Massachusetts (General)
The instrument providing for service-at-cost for Massachusetts
railways, other than the Boston Elevated Railway Co., and the
Eastern Massachusetts Street Railway Co., is statute law, and is
subject, to repeal and amendment by the Massachusetts Legisla-
ture. No other term is fixed.
Montreal
The agreement, entered into in 1918, expires March 24, 1953
(Art. 24).
Eastern Massachusetts
The term of operation under public trustees is ten years from
the dat« upon which the property was taken over by the new com-
pany (on May 31, 1919). (Sec. 2.)
LI
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72
Sebvice At Cost AoreemfxXts
At the termination of the period of operation by public trustees,
the Board of Directors of the New Company shall exercise all
powers conferred upon the Trustees, not inconsistent with the
general laws, until the General Court (Legislature) shall other-
wise determine. (Sec. 13.)
The IN'ew Company shall at the expiration of the ten-year period
of operation of public trustees have all the powers and privileges
and be eabject to all of the restrictions of a street railway com-
pany organized under the general laws of Massachusetts, and, with
the consent of the Public Service Commission, may exercise addi-
tional powers conferred on the Bay State Street Railway Co., by
the special act, subject to further action by the General Court.
(Sec. 18.)
NOTPE. — The Public Service Commission was abolished on December 1, 1919,
and its franchises were assumed by a new public body — the Department of
Public Utilities — the new department being a merger of the Public Service
Commission and the former Gas and Electric Commission.
Westebville
The life of the franchise is 25 years. (Sec. 2.)
The life of the Grant is indeterminate. Unless forfeited, or
otherwise terminated by law, it ends only with the purchase of
the property by the City or by a license of the City. (Sec. 38.)
Memphis
Service at cost was made effective by an order of the State
Railroad and Public Utilities Commission, which order is revoc-
able at the pleasure of the Board.
2.— RENEWAL
Cleveland
When the grant has less than fifteen years to run, the Company
shall have the right to collect the maximum rate of fare and con-
trol of schedules passes from the City to the Company, except that
the City retains its police power to require proper and reasonable
service. If the Interest Fund exceeds $500,000, the surplus shall
be applied to the reduction of capital value, by
Service At Cost Aoreemen^ts
73
First, the payment of floating. indebtedness;
Second, the retirement of such bonds as can under the
terms of the mortgage be so paid ;
Third, the creation of a sinking fund for the reduction of
capital value. (Sec. 38.)
The City may at any time, either before or after the grant has
fifteen years to run, renew such grant, " imposing upon the Com-
pany no substantial burden ... in addition ", and the Com-
pany must either accept mch renewal, or be deprived of control
over rates or schedules. "Substantial burden" is defined to
mean that the grant shall be identical in terms with present grant,
except as to date of expiration and as the certain provisions of its
rights- to assign its right to purchase to a third party, or shall
differ from present grant only in such particulars as shall be
agreed upon by Company and City. (Sees. 39, 40, 41.)
The right of the City to propose extensions, betterments and
permanent improvements ceases when the grant shall have legs
than fifteen years to run. (Sec. 27.)
Youn^gstown
There are no specific provisions for the renewal of the fran-
chise.
When the grant has less than 15 yearg to run, the Company
shall :
Have sole control over betterments, extension and permanent
improvement. (Sees. 15 and 18.)
Have the right to charge such a rate of fare, as will create an
Amortization Fund, to consist of all surplus receipts remaining
after operating costs, maintenance, repair and renewals and re-
turn on capital value, sufiicient with accumulated interest at seven
per cent, thereon, to extinguish the difference between the esti-
mated salvage value of the property at the expiration of the grant,
and the then capital value. The power of the Commissioner ex-
cept as thus limited, is to continue, and disagreement as to rates
of fare and salvage value is to be subject to arbitration (Sec
18.)
If the grant be renewed, the capital value, fixed therein, shall
be the capital value fixed by the original grant, increased or de-
creased as provided for in the original grant. (Sec. 18-A.)
!
■861
74
»
Sebvice At Cost Agreements
Cincinnati
There is no provision for the renewal of the original franchise,
but revisions are provided for at the expiration of the first twenty
years and each fifteen years thereafter.
Boston
Public operation and management shall continue after the ex-
piration of the ten-year period until such time as the Common-
wealth shall elect to discontinue it. (Sec. 12.)
^0 provisions.
No provisions.
'No provisions.
Massachusetts (General)
Montreal
Eastern Massachusetts
Westerville
1^0 direct provisions for renewal are contained in the Grant.
When the Grant has less than fifteen years to run, control of
service passes- from the Commissioners to the Company, which is
authorized to charge any rate of fare, not in excess of the highest
named in the schedule of fares contained in the Grant. If, later
the 6rant shall be renewed, for a period of not less than fifteen
years, nor less than the unexpired term, so that no substantial
changes shall be made in its provisions, control of the service shall
revert to the Commissioners, and fares shall be regulated in ac-
cordance with Grant. (Sec. 7.)
No provisions.
See A. 1.
Dallas
Memphis
8.— FORFEITURE
Cleveland
If the Company fails to comply with the provisions of the grant
find the general ordinances of the City, and shall continue in such
default for six months after written notice has been served upon
it by the City, it shall forfeit all rights and privileges under the
grant. (Sec. 43.)
Service At Cost Agreeme'nts
75
YOUNGSTOWN
If the Company fails to comply with the terms of the grant and
♦his failure shall continue for six months after written notice
shall have been served by the City, the City shall have the right to
assume charge of the property and operate it until the Company
shall have complied with all terms and conditions of the grant.
During such period of City operation, the surplus income derived
shall be paid into the Stablizing Fund. (Sec. 19.)
Cincinnati
The Companies shall give an additional bond of $250,000 to in-
sure the performance of their obligations under the ordinance of
1896 and the present revision. Failure to so perform their obliga-
tions renders the ordinance null and void, in so far as it confers
rights or privileges upon the Companies. The sureties may be
increased at the instance of the City. (Sec. 28.)
Boston
By appropriate legislation, passed not less than two years before
the date fixed for termination, the Commonwealth may terminate
public management, either at the expiration of the ten-year period
or at any time thereafter. (Sec. 12.)
Massachusetts (General)
The law may be repealed or amended by the Massachusetts
Legislature.
Montreal
No provision for forfeiture :
For failure to comply with the terms of the agreement the Com-
pany is liable to a fine of $40 a day for each day during which the
noncompliance continues-. The fine is collected through the
Recorder's Court of Montreal and, in the discretion of the Court,
costs may be added thereto. The fines collected become the prop-
erty of the city. In the case that the violation affects only outside
municipalities, they may proceed through any court of competent
jurisdiction to collect the fine, and upon collection it becomes the
property of the municipality, where the failure to comply occurred.
(Art. 96).
76
Sekvioe At Cost Agreemfxts
Ko provisions.
Mo provisions.
Eastern Massachusetts
Westervillb
Dallas
In the event that the City determines to purchase the property,
or authorizes its purchase by a License, and the Company fails to
comply with the provisions of the Grant relative to such purchase,
the Grant shall be forfeited. (Sec. 41.)
The Grant is forfeited, if the Company fails to comply with
my or all of the terms of the Grant ; with the general city ordi-
nances relative to the construction, maintenance or operation of
street railways lawfully in force at the time of the acceptance of
the Grant or thereafter adopted; if the Company willfully de-
faults in the performance of the terms and conditions of the lease
covering the property of the Northern Texas Traction Co., pro-
vided in the Grant or collusively permits the termination of such
lease before the term provided ; or willfully and continuously fails
to carry out the award of any Board of Arbitration. When the
Company is in default in any of these regards, the City may serve
due notice upon it, specifying the default. If default continues
for six months after the date of such notice, the Board of City
Commissioners is authorized to declare the Grant forfeited, but
the forfeiture shall be enforced only in the manner provided in
the Dallas City Charter. (Sec. 42.)
See A. 1.
1.— BY THE CITY
Memphis
B. PUBLIC PURCHASE
(a) When the Purchase Can be Made
Cleveland
The City may at any time, upon six months' notice, purchase
the property, franchises and all rights of the Company. (For
terms, see B-1 (b).) (Sec. 31.)
The City may at the expiration of the grant, purchase either the
entire property of the Company, or that portion of its property
located within city limits. (For terms, see B 1 (b).) (Sec. 34.)
Service At Cost Ageeembtxts
i i
YOUNGSTOWN
The City may, upon six months' notice, any time during the
life of the grant, purchase the property covered by the grant.
(Sec. 16.)
The City may purchase the property covered by the grant at
the expiration of the grant. (Sec. 16-A.)
Cincinnati
At any time during the term of the grant, or any renewal or
extension thereof, upon three months' notice by the City of its
intention to purchase. (Sec. 25.)
Boston
Under provisions of the act, at any time during the period of
public management and operation; under the State's power of
eminent domain, at any time. (Sec. 16.)
Massachusetts (General)
At any time.
Montreal
On March 24, 1953, and at the expiration of every subsequent
five-year period, upon notice being given six months before the
date of purchase.
Eastern Massachusetts
Under provisions of the Act, at any time during the period of
operation by Public Trustees ; under the State's power of eminent
domain, at any time. (Sec. 19.)
Westerville
At any time upon six months' notice in writing by the Com-
missions. (Sec. 15.)
Dallas
At any time after ten yeai-s from the date when the Grant bcv
came effective. (Sec. 38.)
li
Memphis
No provisions.
78
Service At Cost Agreemitnts
(b) Terms of Purchase
Cleveland
If the City shall purchase the property of the Company before
the expiration of the grant, it shall assume the current floating in-
debtedness of the ccmpaiiy, shall assume, or pay, its bonded in-
debtedness, shall pay the difference between its bonded indebted-
ness and its capital value, as determined by the terms of the present
grant, and, in addition shall pay an additional ten per cent, upon
the difference between the sum of its bonded and floating indebted-
ness and its then capital value. If the current obligations, of the
Company, except those incurred, for extensions, betterments and
permanent improvements, exceed a sum equal to ten per cent of
the gross reteipts of the Company for the next preceding calendar
year, such excess is to be deducted from capital value. (Sec. ai.)
If the City shall purchase the property at the expiration of the
grant, it shall be upon the same terms- as are provided for pur-
chase during the life of the grant, except that ten per cent shall
not be added to any part of the capital value. (Sec. 34.)
YOUJSTQSTOWN
If purchased before the expiration of the grant, the City shall
by ordinance, provide for a term of twenty-five years, for the
operation of the interurban, suburban, freight and supply cars of
the Mahoning & Shenango Eailway & Light Company, over the
city tracks, at a price to be base on cost of maintenance,
repair and renewal of tracks and power stations and return
on investment; it shall provide by contract for the supply of
steam to the Company from the North Avenue station and the
maintenance of steam lines and connections thereto ; it shall pay
for the property covered by the grant, the then capital value,
either by cash payment or by the assumption of the bonded and
floating debt and the payment in caeh of the difference between
this amount and the then capital valua If the City so desires
the Company shall turn any securities in the Stabilizing Fund
into cash, and retain the full amount in the fund, deducting this
from Capital value, or the fund may be retained by the City and
Service At Cost Agreemfnts
79
110 deductions made from Capital value. These terms apply also
to purchase at the expiration of the grant. (Sees. 16 and 16-A.)
If within forty-eight months of the time that the grant shall
take effect, the Mahoning & Shenango Railway & Light Co. shall
nave organized a new corporation which shall purchase and
.•perate the property named in the grant, and which shall agree to
offer for sale to the residents of Youngstown, any securities there-
after issued by it in accordance with the permission of the City,
there shall be added to the purchase price ten per cent, of the
difference between the funded debt of the Company and the Capi-
tal value at the time of the purchase, if the property be purchased
before the expiration of the grant, but not if it be purchased at
the expiration of the grant. (Sees. 16 and 16-A.)
Cincinnati
The City may purchase the property in pursuance to the method
provided by the constitution of the State of Ohio, or upon pay-
ment of $26,238,950, plus.
1. The amount required to pay and retire the outstanding Ee-
ducible Debt. (See E. 1, Third.)
2. The amount required to retire outstanding car trust certifi-
cates issued after the date the grant became effective. (See E. 1,
First.)
3. The amount required to retire the securities issued to pro
vide $250,000 of the Reserve Fund. (See E. 1, Eight.)
4. The amount required to retire securities issued to provide
for capital expenditures made after January 1, 1917.
5. Deficiencies in payments from gross revenue required to be
made by the terms of the grant.
6. Interest on moneys borrowed to make up such deficiencies.
MINUS
1. The balance at the time of the purchase in Depreciation and
Reserve funds accrued after January 1, 1917.
2. Payments made after January 1, 1917, into sinking funds
for securities and notes- issued by the Companies after January 1
1917.
3. The sums in the Working Capital Fund (see E. 1, Seventh)
and the Reserve Fund (see E. 1, Eighth).
80
Service At Cost Acjreements
1
' 1! .
I li
4. The aggr^ate amount paid after Januaiy, 1917, for dam-
ages and claims, accruing before that date, the City to assuiiie all
liability for damages and claims made after the date of purchase.
All cash on hand, and in banks, and bills and accounts receiv-
able by the Company from its operations-, as well as money to be
received from the sale of securities and notes to be conveyed to the
City, which assumes responsibility for outstanding contracts and
liabilities of the Company and agrees to pay all HUs and accounts
payable. (Sec. 25.)
Upon the proffer of the purchase price in gold coin of the
United States, the Company shall convey its property, as specified
in the ordinance to the City, assigning to the City all contracts,
rights, privileges of all persons-, firms or corporations made or
granted by the Company under the terms of the grant. The pur-
chase price includes the value of the franchises owned by the Com-
panies. (Sec. 25.)
Boston
Upon the assumption of the Company's outstanding indebted-
nesg and liabilities and the payment of an amount in cash, equal
to the amount paid in, in cash, by its stockholders for its stock then
outstanding. (Sec. 16.)
Readjustment of this provision in order to meet conditions
which would arise through the purchase, the terms of which are
already provided by law previously enacted, of the West End
Street Railway Company, now leased by the Boston Elevated
Railway Co., is provided for, but the principle involved is the
sama (Sec. 16.)
Massachusetts (General)
The Commonwealth, city or town, shall pay in cash an amount
equal to the Cash Investment as defined in the act, plus the amount
paid in for preferred stock, and shall assume all outstanding
bonds, contracts, leases and other liabilities of the Company.
(Sec. 9.)
The right of the Commonwealth or any city or town to acquire
the property by virtue of their power of eminent domain is not
*iffected by the provisions of the Act. (Sec. 9.)
Service At Cost Agreements
oX
Montreal
The City appoints one arbitrator, the Company another, and a
third is appointed by a judge of the Superior Court sitting in the
District of Montreal. These three, disregarding any valuation
named in the agreement fix a valuation on the property, to which
is added ten per cent, over and above such valuation. This figure
constitutes the purchase price, and for it the Company shall con-
vey to the City, all of its property both in and out the city, includ-
ing its- franchises and privileges in communities outside the City,
the value of which shall not, however, be included in the estimate
of the' arbitrators. (Art. 92, Par. 8.)
No other municipality than the City shall have the right of
purchase. (Art. 02, Par. 8.)
Eastern Massachusetts
Under the provisions of the Act, upon the assoimption of the
Company's outstanding indebtedness, and the payment, in cash,
of an amount equal to the par value of its shares, plus any
premiums paid in cash therefor. (Sec. 19.)
Note. — Acquisition of the property under the State's power of eminent
domain would be made in accordance with the general laws governing such
acquisition.
Westerville
The Company is required to sell at 110 per cent, of the Capital
Value as of the time of purchase. (Sec. 15.)
Dallas
If the City shall purchase at all, it must purchase all, and " not
less than all " of the Company's property, except that if the City
has not the legal power to purchase any part of the property lying
outside of the City limits, it is required to purchase only such
property as lies within the City limits, together with such prop-
erty lying outside as it has the legal power to purchase. (Sec. 38.)
The price to be paid shall be based upon the Property Value of
the Company as determined by the terms of the Grant. (Sec. 38)
Tn the event that Company shall have purchased the property
of the Northern Texas Traction Co., the lease of which is pro-
vided for in the Grant, the Initial and Added Value of this prop-
erty as provided for in the Grant, shall be included in Property
S2
Seevice At Cost Agkeements
I
1;,
Value : in cage that this property has not been purchased, the lease
thereof shall be assigned to the City and its- Initial and Added
Value, with certain readjustments set forth in the Grant shall be
deducted from Property Value. (Sec. 38.)
Extensions, Betterments and Improvements addc-l >f Property
Value, but not paid for shall be deducted from Property Value,
but the City shall assume obligatione so incurred. (Sec. 38.)
Property purchased subject to mortgage, with the consent of the
City, the mortgage upon which cannot be extinguished, shall be
transferred to the City subject to such mortgage, the amount of
which shall be deducted from Property Value. (Sec. 38.)
If in the Property Value at the time of purchase, there shall
be included Extensions, Betterments or Improvements made
within the ten years next prior to the date of purchase, and de-
termined by the Company and Commission at the time under-
taken, to have been for the purpose of providing for the entrance
into the City of an interurban road, or to which the Commission
and the Company shall mutually agree this provision shall apply,
and there shall not have been earned upon the capital value repre-
sented by such extensions, a rate of return equal to that earned
upon the rest of the Property Value, and if during the time be-
tween the expenditures for such Extensions, Betterments or Im-
provements, the earnings of the Company shall have been insuf-
ficient to pay the authorized return upon total Property Value,
then there shall be added to the purchase price a sum equal to the
aggregate deficit between the return earned upon the Property
Value as a whole and that earned upon the Property Value repre-
sented by such Extensions, Betterments or Improvements (Sec
40.)
In the event that City does not purchase all of the property
lying outside of City limits, the value of such property reached,
" after taking into consideration the fact of its severance from rest
of Grantee's property '- shall be deducted from Property Value.
In its notice to the Company of intent to purchase, the City shall
list specifically the property it has not the l^al power to piirchase
and if within three months after the date of such notice. City and
Company are unable to agree upon the amount to be deducted, the
question shall be arbitrated. (Sec. 38.)
Service At Cost Agreements
83
The City may elect to assume, in lieu of cash payment, any or
all of the bonds and other evidences of indebtedness, secured by
lien, on account of Property Value. If so, the amount, together
with accrued interest, shall be deducted from Property Value.
(Sec. 38.)
All of the Keserves provided for in the Grant, and property
purchased with money taken therefrom, become the property of
the City. This includes Working Capital, except such amounts
as are due and applicable to return on Capital Value, due to the
Company. (Sec. 38.)
Cash on hand, derived from securities or borrowed for the pur-
pose of making Extensions, Betterments and Improvements, shall
be treated as if actually expended and shall pass to the City as
part of the property purchased. (Sec. 38.)
Because the Reserves become the property of the City, the City
assumes liability for all payments chargeable either to the Re-
serves or Operating Expenses. The City assumes the Company's
obligations, both of contract and of tort " so far as incurred in the
ordinary and proper conduct of the Grantee's business- hereunder,"
except as to bonds or other indebtedness not assumed by the City
as a part of the Purchase Price not a lien upon the property, or
such additions to Working Capital as are included in Property
Value. (Sec. 38.)
The price to be paid by the City for the property shall equal
the then Property Value, as determined in accordance with the
foregoing, plus five per cent of Property Value and plus an addi-
tional five per cent of the Property Value added during the ten
years next prior to the date of purchase. (Sec. 38.)
The City, electing to purchase, shall serve six months' notice
on the Company specifying a date (not more than twelve months
from the date of such notice) when the property shall be turned
over to it. (Sec. 38.)
If the Company fail? to turn over the property in accordance
with the terms of the Grant, after such notice, the Grant is for-
feited. (Sec. 41.)
If the City shall elect to pay cash for the property and not
assume any of the Company's funded debt, in part payment, it
shall deposit with the Trustees of the first mortgage provided for
i'
> 1
nm
84
Sebvic'e At Cost Agreements
in the Grant, the amount of the purchase price in cas^h to be held
for the benefit of the bondholders and the Company as their
respective interests may appear. Such deposit shall act as a dis^
charge of all liens against the property under mortgages secured
by the bond is^^iies. (Sec. 38.)
Fnless the Courts decide that the provisions of the Grant as to
purchase do not apply, the City may not purchase the property
in any other manner than in that set forth in the Grant
fSec. 88.)
Memphis
No provisions.
8.— BY LICENSEE OF CITY
(a) When Purchase Can Be Made
Cleveland
The City may grant its right of purchase at any time to a
licensee, who shall agree to accept a rate of return, not lese than
a quarter of one per cent, lower than that fixed in present grant
Such licensee shall be designated by competitive bidding, in which
the Company shall be allowed to participate. (Sees. 32 33 )
If at the expiration of the grant, the City shall not purchase
the property, it shall have the right to grant a franchise for its
operation to other person or persons, who shall purchase the prop-
erty of the Company on the same terms, as are provided for Citv
purchase. (Sec. 37.)
YOUNGSTOWN
'No provisions.
No provisions.
No provisions.
Ho provisions.
No provisions.
Ko piroviiioni.
Service At Cost Agkeements
85
Cincinnati
Boston
Massachusetts (General)
Montreal
Eastsbn Massachusetts
Westerville
No provisions.
Dallas
At any time after ten years from date when Grant became
effective. (Sec. 39.)
Memphis
No provisions.
(b) Terms of Purchase
Cleveland
If a Licensee shall acquire the property of the Company, it
shall be upon the same terms as are provided for city acquisition
(Sec. 33.)
If at the expiration of the grant, a subsequent grantee, shall
purchase the property of the company, it shall be upon the same
forms as are provided for City purchase. (Sec. 35.)
No provisions.
No provisions.
No provisions.
No provisions.
No provisions.
No provisions.
No provisions.
Youngstown
»
Cincinnati
Boston
Massachusetts (General)
Montreal •
Eastern Massachusetts
Westerville
Dallas
Before designation by the City, the Licensee must deposit with
Hie City a sum equal to 10 per cent of the then Property Value
of the Company. Should the Licensee fail to acquire the prop-
erty of the Company within tbi-ty days after the date set in the
86
Service At Cost Agkeements
notice to the Company, or, in the event of bona fide legal pro-
ceedings or other events over which the Licensee has no control,
within thirty days from the date of release from such restrictions,
the Commissioners shall by resolution declare such deposit for-
feited. In that event, 50 per cent of the amount shall be paid
into the City Treasury for us© for general city purposes, and 50
per cent shall be paid to the Company, which after discharging
any expenses incurred by reason of the purchase proceedings,
shall deposit the remainder in Surplus Eeserve. It is provided
that the Company shall save the City harmless by reason of this
payment. (Sec. 39.)
The purchase of the property by any licensee of the City shall
be subject to the same rights of purchase either by the City, or
by a licensee of the City, as are established by the original Grant.
(Sec. 39.)
In the case of purchase by a Licensee, the City reserve the right
to amend the Grant in any manner it may desire, except that the
highest rate of fare permitted shall not be in excess of that per-
mitted to be charged by the original Grantee. (Sec. 40.)
In the event of purchase by Licensee the deed of conveyance
given by the Grantee may stipulate that the conveyance is made
subject to the assumption by the Licensee of all liabilities of
Reserves or Operating Expenses, and all obligations of the Com-
pany, and the Grantee may retain a lien upon the property to the
extent of this obligation assumed by the Grantee; or, the Grantee
may require from the Licensee a liability bond, sufficient to cover
any loss arising from the failure of the Licensee to discharge such
obligations. (Sec. 39.)
In other regards, except as to the Purchase Price, the terms
of sale are the same as that covering purchase by the City. [See
B. 1, (a).] (Sec. 39.)
The price to be paid by the Licensee for the property shall equal
the then Property Value, as determined in accordance with the
provisions* of the Grant, plus 10 per cent of the then Property
Value and plus an additional 5 per cent of the Property Value
added during the ten years next prior to the date of purchase.
(Sec. 39.)
Service At Cost Ageeements
87
The providon as to the addition to Purchase Price, to care for
deficits in return on additions made during the ten years next
prior to the date of purchase on account of the furnishing of facil-
ities for the entrance into the City of interurbans, or on other
additions agreed upon between the City and the Company, as it
appears under B. 1. (a), applies to a purchase made by a Licensee.
(Sec. 40.)
Memphis
"No provisions.
C. CONTROL
1.— CORPORATE AUTONOMY
Cleveland
The autonomy of the corporation is assured by the following
provision :
Nothing in this ordinance contained shall operate as an abridge-
ment of the corporate rights or powers of the Company, nor of the
discretion of its board of directors in the selection of managers
and employes, or any one performing any duties imposed upon
the company and its officers by law; nor shall anything herein
contained be deemed a limitation upon the amount of capital
stock which shall be issued by the Company, or indebtedness
incurred by it. The Capital Value fixed by Section 16 hereof is
for the purpose of determining the return to the Company from
the carriage of passengers, and for the purpose of fixing, from
time to time, the rate of fare and the price at which the purchase
of the property of the Company may be made. (Sec. 37.)
The Company may, without the consent of the City, issue and
sell its capital stock, or increase its bonded or floating debt ; but
no increase in capital stock or bonded or floating indebtedness
by the Company shall be considered a part of Capital Value for
the purpose of fixing the return to the Company, unless made pur-
suant to the provisions of the Grant or with the consent of the
City. (Sec. 16.)
YOUNGSTOWN
The autonomy of the corporation is assured by the following
provision :
(
88
Service At Cost Aokeeaients
Service At Cost Agreements
89
N'othing in this ordinance contained shall operate as an abridge-
ment of the corporate rights or powers of tlie Companies, nor of
the discretion of their hoards of directors in the sdection of
managers and employes, or anyone performing any dnties imposed
upon said Company and its officers hy law; nor shall anything
herein contained be deemed a limitation npon the amount of cap-
ital stock which shall bo issued by the Company, or indebtedness
incurred by it except to the extent limited by that part of section
16, which applies to the segregation in a new corporation of the
• lines and property covered by this ordinance if said Company
shall in the terms thereof elect to so s^regate said property. The
Capital value fixed by sections 10 and 10-A hereof is for the sole
purpose of determining, first, the return to the Company ; second,
for the purpose of fixing, from time to time, the rate of fare; and,
third, the price at which the purchase of the property of the Com-
pany covered by this ordinance shall be made. (Sec. 17.)
Cincinnati
No specific provision for corporate autonomy is included,
although the jurisdiction of the City over certain specified funds
is? waived.
Boston
The Company practically surrenders its corporate autonomy.
A Board of Directors is retained, elected bv the stockholders, but
the President, Treasurer, Clerk and all other officers of the Com-
pany are appointed and may be removed by the Public Trustees.
The Directors shall '* have no control over the management and
operation of the street railway system, but its duties shall be con-
fined to maintaining the corporate organization, protecting the
interests of the Corporation so far as necessary, and taking such
action from time to time as may be deemed expedient in cases, if
any, where the Trustees cannot act in their place." (Sec. 4. )
The Trustees shall allow the Board of Directors from each vear
such sum as may be deemed reasonable to provide for the cor-
porate organization and enable the Board of Directors to perform
itfi duties. (Sec. 4.)
Massachusetts (General)
The act does not directly provide for corporate autonomy. It
does provide that the Governor shall, with the consent of his- Coun-
cil, appoint three Directors to the Board of Directors of any Com-
pany, accepting the act. These Directors shall have all the powers
of any directors, and if the Board shall have any Executive Com-
mittee, Finance Committee, or any other Standing Committee,
one such Director shall be a member thereof. It further provides-
that the by-laws of the Company shall provide for monthly meet-
ings of the Board. (Sec. 10.)
Montreal
No direct provision for corporate autonomy, although this is
implied by the terms of the agreement. The Company is, how-
ever, restrained from carrying on any other kind of business- than
that provided for in the agreement (Art. 27), and is forbidden
to sell, lease, transfer or cede any part of its systems, or the rights
conferred upon it by franchises* or agreements (Art. 25).
The Company shall establish and maintain its plants, work-
shops and principal offices within the City limits and shall build
and manufacture within the City limits any part of the materials
used by it, which, in the opinion of the Commission can be manu-
factured advantageously within the City limits (Art. 87).
Eastern Massachusetts
The autonomy of the company is practically surrendered. Its
shareholders elect a Board of Directors, but the Trustees have the
right to appoint and remove, at their discretion, the President,
Vice-President, Treasurer, Clerk and all other officers of the Com-
pany, excepting the Board of Directors. The Trustees are author-
ized by the Act to exercise " all the rights- and powers of the New
Company and its Directors and shall receive and disburse its
income and funds." (Sec. 11.)
The consent of the Board of Directors to contracts for con-
struction, acquisition, rental or operation of new lines-, or the
extension, sale or lease of existing lines, is necessary, unless the
Public Service Commission shall determine that public necessity
90
Service At Cost Agreements
and convenience requires such contracts and that they do not impair
the return upon securities issued under the authority of the Act.
(Sec. 12.)
The New Company, its stockholders and Directors, shall be
presumed to have authorized any issue of securities made by the
Trustees and are in addition required to give their formal consent
if that he considered necessary. (Sec. 13.)
Westerville
There are no specific provisions in the Grant covering the ques-
tion of Corporate autonomy. There are, however, no restrictions.
Dallas
"The Grantee may at any time refund its bonds, issue securities
(stocks and bonds, or either of them), and incur such indebtedness
(and at its option issue notes therefor) in any lawful manner, and
to any lawful extent and secure the payment of any bonds or other
indebtedness by a mortgage or mortgages on the property of
Grantee, including its rights under said lease from Northern
Texas Traction Company, or any part thereof, the City hereby
conferring upon Grantee all necessary authority therefor ; and it
is expressly agreed that in dealing with the Grantee, its success-
ors and assigns, or with its property, the City shall in no wise
(except in case of purchase by the City or a Licensee of the prop-
erty operated hereunder and then only as hereinafter provided) ,
be in any way concerned with any of the indebtedness or securi-
ties of the Grantee, but shall consider and be concerned only with
the Property Value of the property of the Grantee as herein
defined, which Property Value shall never be changed by the City
or the Grantee except pursuant to the provisions of this ordinance;
provided, however, that the Grantee shall not issue bonds or other
evidences of indebtedness secured by a lien on its property exceed-
ing in aggregate par value eighty-five per cent (85%) of the Prop-
erty Value. The City covenants, nevertheless, that it will from
time to time by resolution of the Board of Commissioners give
confirmatory authority for or certificate of approval of securities
issued or to be issued by Grantee whenever requested by Grantee ;
Service At Cost Agreements
91
but no such confirmation or approval shall ever have any opera-
tion or effect upon the Property Value, nor affect the liability or
obligation of the City or Licensee, in case of a purchase of the
Grantee's property." (Sec. 19.)
The rights, privileges and franchises conferred by the Grant
may not be sold or assigned without the consent of the Board of
Commissioners. (Sec. 44.)
The principal offices of the Company shall always be main-
tained in Dallas. (Sec. 11.)
The Company may not amend the lease provided in the Grant
for the Dallas Terminal and may not execute a new lease. Tt may
renew and extend the old lease. (Sec. 37.)
Memphis
No provisions.
2.--0F SERVICE
(a) Within Municipality
Cleveland
The control of the City over s-ervice is absolute, except that
when it is claimed by the Company that the service required by
the City cannot be rendered within the revenue provided by the
highest rate of fare provided in the grant, such additional service
may be discontinued, on the award of a Board of Arbitration.
The language of the grant is :
" The City reserves to itself the entire control of the service,
including the right to fix schedules and routes, including routes
and terminals of interurban cars, the character of the cars, the
right to increase or diminish the service." (Sec. 9.)
Young STOWN
The grant reads : " The City reserves to itself the entire con-
trol of the service, including the right to fix schedules and routes,
character of new cars and the right to increase or diminish service
* * *." The execution of the right is lodged in the City Coun-
cil, but the Commissioner may temporarily approve changes, to
be effective until the Council otherwise orders. The question as
^^
92
Service At Cost Agreements
if
to whether the service pres<!ribed can be carried out under existing
rates of fare, or a higher rate of fare is subject to arbitration.
(Sec. 6.)
Cincinnati
The City reserves the control of the service on all routes,
including the right to fix schedules and stopping points, the type
of cars, transfer regulations and the fixing, changing and exten-
sion of routes. The prescriptions of the City shall be enforced in
any court of competent jurisdiction and the Companies may
defend, only on the ground that the requirements of the City are
impossible under budget allowances if the Company is to perform
its- corporate obligations, maintain its organization and perform
the duties imposed upon it by the Grant. In the case of require-
ments involving capital expenditure, the Company may defend
upon the ground that acting diligently and in good faith it is
unable to provide the funds required. (Sec. 8.)
m
w
BOSTOH-
The control of service lies entirely with the Board of Trustees.
The act provides that they " shall determine the character and
extent of the service and facilities to be fumiehed, and in these
respects their authority shall be exclusive and shall not be subject
to the approval, control or direction of any other State Board or
Conmiission." (Sec. 2.)
Massachusetts (General)
Except as the Act provides, the Companies are subject to the
general laws of the State relating to street railway companies.
Control and regulation of service is, therefore, lodged in the State
Public Service Commission. (Sec. 1.)
Montreal
The Montreal Tramways Commission shall determine speed of
cars, stopping and transfer points, service and frequency of serv-
ice, and may allow a speed in excess of that fixed by law (Art.
54). The Company may not change its routes without the con-
sent of the Commission (Art. 55). It may not operate combined
Service At Cost Agreements
9S
passenger and freight cars without the consent of the Commission
(Art. 57). The Commission shall determine the number of pas-
sengers that each car may accommodate (Art. 63). The Com-
mission may establish rules for the transportation of freight,
determine the character of the freight to be so transported and
order the Company to establish loading and unloading places
(Art. 83). Establish the limits of average density per car-mile
(Art. 92, Par. 1). The Company may not allow the use of its
tracks by another company, or connect its tracks with those of
another company without the cons-ent of the Commission (Art.
28) ; width of space between tracks, radius of track curvature on
streets, projection of ties outside rails, width of rolling stock,
types of cars and their accessories, type and location of poles,
location of tracks in streets, weight and type of rails, stop signs,
lighting and heating of cars, weight of both passenger and freight
cars, maximum permissible load of freight cars, numbering of
cars and number of cars per train are subject to the approval of
the Commission (Art. 53). The Commission shall locate transfer
points at which agents are to be placed by the Company and indi-
cate agent's duties (Art. 56). The Commission shall approve the
placing of illuminated route and destination signs on all cars
(Art. 61).
The agreement itself requires that conductors and agents speak
English and French and call in both languages the names of
streets (Art. 59) ; shall provide each car with a gong (Art. 60) ;
shall ventilate and keep clean its cars (Art. 62).
Eastern Massachusetts
The Trustees shall determine the character and extent of the
service and the facilities to be furnished. Their authority in this
respect is exclusive, as to joint service with connecting companies
other than with the Boston Elevated Railway Company, in which
instance the Public Service Commission has authority. Upon the
request of the Mayor of a City, the selectmen of a town, or twenty
of the patrons of- the road, the Trustees must hold a public hearing
for the presentation of complaints as to service, but after such
hearings they may take such action in the premises as they see it
(Sec. 11.)
94
Service At Cost Agreements
Service At Cost Agreements
05
Westervillb
The Commission has control of service, including the alteration
of schedules, the increasing and diminishing of service and the
estahlishment of stops. The Commission shall not require service
to an extent which will not produce revenue sufficient to make
good loss in Working Capital. When the Grant has less than
fifteen years to run, and until it shall he renewed for not less than
fifteen years, control of the service shall rest with the Company.
(Sec. 7.)
Dallas
The Commission shall decide the design and equipment of cars
and has the power to order improvements therein, to the end that
they shall he safe, comfortahle and convenient; it shall prescribe
schedules and stops. If the Company contends that any order pre-
scribing service jeopardize the ability of the Company to earn,
at the highest permissible rate of fare, the return to which the
Company is, under the Grant, entitled, the question as to whether
such orders shall be enforced shall be arbitrated, but the decision
of the Arbitration Board shall not prevent the City from exer-
cising such control over service as is given to it by the provisions
of the City Charter. (Sec. 10.)
'No trackg, or operation thereon, shall be abandoned without
the consent of the Board of Commissioners. (Sec. 30.)
Memphis
The State Eailroad and Public Utilities Commission has ex-
clusive control of the service. The service at cost order provides
that until further ordered the Company shall provide each month,
not less than .155 nor more than .185 passenger car miles for each
revenue passenger carried.
(b) Ontdde of MnnidpaHt^
Cleveland
The Company shall perform existing contracts with commu-
nities outside of the City limits, but shall not increase service
above, or reduce fares below the requirements of such contracts.
In case of dispute as to such requirements, the matter shall be
decided by arbitration if the outside community affected consents,
the City to appoint one arbitrator, the community another and the
third to be appointed as in the case of other Arbitration Boards.
(See C-6-(a).) (Sec. 29.)
YOUNQSTOWN
The Company is given the right to operate interurban, sub-
urban, freight and supply cars over the city tracks, upon payment
of the actual cost per car-mile for power, maintenance, repair and
renewal of track as determined for city cars, plus interest on
investment and taxes. In the event of the purchase of the prop-
erty by the city, it is agreed that provision shall be made for a
continuance of these rights for a period of at least 25 years. The
interurban and suburban cars of the Company, shall not carry
passengers to and from points in the city unless directed to do so
by the Commissioner. Damages resulting from the operation of
such cars shall be paid by the Company, but the relative liability
for such accidents shall be determined and the portion adjudged
to be due to the property or employes of the city lines shall be
paid to the Company out of operating expenses, the apportionment
to be made by the Company, the Commissioner and the City
Solicitor. In the event of a disagreement it shall be arbitrated.
Repairs to cars and equipment not included in city property may
be made by the Company in the Haselton Shops, work and
materials to be supplied at actual cost, to be paid each month.
At the end of each six months, the Company shall pay into gross
receipts from city operation an agreed upon amount for overhead
and maintenance. (Sees. 11-B and 11-E.)
The Company agrees to permit the operation of city cars over
the Youngstown and Sharon Line (a suburban line), at the same
charge per car-mile as is agreed upon for the operation of inter-
urban and suburban cars over city lines. (Sec. 11-E.)
The type of all suburban, interurban, supply and freight cars
used by the Company, shall be subject to the approval of the city.
Cincinnati
No provision&
Boston
Powers of Trustees extend over entire system.
96
Sebvice At Cost Agreements
Massachusetts (General)
Public Service Commision has jurisdiction.
Montreal
The same control is exercised by the Commission outside of the
city of Montreal as in the city, except that the right of
municipalities outside of the City to exact the routes and fre-
quency of service to which they are entitled by their contract with
the Company is provided for (Art. 34).
Eastern Massachusetts
Powers of Trustees extend over entire system.
Westerville
The cx>ntrol of the Commission is over all service in Franklin
County. The Commission has no control over such portions of the
Company's lines as* are situated in the city of Columbus, Ohio.
Daixas
Control exercised by Commissioners extends to lines outside of
City Limits.
Memphis
The Utilities Commission exercises jurisdiction irrespective of
municipal limits.
S.— OF CONSTRUCTION, MAINTENANCE AND REPAIRS
No provisions.
No provisions.
No provisions.
No provisions.
No provisions.
Cleveland
youngstown
Cincinnati -
Boston
Massachusetts (General)
Service At Cost Agreements
97
Montreal
" The Company, on the order of the Commission and within
the delay fixed by it, shall make to its lines, to the pavements
imder its care, to its rolling stock or to anything else pertaining
to its system, either within or without the limits of the City, all
necessary modifications, additions, reconstructions, alterations or
repairs" (Art. 38).
The Commission is empowered to adjudge that a line or a part
of a line is useless and order the Company to remove track, line
and other appurtenances' and to reconstruct pavement and side-
walks. If the Company is negligent in carrying out such order,
the municipality affected may, with the consent of the Commis-
sion, do the work and charge the cost to the Company (Art. 39).
The Commission shall approve the type of rail, other than T-rail
(the use of which is forbidden) to be substituted in streets about
to be paved with any other than plain macadam pavement (Arts.
43, 52). The Commission shall direct the resetting of poles and
tracks, in the case of street widening (Art. 44).
The City Engineer shall set the grades to be used in track con-
struction in conformity vsdth the street grades (Art. 39). The
City shall specify the kind of pavement to be used replacing pave-
ment torn up for track construction or reconstruction, except that
if the pavement specified exceed in cost that removed, the Com-
pany may recover the difference from the City (Art 41). The
Company is compelled to provide drainage for its tracks, subject
to the approval of the City Engineer (Art. 50).
No provisions.
No provisions.
No provisions.
No provisions.
Eastern Massachusetts
Westerville
Dallas
Memphis
98
Sebvice At Cost Agbbements
f
4.— OP EXTENSIONS, BETTERMENTS AND PERMANENT IMPROVE-
MENTS
(a) Deflnitioiis
Cleveland
Extensions, Betterments and Permanent Improvements, in con-
tradistinction to Maintenance, Kenewals and Replacement are
defined to mean :
The acquisition, construction and equipment of additional Imes
of street railway, power housee, switches, sidings, car houses,
shops, rolling stock, machinery and other property, or additions
to existing equipment, or difference between new cost of new
sources of power, or new methods of propulsion, and the cost of
the source of power or method of propulsion replaced, if new at
the time of replacement, and all expenses incident to such con-
struction and acquisition ; and also, whenever any property of the
company is replaced by other property at a greater cost than would
be the first cost of such property, if purchased at the time of
replacement, then such excess cost shall be deemed an Extension,
Betterment or Permanent Improvement within the meaning of
those words as used in this ordinance. (Sec. 26.)
Toitngstown
Betterments, Extensions and Permanent Improvement in con-
tradistinction to Maintenance, Repairs and Renewals are defined
to be:
The acquisition, construction and equipment of additional lines
of street railway, switches, power houses, sidinge, car houses,
shops, rolling stock, machinery, stations and other property or
additions to existing lines and equipment. It ehall also be held
to mean and include the difference between cost of new sources of
power and method of propulsion, and the cost of the sources of
power and method of propulsion replaced as if the same were new
at the time of replacement, and all expense? incident to such con-
struction and acquisition, and also whenever any property of the
Company is replaced by other property at a greater cost than
would be the cost of such property so superseded or replaced, if
Service At Cost Agreements
99
purchased at the time of replacement, then such excess cost shall
be deemed a Betterment, Extension of Permanent Improvement
within the meaning of those words as used in this ordinance.
Cincinnati
The grant contains no definition of Extensions, Betterments and
Permanent Improvements, excepting that the I. C. C. Uniform
System of Accounts is prescribed.
Boston
The act contains no definition of Extensions, Betterments or
Permanent Improvements.
Massachusetts (General)
The Act contains no definition of Extensions, Betterments and
Permanent Improvements.
Montreal
There is no definition of either Extensions, Betterments or
Permanent Improvements contained in the agreement.
Eastern Massachusetts
The Act contains no definition of Extensions, Bettermer.t« and
Permanent Improvements.
"Westerville
The Grant contains no definitions of Extensions, Betterments
and Permanent Improvements.
Dallas
" The words ^ extensions, betterments and improvements * are
used in contradistinction to repairs to and maintenance, renewals
and replacements of property. They shall be held to mean and
include additions to or betterments of existing, and acquisitions,
construction, additions to or betterments of new lines of street
railway tracks, switches, sidings, overhead trolley and feeder sys-
tems, signal systems, street paving, street, sidewalk and other
special or local improvements, power houses, substations, eai
100
Sebvice At Cost Agreements
bmses, shops, machinery, rolling stock, tools, appliances, miscel-
laneous equipment, transmission lines, real estate, buildings and
oUier property, including additional track, or tracks on streets or
places at any time occupied by track or tracks operated hereunder:-
and w.tho,,t hmitation by the preceding enumeration, general^
shall include all expenditure, not properly chaigeable to operating
^penses or not properly chargeable to or paid out of the Repair
Maintenance and Depreciation Reserve, but shall not include any
interest on the Grantee's indebtedness other than interest during
construction as herein provided." (See. 1.)
« The word ' extensions ' (as distingiiished from betterments
and improvements) shall be held to mean and include new or ad-
nitional street railway lines." (Sec. 1.)
Sebvice At Cost Aobbembnts
101
No definition.
Memphis
(b) Within Mnnicipalil^
Cleveland
Extensions, Betterments and Permanent Improvements, may be
proposed by either the City or the Company. If proposed by the
Company, they must be approved by the City, if the Cost ie to be
added to Capital Value. If proposed by the City, thev must be
earned out by the Company, unless a Board of Arbitration shall
decide that the ability of the Company to earn its fixed return is
J«.pard,zed, or that the Company is unable to finance them,
(oec. 27.)
The City has the right of supervision over the construction of
all eTtensions, betterments and permanent improvements. (Sec.
YoUNGSTOWir
The Companj agrees to provide and spend within Rye years
for aich Extensions, Betterments and Permanent Improvements
as tue iAtj may designate the sum of $750,000. (Sec IS-A )
Betterments, Extensions and Permanent Improvements may be
proposed by either the City or the Company. If the cost of those
proposed by the Company is to be charged to Capital Value, they
must be approved by the City. If proposed by the City, or ap-
proved by the Cily, they shall be carried out by the Company S
the Company can procure by the sale of its securities, or by an
increase in its floating debt, the necessary funds ; unless, the Com-
pany shall claim that the carrying out of the plans will impair its
present or future ability to earn the return stipulated in the grant,
or that it is unable to finance the plan at the return allowed by the
City. These contentions are subject to arbitration. (Sees. 15-B
and 15-C.)
The Commissioner shall have the right to check all estimates
made by the Company for Extensions, Betterments and Improve-
ments and shall supervise the work of carrying out the plans.
He may incur any necessary expenses in preparing estimates for
the City. If the plans are actually carried into effect, the ex-
penses so incurred shall become a part of the capital cost of such
undertaking and shall be paid by the Company, provided they do
not exceed one-half of one per cent of the total cost. If the en-
terprise is not carried out such expenses shall be paid as an
operating cost. (Sec. 15-D.)
Cincinnati
The provisions of the Grant covering the making of Extensions,
Betterments and Permanetnt improvements, reads:
" Changes of routes and extensions- thereof and new and addi-
tional lines of roads or routes shall be made by the Companies
when ordered by ordinance of the Council if and when Council
may be empowered to require the same under the terms of this
Ordinance, Charter of the City and Laws of the State of Ohio."
(Sec. 8.)
"All new construction, reconstniction, renewal, replacement and
repair of routes made by the Companies in or upon the streets,
avenues, alleys, public ways and grounds of the City shall be done
in conformity with the ordinances of the City now in force and
effect or which may hereafter be passed and enacted regulating or
respecting the opening, closing and repairing of the streets, etc.,
tracks and other construction made after the taking effect of the
grant, shall be of a type approved by the proper boards of officers
of the city, before permits for such construction or reconstruction
shall be issued." (Sec. ^,)
Sebvice At Cost Agbeements
t •
1 1
9;
]{■
I
Service prescribed by the City, which involves capital expendi-
ture, may be objected to by the Companies, in which case the City
may prosecute an action in any court of competent jurisdiction,
for enforcement of its orders, and the Companies may defend only
upon the ground that in good faith and using all usual means it
's unable to finance the preecribed expenditures. (Sec. 8.)
Boston
The State's control is complete, except that contracts for the
operation or lease of subways, elevated or surface lines, or exten-
sions thereof beyond their present limits, may not be made if they
involve the payment of rentals or other compensation by the Com-
pany, after the period of management and control by the State,
unless consented to by the Company's Board of Directors. How-
ever, surface lines may be constructed, or purchased, beyond the
limits of existing lines even should the Board of Directors refuse,
if after a public hearing, the Board of Trustees decide that pub-
lic necessity and convenience requires their construction or opera-
tion. This power lapses, when the Commonwealth has passed
legislation providing for the termination of public control and
operation. (Sec. 3.)
Massachusetts (General)
(This Act provides for State control, regardless of municipal
boundaries) :
Except as the Act provides, the Companies are subject to the
general laws of the State relating to street railway companies.
Therefore, there is only such control over extensions, betterments
and improvements as was lodged in the Commission, previous to
the passage of the Act (Sec. 1), except as to improvements made
under the provisions for a special Improvement Fund, in amount
required by the Public Service Commission, but not to exceed five
per cent, of Capital Investment, raised through the sale of bonds,
«tock, or preferred stock, and fully subscribed within sixty days
after the determination of Capital Investment. The plan for the
expenditure of this fund shall be prepared by the Company and
submitted to and approved by the Commission. (Sec. 8.)
Service At Cost Agreements
103
Montreal
" In its operation, the Company shall be on the look-out for all
improvements and betterments relating to any part whatever of its
system, both within and without the limits of the City, including
its rolling stock, as may prove to be of recognized advantage, and
it must adopt the same when so ordered by the Commission and
within the delay fixed by it " (Art. 32).
The Company was compelled to construct certain specified
double-track lines during the first year in which the agreement
was in force (Art. 33).
The Company is compelled to build and operate any lines, pro-
posed by the City, by any municipality outside the City, or by
itself, if the Commission decides that such lines are required by
the needs of population and of traffic and if general financial con-
ditions permit. The Commission of its volition may require the
construction and operation of any new line, which it deems neces-
sary, if general financial conditions permit. In each case the
Commission shall fix the time within which the work shall be com-
pleted (Art. 34). The Company may not construct any new line
without the authorization of the Commission (Art. 35). The
Commission may order modifications, additions, alterations, re-
constructions or repairs to lines, pavement, rolling stock, or any-
thing else pertaining to the Company's system (Art. 38).
Eastern Massachusetts
In the case of contracts for the construction, acquisition, rental
or operation of new lines, or the extension of existing lines, the
consent of the Board of Directors of the Company is necessary,
unless the Public Service Commission shall decide that public
convenience and necessity require the extension and that the re-
turn upon securities, issued under the authority of the Act, will
not be impaired. The right of appeal to the Supreme Judicial
Court of Appeals rests with the Company. (Sec. 12.)
Westervilxb
^ The Company is required to rebuild a certain portion of its
line, in accordance with the specifications for "boulevard con-
struction," as set forth in the Grant, at such time as the Commis-
sions shall improve the highway in which the tracks of the Com-
pany are located. (Sees. 6 and 14.)
104
. Sebvice At Cost Agbeements
All other Extensions, Betterments and Permanent Improve-
ments, may be proposed by either the Commissioners or the Com-
pany. If proposed by the Company, they must be approved by
the Commissions, if the cost is to be added to Capital Value. If
proposed by the Commissioners they must be carried out by the
Company, unless a Board of Arbitration shall decide that the
ability of the Company to earn its fixed return is jeopardized, or
that the Company is unable to finance them. (Sec. 14.)
Dallas
Extensions may be ordered by the City or proposed by the Com-
pany. The order or proposal shall be accompanied by a requisi-
tion, setting forth in reasonable detail the cost of the proposed pro-
ject, and if necessary to a dear understanding the Grantee ehall
furnish specifications and plans in further detail. In the case of
" Extensions," as distinguished from " Betterments and Improve-
ments,'* approval must be given by the Board of Commissioners.
In the case of « Betterments and Improvements," the Supervisor
may act if he so desires without approval of the Board. The
Supervisor or Commissioners, as the case may be, must within
thirty days from the receipt of the requisition, either approve or
disapprove it. Failure to act within thirty days shall be taken as
approval. The Company, before proceeding with work, is re-
quired, if necessary, to secure the approval of abutting property
owners. If the Company contends that any Extension, Better-
ments or Improvement ordered by the City with jeopardize its
ability to earn the stipulated Return under the highest fare
allowed by the Grant, the matter of making the proposed Exten-
sion, Betterment or Improvement shall be arbitrated. Ko decision
of an Arbitration Board shall, however, relieve the Company from
its obligation to constnict, not to exceed two miles of line per
year, when ordered so to do by the City under a State law cover-
ing the question, nor to relieve the Company from its obligation to
expend under the direction of the City $1,000,000 for Extensions,
Betterments and Improvements within eighteen months after the
taking effect of the Grant as required by the Grant. (Sees. 2 and
27.)
Service At Cost Agreements
105
When in case of accident or emergency it is impracticable to
submit requisitions prior to the making of Extensions, Better-
ments and Improvements, the Company shall within sixty days
after the work is completed file in complete detail a requisition
therefor. This shall be approved or disapproved by the Super-
visor or Commission within fifteen days, and of the City and Com-
pany fail to agree thereon shall be submitted to Arbitration.
(Sec. 27.)
When the City limits are extended, so as to bring within the
same, portions of the Company's lines formerly outside, the con-
struction, maintenance and operation of the lines so included shall
be under the terms of the Grant subject to existing mortgages and
other liens, and the Company shall surrender its rights to operate
under and other franchise. (Sec. 2.)
Memphis
The Utilities Commission has the control granted it by the
general statutes of the State.
* (c) Outside of Muxdcipality
Clevelaistd
The cost of Extensions, Betterments and Permanent Improve-
• ments to Suburban Lines, can be added to Capital Value, only by
agreement with the City, and when such extensions, betterments
and permanent improvements will be self sxipporting. (Sec. 29.)
YOUNGSTOWN^
There is no provision in the grant covering Extensions, Better-
ments and Improvements outside of the Municipality, these being
within the discretion of the Company.
CiNCINH'ATI
There is no provision in the grant
BOSTOIT
Powers of Trustees extend over entire system.
loe
1 1
Lit
i
Sebvicb At Cost Agreements
Massachusetts (General)
The act provides for State control, regardless of municipal
boundaries.
MONTBEAL
Tlie powers of the Commission, in regard to extensions, better^
ments and permanent improvements, extend over the entire sys-
tem, witli the proviso that outside of " Uniform Tariff " territory
(eee F-1) " the cost of construction of any new line or the exten-
eion of any existing line, or of their operation^ shaU not be a
burden on the revenues of the Company in the sense that the
revenues of such lines must be sufficient so as not to affect unjustly
the passenger and freight tariff on the other parts of the Com-
pany's system" (Art. 36).
Eastern Massachusetts
Powers of the Trustees extend over entire system.
Westebville
Commission has no control outside Franklin County.
Dallas
" No Extensions, Betterments and Improvements outside of the
then City limits, unless required by law, shall be made, except
with the formal consent of the City expressed by ordinance or
resolution of the Board of Commissioners ; and in any event the
same shall be made under the supervision of the City, as pro-
vided herein for Extensions, Betterments and Improvements
within the City limits. In the event that such Extensions, Bet-
terments and Improvements outside of the City limits are required
by law, the Grantee shall have the right to add the cost thereof to
Property Value." (Sec. 27.)
Memphis
The IJtilities Commission has the control granted it by the
general statutes of the State.
Service At Cost Agreements
107
5.— OF CAPITALIZATION, FINANCES AND ACCOUNTS
(a) Ordinary Expenses
Cleveland
The operating allowance. Maintenance, Depreciation and Ee-
newals allowance and return upon Capital value is fixed by the
grant. (Sees. 15, 18, 19.)
No expenditure for renewals and replacements may be made
from the Maintenance, Renewals and Replacement funds, without
the approval of the City. (Sec. 20.)
YOUNGSTOWN
The allowances for Operation, Maintenance, Repair and Re-
newals, and for Return upon Capital Value are fixed by the grant.
(Sees. 11, 11-A, 12, 12-A, and 10-E.)
No renewal or replacement charge to the Maintenance, Repair
and Renewal Account shall be made without the consent of the
City Council, or the Commissioner when authorized to approve
puch charges by the City Council. Disagreements are subject to
arbitration. (Sec. 12-a.)
The salaries of all officials, the whole or any part of whose
salary is paid from the receipts of the City system, are subject to
the approval of the Commissioner. In case of disagreement the
dispute shall be settled by arbitration. (Sec. 11-Da.)
Cincinnati
The operating expenses are fixed in a budget, which is subject
to the approval of the City. (Sec. 8.) Other items of expense .
are fixed by the teims of the grant.
>l
1'
i(
Boston
Control complete (Sec. 2.)
Massachusetts (General)
The Act provides for no further supervision and control over
expenses than is now exercised by the Public Service Commission.
I
108
Service At Cost Agreements
Service At Cost Agreements
109
Montreal
The Commission has no direct jurisdiction over the ordinary
expenses of the Company. If the operating allowance be ex-
ceeded hy more than two and one-half per cent, the Commission is
empowered to disallow any expenses which it considers to have
Keen unnecessary, and the amount so disallowed shall be taken
from the guarantee fund (See H-2) (Art. 92, Par. 1).
Eastern Massachusetts
Control complete. (Sees. 11, 13.)
Westervillb
The Commissioners, if they consider the proportion of expenses
for salaries and other expenses, charged to the Westerville di-
vision hy the Company to be excessive, may demand that the ques-
tion be submitted to arbitration, in which event the award of the
Arbitration Board shall prevail. (Sec. 13-c.)
There is no other provision for direct control of expenses, ex-
cept that the items which shall constitute the cost of the service
are defined. (Sec; 13.)
Daluis
It ie the duty of the Supervisor to keep informed as to the ex-
penditures of the Company for salaries, supplies and other costs
of operation and if in his opinion the methods of the Company
are wasteful, he shall notify the Company that wastefulness exists
in the purchase or use of materials or employment of persons or
their compensation or in any other matter connected with the
business, and after an investigation, the cost of which shall be
paid by the Company, he may further notify the Company as to
the ways in which such wastefulness occurs and his suggestions
for ite correction. In the event of a disagreement between the
Supervisor and the Company, as to the existence of such wasteful-
ness or the method of its correction, the matter shall be submitted
to Arbitration. (Sec. 29.)
Memphis
The Utilities Commission has such jurisdiction as is granted it
by the general statutes of the State.
(b) Seciuities
m
Cleveland
The sale of stocks and bonds, to be added to Capital value, may
be made only with the consent and approval of the City. (Sec.
15.)
Youngstown
The sale of stocks, bonds and the incurring of floating debt, to
be added to capital value, shall be subject to the approval of the
city. (Sec. 10-B.)
Cincinnati
The City shall approve the amount and character securities, the
rate of interest or dividend, sinking fund provisions, and the price
at which such securities may be sold. (Sec. 22.)
Boston
The Trustees have authority to make contracts in the name of
the Company and to issue stocks, bonds and other evidences of in-
debtedness in its behalf. (Sec. 3.)
In spite of the fact that the Company, by the acceptance of the
act, have consented to this power being lodged in the Board of
Trustees, the Board of Directors are required by the provisions
of the act to take such action, as they may be requested to by the
Board of Trustees to validate its acts in relation to the issuance
of securities. (Sec. 4.)
Massachusetts (General)
The investment upon which return is allowed is fixed by the
Public Service Commission. (Sees. 2, 4.) Existing law pro-
vides the conditions under which new securities may be issued and
includes supervision and control by the Public Service Commis-
sion.
Montreal
N'ew Capital, upon which return is allowed, needed for pur-
poses, approved by the Commission, shall be borrowed, if, in the
judgment of the Commission, their condition permits, from the
Contingent Keserve Fund (see F-2) and from the Maintenance
and Renewals Fund (see E-3-b-61), and from the Tolls Reduc-
tion Fund (see F-2). Moneys so borrowed shall be reimbursed
8
110
Seevice At Cost Agreements
by the Company when and as ordered by the Commission (Sec.
ii2, par. 3). When it is not possible to borrow from these funds,
money shall be obtained in the usual manner, but it is provided
that, except in the case of certain trust deeds now in existence
covering $1,500,000, mortgages or issues of mortgage bonds or
debenture stock shall not aggregate more than seventy-iive per
cent, of the total additional new capital. (Art. 92, par. 3.;
Eastebn Massachusetts
The Trustees have the authority, with the approval of the Pub-
lic Service Commission, to issue stocks, bonds and other evidences
of indebtedness of the Company. The acceptance of th« act is
deemed to have given the assent of the stockholders and Directors
of the Company to such issues, but if it becomes necessary, the
Directors are required to take such action as may be requested
by the Trustees in r^ard to security issues. (Sec. 13.)
Securities may be issued, for the purpose of refunding existing
obligations, or for the purpose of constructing, or acquiring, new
lines, for the extension of old lines, for the improvement of the
property, for the purchase of new equipment or for any other pur-
pose, only with the approval of the Public Service Commission.
(Sees. 5, 7.)
Westebville
There is no provision for the control of security issues.
Dallas
The City assumes no control over the issuance of securities by
the Company, other than to require that the amount of bonds is-
sued shaU at no time exceed 85 per cent, of the then Property
Value. The Company is given, with this exception, express per-
mission to issue securities as it may see fit, while the City, in ad-
dition, agrees to approve and certify security issues when it is
requested so to do by the Company. The basis of the control exer-
cised by the City, is the Property Value of the Company as fixed
by the Grant and the City is not concerned with the amount of
outstanding securities, except as they affect the terms of purchase.
(Sec. 39.)
Sbbvice At Cost Agreements
111
Memphis
The Utilities Commission has such jurisdiction as is granted it
by the general statutes of the State.
(o) Bookkeeping
Clevelaito
The City, acting through the Street Railroad Commissioner,
has general supervision over the bookkeeping and accounting
methods of the Company, subject to arbitration by the Committee
on Standard Classification of Accounts of the American Electric
Railway Accountants' Association. (Sees. 10, 15.)
YOUNOSTOWN
The Commissioner shall have supervision over the book-keeping
practices of the Company. In case of dispute, disagreement shall
be submitted to the arbitration of the Committee on a Standard
Classification of Accounts of the American Electric Railway Ac-
countants' Association, or to any other person, or persons to whom
the regulation of accounts may be delegated by law. (Sec. 8.)
Cincinnati
The City, acting through the Director of Street Railroads, has
general jurisdiction over the method of keeping books and ac-
counts. If the Director disapprove of such methods, he shall
notify the Companies, and if a dispute arises the matter shall be
referred to the authorities with whom the regulation of such mat-
ters may rest (Presumably the Ohio Public Utilities Commis-
sion). The Director is empowered to audit receipts, disburse-
ments, vouchers, prices, pay rolls, etc. (Sec. 8.)
Boston
Control in hands of Trustees.
Massachusetts (General)
The act provides for no further supervision and control over
bookkeeping than is now exercised by the Public Service Commis-
sion. This is, however, extensive.
112
Seevicb At Oost Agreements
Service At Cost Agreements
113
In addition to the powers already exercised by the Public Serv-
ice Commission over accounts, it is provided that the Companies
shall each month furnish the Commission with such statements,
as the Commission may direct, showing the condition of the re-
serve fund, the income and expenditures of the previous month,
and such additional information as the Commission may require.
(Sec. 11.)
Montreal
The Commission has the right, " by itself or it& employes, at
any time, to examine all the Company's records or other docu-
ments, ^and to inspect the Company's property, but for the ex-
amination, verification and audit of the Company's accounts, the
Commission, unless it does so itself, shall employ a chartered ac-
countant." (Art. 18.)
Within thirty days after the expiration of each year of opera-
tion the Company is obliged to furnish to the Commission detailed
statements of its expenditures for operation, maintenance and re-
newals, and return upon capital value. (Art. 92, Par. 9.)
Eastern Massachusetts
Control in hands of Trustees. (Sec. 11.)
Westerville
The Commission is given access to the books, records and ac-
counts of the Company, to the ex-tent necessary for the ascertain-
ment of all facts in connection with the operation of the Division
and the carrying out of the terms of the Grant. (Sec. 16.)
The Commission is not given power to prescribe or supervise
the bookkeeping or accounting methods of the Company, nor are
there any provisions in the Grant, covering the methods in which
books and accounts shall be kept.
Daluls
The method of vouching expenditures, or of keeping accounts
may be disapproved by the Supervisor, in which case the decision
of the Commissioners shall be final and not subject to arbitration.
It is stipulated, however, that the system of accounts promulgated
by the American Electric Eailway Accountants' Association, the
Interstate Commerce Commission, or by any law of the State of
Texas, or authority granted thereunder, shall be satisfactory.
(Sec. 11.)
Memphis
Under the jurisdiction given it by the general statutes of the
State, the Commission requires that the accounts of the company
shall be kept in accordance with the Standard Classification of
Accounts of the Interstate Commerce Commission, subject to such
modifications as the Utilities Commission may from time to time
make.
The Company is required to furnish to the Commission its
regular monthly statements and such other statements as the Com-
mission may require, showing the condition of the Fare Index
Fund, various other reserves, its revenue and details of the cost'
of the service for the previous month, and such other information
as the Commission may desire. The Commission may make such
investigation of the accounts of the Company as it may deem nec-
essary, the cost to be borne as a part of the cost of service.
(6) METHODS AND PRACTICES
Cleveland
The City Street Railroad Commissioner is charged with the
duty of seeing that the Company uses due diligence in the col-
lection of its revenue, and in enforcing the rules against the grant-
ing of free transportation. He is to require the Company to
adopt such methods in this respect as he may prescribe. (Sec.
30.) ^
YOUNGSTOWN
1^0 settlement for claims and damages shall be paid unless ap-
proved by the City Solicitor, who is privil^ed to appear in all
actions for damages, involving City lines. (Sec. 10-Ca.)
Cincinnati
The Director must approve contracts for use or sale of power,
and new and additional leases of street or interurban railways.
(See; S.) r . V ■■ ■
I
114
Sebvice At Cost Aobeembnts
No transfer of franchises or grants shall be made without the
approval of the Director. (Sec. 8.)
Boston
Control in hands of Trustees.
Massachusetts (General)
" The Commission may require such changes in the manage-
ment and operation of any company which has accepted the pro-
vision of this act, as in its opinion, may be necessary for the
e^cient conduct of the business of the company in the interest of
the public." (Sec. 11.)
" Tn case any special investigation of any company is deemed
necessary by the Commission, the Commission may order such
investigation, the expense thereof to be paid by the Company."
In addition, the Public Service Commission is by the general
UwB of the State already clothed with extensive powers of supei-
Vision and control.
Montbsal
Certain methods and practices are provided for in the agree-
ment, as: °
The use of T-rails is forbidden, except in streets that are un-
paved or paved with plain asphalt. (Arts. 42, 52.)
The use of iron trolley poles is required. (Art. 45.)
Conductors and agents must speak both French and English
(Art. 59.) ^
Cars must cariy illuminated route and destination eigna
(Art. 61.)
Eastebn Massachusetts
Control in hands of Trustees. (Sec. 11.)
Westerville
No provisions.
Dallas
Methods of construction, maintenance and operation, including
location, character and type of tracks, and the location of all polej
Service At Cost Agreements
115
wires and other appurtenances in the street are subject to City
ordinance, rules and regulations. (Sec. 3.)
Rails- shall be maintained flush with the street. (Sec. 3.) See
also C.-4, (a).
Memphis
The Utilities Commission has such jurisdiction as is granted
it by the general statutes of the State. The order provides that it
may make such investigation of the character of the service as
it deems necessary, the cost to be borne as a part of the cost of
service.
7.— USE OP TRACKS AND FACILITIES BY OTHER COMPANIES
Cleveland
No provisions.
Youngstown
No provisions.
Cincinnati
The Company is required to permit the use of its track by
suburban, interurban, elevated or underground electric railways,
or union interurban terminal railways, for access to terminals of
such railways within the city, or for access to any rapid transit
railway which the city may build, upon terms and conditions in-
cluding a reasonable return upon the investment of the Company.
Tn the event of a disagreement, the decision of the Director of
Street Railroads shall be final, except that the Company may
appeal to any court of competent jurisdiction on the ground that
the conditions are inequitable, or that the compensation fixed does
not provide cost and a proper return to the Company. (Sec. 8.)
t I
I
Boston
No provisions covering these matters in the act, but as Sec. 2
take? jurisdiction away from the Public Service Commission, that
body is now without power to order joint use of track.
li
No provisions.
Massachusetts (General)
116
Service At Cost Agreements
Service At Cost Agreements
117
Montreal
With the acceptation of the use provided Tby the agreement be-
tween the Company and the Southern Counties Railway Co., in
edstence at the time the agreement took effect, the Company is
lorbidden to permit the use of its tracks by another company, or
> connect its tracks with tho^e of another company without the
'msent of the Commission. (Art. 28.)
Eastern Massachusetts
Ko provisions except that the Company is especially authorized
to dispose of surplus electricity, at rates and charges to be fixed
by itself, subject to the approval of the State Board of Gas and
Electric Light Commissioners which shall first determine that
public necessity and convenience requires the same. (Sec. 20.)
Westerville
1^0 provisions.
Dallas
The Company upon which the Grant was conferred was organ-
ized to acquire, among other properties, the Interurban Terminal '
owned by the Dallas Interurban Terminal Association, and to
execute leases with the interurban companies entering Dallas for
its use by them.
Fnder the Grant, the Company is required to permit the use
of Its tracks for the purpose of reaching the terminal, by any
interurban which may secure the consent of the City to enter
tl P City. In the event of disagreement as to the compensation
tA be paid the matter shall be submitted to arbitration. The
award of the Arbitration Board shall be binding, unless disap-
proved by the Board of Commissioners, which may then decide
upon the compensation to be paid and such decision shall then
be binding. (Sec. 37.)
During the first ten years after the taking effect of the Grant,
the Company is required to pprmit the use of the terminal by at
least foiir new interurban companies and to permit their partici-
pation in the lease, regardless of the effect upon the ability of the
Company to earn its stipulated rate of return, provided that the
consent of the Commissioners' is obtained, and the Company shall
further provide facilities for such Companies. (Sec. 37.)
After ten years, or after four new interurbans have been given
entrance to the terminal, the question of the admission of any
new interurban shall be subject to arbitration. If any inter-
urban, party to the lease, shall object to the entrance of a new
interurban on the grounds that the Terminal would be over-
crowded, the Board of Arbitration shall diecide whether the Ter-
minal would be so overcrowded, and whether the furnishing of
any additional facilities needed would jeopardize the Company's
ability to earn its stipulated return under the highest fare
allowed by the Grant. If the Board decides that the Terminal
would not be overcrowded the new interurban shall be admitted.
If it decides that it would be overcrowded and that the furnish-
ing of additional facilities' would jeopardize the Company's
return the new interurban shall not be admitted. (Sec. 37.)
The City may order, or the Company may propose, subject to
the City's approval, addition to Terminal facilities. In case of
disagreement as to the jeopardy of the Company's return because
of such expenditure the matter shall be arbitrated. (Sec. 37.)
Grantee may provide storage facilities in connection with the
Terminal, and the use of such facilities including track connections
by interurbans shall be permitted by City. (Sec. 37.)
If Grantee elects not to renew lease of any interurban and such
interurban elects to purchase under terms of lease, the price shall
be subject to the approval of the City, and the Grantee shall sub-
mit to arbitration any disagreement as to the price fixed by City.
(Sec. 37.)
When the ownership of the Terminal by the Grantee ceases the
provisions of the Grant relative to its use cease to be operative.
(Sec. 37.)
The Grant does not abridge or interfere with existing con-
tracts affecting the operation of interurban or suburban cars, or
interurban express cars. Copies of such contracts must be filed
with the City. (Sec. 37.)
The City may require the Company to permit the attachment
to its poles of the wires of other persons or corporations, provid-
ing that it can be shown that such attachment is safe, and that
118
SxBviCB At Oost Agreements
it does not subject the Company to increased risk? of interrup-
tion, and only if the wires and appurtenances to be attached con-
form with the modem practice. (Sec. 3.)
The City may grant to the Company under like conditions the
right to attach its wires to the poles of other corporations or per-
sons. (Sec. 3.)
Memphis
The Utilities Commission has such jurisdiction as is granted to
it by the general statutes of the State.
S._]IACHI1IEST OF CONTROL
(a) Powor; Where Lodged
Cleveland
Such control over the affairs of the Company ae is provided in
♦he grant, is exercised by the City acting through its City Council.
YOUNOSTOWN
The general power of control is lodged in the city of Youngs-
town, acting through its City Council. Certain details of admin-
istration are assigned to the Commissioner. (Sec. 6.)
Cincinnati
The approval of type and character of construction ie with
the boards and officers of the City having jurisdiction under law
and ordinance. (Sec. 6.)
The power to order changes and extensions of routes and addi-
tional lines of road is lodged in the City Council, which shall act
by ordinance. (Sec. 8.)
The approval of the issuance of securities- is lodged with the
Director of Street Railroads and the Public Utilities Commis-
sion of Ohio. (Sec. 22.)
The control of service is vested in the Director of Street Rail-
roads. (Sec. 8.)
Boston
All control is lodged in a Board of five Trustees, appointed by
the Governor, with the advice of his Council. Their term is ten
years, the fixed period of public management and control. If
Service At Cost Agreements
119
this period is extended, their successors may be appointed for a
like term but not for longer than public management and control
shall continue. They shall own no stock, or other securities of
the Company, or companies leased or operated by it. They
receive $5,000 a year, each, paid by the Company. They may
be removed for cause by the Governor, with the advice and
consent of the Council. Vacancies are filled by the Governor
with the consent of the Council.
The Trustees are relieved by the act from the legal inhibition
against the employment by the Company of any person at the
instigation of public officers, in so far as it might apply to them
as public officers. In other respects they are subject to the laws
of the State governing public officers as are the Directors of the
Boston Elevated Railway Company. (Sec. 1.)
In the management and operation of the company, the Trus-
tees shall be deemed to be acting as agents of the Boston Elevated
Railway Company and not of the Commonwealth and the Com-
pany is liable for their acts as if they were in Company employ,
but the Trustees shall not be held personally liable. (Sec. 2.)
A majority of the Board constitutes a quorum for the trans-
action of business. (Sec. 2.)
Massachusetts (General)
Control of the affairs of the Company is exercised in two ways.
First, through three trustees appointed to the Board of Directors
of the Company by the Governor who are in intimate touch with
its corporate affairs. (See C-1), and, second, by the State Pub-
lic Service Commission. (Sees. 2, 4, 6, 7, 8, 11, 12, 13, 14.)
Montreax
Two Commissions have jurisdiction over the affairs of the Com-
pany. The agreement does not change the jurisdiction already
possessed by the Quebec Public Utilities Commission, but con-
fers certain powers and duties upon the Montreal Tramways
Commission, and it is agreed as between the Company and the
City, that in all matters in which the Montreal Commission has
jurisdiction, demands and complaints shall be initiated before it.
M
n
120
Service At Cost Agreements
1
Sebvice At Cost Agreements
121
f f
although tinder the law, they might he taken directly to the Que-
bec Public Utilities Commission. When an appeal from the deci-
sion of the Montreal Commission to the Quebec Commission is
not authorized under the agreement, or when an appeal is author-
ized but not made and the Company refuses or neglects to carry*
out the orders of the Montreal Conmiission, the matter is reported
to the Quebec Commission, which shall issue and enforce such
orders in the premises as it deems necessary. In other words the
Quebec Commission acts as a court of appeals in matters in
which the Montreal Commission has jurisdiction, and its powers
may be invoked by the Montreal Commission in matters over
which the latter has no jurisdiction. (Art. 20.)
When the Commission shall refuse or neglect to act in any
matter within its jurisdiction as established by the agreement,
within the period therein allowed for delay, or if no such period
is fixed, within a reasonable time, upon the request of any inter-
ested party, the Quebec Public Utilities Commission shall act in
its stead. (Art. 91.)
In addition certain power is lodged directly with the City:
Grades of tracks in streets shall be fixed by the city engineer
(Art. 40) ; the pavement to be used between the tracks shall be
specified by the city (Art. 41) ; the city engineer shall specify
the system of track drainage to be used (Art. 50) ; the City may
specify the manner in which snow and ice shall be removed from
tracks (Art. 66) ; the City may, if in the opinion of the Com-
mission, the work will not interfere with the traffic, require the
Company to flush, sprinkle or sweep streets and to carry garbage,
waste, rubbish and snow for the city, at a price which shall
include a profit of ten per cent, over cost. (Art. 68.)
Eastebn Massachusetts
Control is lodged in a Board of Five Trustees, appointed and
removable by the Governor with advice and consent of his Coun-
cil. Their term of office is ten years, the full period of public
control. The salary is $5,000 a year each, to be paid from the
receipts of the Company.
The Trustees elect their own Chairman. The affirmative action
of not less than three members present at any stated or special
meeting is necessary or required for the action of the Board.
(Sec. 11.)
In the management and operation of the Company, the Trus-
tees shall be deemed to be acting as the agents of the Company,
and the Company is liable for their acts, as if they were in the
employ of the Company. The individual Trustees are not to be
held personally liable, except for malfeasance in office. (Sec.
11.)
Westebville
Control is lodged in the Board of County Commissioners of
Franklin, or in the event that the Board is abolished, then in
such other public officers as may be assigned its duties. (Sees. 6
and 7.)
Daltjis
By the provisions of the Grant, certain specific authority is
given both to the Supervisor of Public Utilities and to the Board
of Comissioners (i.e., Board of City Commissioners, Dallas hav-
ing a Commission form of Government). In general, however,
the powers of the Supervisor are largely administrative and the
actual control is lodged with the Board of Commissioners.
Memphis
Lodged in the State Kailroad and Public Utilities Commission.
(b) Adminigtration
Cleveland
A City Street Kailroad Commissioner is appointed by the
Mayor, with the approval of the City Council, and is removable
at the pleasure of the City. His salary and expenses are paid
by the Company. (Sec. 10.)
YOUNGSTOWN
A Street Railroad Commissioner is appointed by the Mayor
subject to the confirmation of the City Council. He is subject
to removal by the Mayor, who is authorized to appoint his suc-
cessor. (Sec. 8.) His salary, not to exceed $600 a month, is
paid as an Operating Expense. His administrative expenses,
»" <i
122
Sbbvice At Cost Aokbembnts
including assistants, etc., not to exceed $900 a month, are charged
as an operating expense. His expenses in connection with the
preparation of plans and estimates for, and supervision over,
Betterments, Extensions and Permanent Improvements are a
charge against Capital Value, if the improvements be carried out,
but against Operating Expense, if they be not carried out.
(Sees. 8-A and 15-D.)
Cincinnati
The office of Director of Street Railroads was in existence at
the time of the passage and acceptance of the present agreement,
which simply specifies his duties under the terms of the grant,
and does not provide for his appointment or compensation. As
ft matter of fact he is appointed by the Mayor and his salary and
expenses paid by the City.
Boston
The affairs of the Company are administered by the Board of
Trustees, a majority of whom shall constitute a quorum.
(Sec. 2.)
IMassachusetts (General)
The Public Service Commission is directed to divide the
State into " Street Railway Districts," and to appoint for each
such district, in which is located one or more companies, which
have accepted the provisions of the Act, one or more Resident
Supervisors, whose term of office shall be three yeare and whose
salaries and expense allowances shall be fixed by the Commis-
sion, and paid by the Company or companies to the supervision
of which they ar^ assigned. (Sec. 11.) Such Commissioners
report to the Public Service Commission. (Sec. 11.)
The administration of the Act lies with the Public Service
Commission, which is authorized to enforce its orders, rules and
regulations in the manner already provided by statute for the
enforcement of Public Service Commission orders. (Sec. 15.)
Monteeal
There is created the Montreal Tramways Commission, con-
sisting of three members, to be appointed by the Lieutenant-Gov-
ernor in Council, who shall also designate the chairman and act-
ing chairman. Appointees shall reside in the territory under the
Service At Cost Ageeembnts
123
Commission's control (Arts. 2, 3); the term of office of each
Commissioner is ten years, but he may be dismissed for cause by
the Lieutenant-Governor (Art. 5), and the City or the Company
may bring quo warranto proceedings in the Superior Court for
the District of Montreal to oust any Commissioner, on the ground
of fraud, bribery, refusal or neglect to carry out in good faith the
powers and duties assigned by the agreement, or if he is dis-
qualified because of his being a member of the City government,
or of any of the municipalities interested, or in the employ of
any of the parties or municipalities interested in the agreement,
or hold any of the securities of the Company, or be interested
directly or indirectly in any contract with one of the parties or
with any of the municipalities, or be interested in any patented
article used by the Company, or be a holder of the securities of
any company having a contract with the City, Company or any
of the municipalities ; or be a member of the Legislative Assem-
l:ly or of the Legislative Council of the Province. (Arts. 6, 7.)
Vacancies are filled by the Lieutenant-Governor; the compensa-
tion of the Commissioners is fixed by the Lieutenant-Governor
and paid by the Company. (Art. 9.) The Commission makes
the rules for its internal government and for procedure in mat-
ters brought before it, which rules must be approved by the Que-
bec Public Utilities Commission. (Art. 10.) Every decision of
the Commission to be effective must have the votes of at least
two members (Art. 8), and cannot be rendered until all inter-
ested parties shall have been notified. (Art. 12.) The Commis-
sion may appoint a secretary, such employes as it may require,
and ^x their salaries, engage and pay experts and lawyers, pro-
vide itself with suitable offices and whatever it may need to
enable it to perform its duties, and the Company shall pay all
such expenses at the request of the Commission, except that it
may appeal to the Quebec Public Utilities Commission for a
revision of such expenses. (Art 17.)
!lfl
Eastern Massachusetts
The affairs of the Company are administered by the Board of
Trustees. (Sec. 11.)
lU
Sebvicb At Cost Agbeembnts
VI
Westerville
The Commissioners may appoint a Street Railway Commis-
sioner, remove such Commissioner and fill vacancies in the office.
(Sec. 8.)
The Street Railway Commissioner shall represent the Com-
inissioners in all matters relating to service, schedules and opera-
Hon of ears. He shall he paid a salary of not more than $50 a
month, unless a higher sum is mutually agreed upon by the Com-
missioners and the Company. His salary and necessary expenses
shall he included as part of the cost of operation. (Sec. 9.)
Dallas
The administrative officer, the Supervisor of Public Utilities,
is appointed by the Board of Commissioners for an indeterminate
term, is removable at the Board's pleasure, and if found to be
incompetent or dishonest must be so removed. (Sec. 11.)
If at any time the provisions of the act relative to the author-
ity of the Supervisor are found to be invalid, the Board shall
appoint one of its members to act a& Supervisor ex-offlcio. CSec.
43.) ^
In the case of the ten»porary absence or the disability of the
Supervisor the Board of Commissioners may appoint some one
to act in his stead, and until such appointment is made the Mayor
ehall so act. (Sec. 11.)
The Company shall, at the request of the Board, furnish, not
to exceed two rooms as offices for the Supervisor, together with
needed furniture and supplies. (Sec. 11.)
The Supervisor may employ such assistants, including engi-
neers, accountants and clerks, as may be authorized by the Board
of Commissioners. (Sec. 11.)
The salary of the Supervisor shall be fixed by the Board of
Commissioners. The Company shall pay such proportion of the
salary and of the expenses of administration, including the sal-
aries of his assistants, as its total gross receipts bear to the total
gross receipts of all utilities supervised by him, except that it shall
not be required to pay in any one month more than one-half of
one per cent of its average monthly gross receipts for the preced-
ing twelve months. The salaries paid shall in no case be unreason-
able in amount (Sec. 11.)
Sebvice At Cost Agkeemexts
125
The Supervisor may further employ such assistants as may be
necessary to permit the checking of estimates for Extensions,
Betterments and Improvements, and for checking materials, lal)or
and other costs of such Extensions, Bettennents and Improve-
ments, and in the event that the Extensions, Betterments and
Improvements are made such expenditures shall be charged
against them and added to Property Value, while, if they are not
made, the expenditures shall be charged to Operating Expenses.
(Sec. ?7.)
Memphis
Administration is by the State Railroad and Public Utilities
Connnission.
(c) Powers and Duties of Administrative Body
Cleveland
The City Street Railroad Commissioner is the technical ad\4sor
to the City Council, in matters affecting the interpretation of the
grant, and in matters affecting the quantity and quality of the
service, its cost, and the rate of fare. He is to keep informed
as to
The cost, quality and quantit;^^ of service.
The receipts-, disbursements and property of the Company,
The rate of fare.
The vouchering of expenditures,
The keeping of accounts.
Other bookkeeping methods (Sec. 10). He is to require and
secure from the Company monthly reports of car-mileage and
earnings, and such other reports as he may deem necessary. He
has authority to inspect, examine, audit and verify the account?,
vouchers, documents, books and property of the Company, relat-
ing to the receipt and expenditure of money, and the operation
of the Company. (Sec. 15.)
He has power, pending action of the City Council and to meet
emergencies to approve changes in schedules and routes. (Sec.
12.)
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Service At Cost Agreements
Service At Cost Agreements
41
When authorized so to do by the City Council he shall exercise
the Council's power to pass upon expenditures for renewals and
replacements, made from the Maintenance, Renewals and
Replacement Fund. (Sec. 20.)
He shall prepare estimates of Extensions, Betterments and
Permanent Improvements, to be proposed by the City, and shall
check estimates for the same purpose proposed by the Company.
(Sec. 27.)
He shall inform, himself as to the methods and practices of the
Company, in the matter of collection of revenue and the granting
of free transportation, and if these methods are in his judgment
wasteful, he shall notify the Company and secure their correc-
tion. (Sec. C-4-(d).) (Sec. 30.)
Younostown"
The Street Railroad Commissioner is the technical adviser to
the City Council as to the interpretation of the grant, and as to
matters affecting service, its cost or the rate of fare.
He shall keep informed as to:
The cost, quality and quantity of service,
The receipts, disbursements, property and equipment of the
Company,
The rate of fare,
The vouchering of expenditures,
The keeping of accounts and other bookkeeping methods.
(Sec. 8.)
Shall have authority over the carrying of city passengers on
interurban and suburban cars. (Sec. 11-E.)
Shall, with the City Solicitor, act in the allotment of damages
as between the City system and the interurban and suburban sys-
tem for accidents on interurban and suburban cars. (Sec
11-E.)
Shall require and cause to be made by the Company monthly
reports of car mileage and earnings and such other statements as
he or the City Council may require. (Sec. 7.)
127
Shall, in emergencies, and pending action by the City Council,
have power to approve changes in routes and schedules. (Sec. 6.)
Shall have the power to inspect and audit receipts, disburse-
ments, vouchers, payrolls, time cards, shop cards, papers, books,
documents and property of the Company. (Sec. 8- A.)
Shall approve all salaries paid officials, who receive all, or part
of their salaries from receipts of City lines. (Sec. 11-Da.)
Shall, when authorized by the City Council, have jurisdiction
over all charges for replacement and renewals proposed to be
made from the Maintenance, Repair and Renewal Account.
(Sec. 12-A.)
Shall supervise methods of fare collection and enforce the
rules regulating free transportation and shall prevent wasteful
expenditures for materials or in the employment of persons.
(Sec. 14-A.)
Shall prepare for the City estimates and plans for Extensions,
Betterments and Permanent Improvement?, proposed by the City,
and shall supervise the work of carrying out such Extensions,
etc., whether proposed by the City or the Companv. (Sec.
15-D.)
May require the Company to place at interest moneys raised
for Betterments, Extension and Permanent Improvements when
same are not to be used for at least one month. (Sec. 10-B.)
■
Cincinnati
The Director of Street Railroads —
He is technical adviser to the Council in all matters affecting
the interpretation of the Grant, and in matters affecting the
quantity and quality of the service, its cost and the rate of fare.
He is vested with such control of the service as is- reserved to
the City. He shall keep informed as to —
The cost, quality or quantity of the service;
The receipts, disbursements, leases-, rentals and property of
the Company;
Transfers, transfer regulations and rules;
Vouchers of expenditures and payments to the City pro-
vided by the grant ;
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ServiOe At Cost Agreements
129
I
41
Tlie manner of compliance by the Compny with the terms
of the Grant, or rules made, orders issued and decisions
rendered. (Sec. 8.)
He is empowered to inspect and audit all receipts, disburse-
ments, vouchers, prices, pay rolls, salaries of officers, time-cards,
papers, books, documents and property of the Companies l)ear-
ing upon the performance of their duties and obligations.
(Sec. 8.)
Contracts for the use and sale of power and the leases of new
and additional lines of street and interurban railways are sub-
ject to his approval. (Sec. 8.)
Neither franchises of the Company, nor grants made to the
Companies may be transferred without the approval of the
Director. (Sec. 8.)
The Budget of Operating Expenses, by General Accounts, is
subject to his approval, and may not be exceeded except upon the
submission and approval of a supplementary estimate. (Sec. 8.)
Contracts for the use of the tracks and other facilities of the
Companies, by other railways are subject to his approval and in
the event of a disagreement between the Companies and railways
desiring to use such facilities, he may fix the compensation, sub-
ject to review by a court of competent jurisdiction. (Sec. 8.)
He may change and revise the rules issued by the Company
for the regulation of transfers. (Sec. 8.)
He is empowered to require the Companies to display in their
WITS copies of transfer regulations. (Sec. 11.)
The rules of the Companies regulating the sale of tickets ar«
subject to his approval. (Sec. 20.)
He shall approve, or in the event of his disapproval, fix rates
for the carrying of freight, express matter and packages, subject
to review by a court of competent jurisdiction. (Sec. 20.)
He shall direct the depositing, or investment of Depreciation
Funds, accumulated in accordance with the terms of the Grant.
(Sec. 22.)
He shall certify the expenses and court costs incurred by the
City in actions relative to the enforcement of the terms of ordi-
nances, franchises and grants, which expense shall be paid as an
Operating Cost. (Sec. 22.)
The payments provided in any new lease or agreement between
the Cincinnati Traction Co. and the Cincinnati Street Railway
Co., to be paid out of gross receipts are subject to his approval.
(Sec. 22.)
Floating debt and the interest thereon, the proceeds of which
are to be used for Capital Expenditures, or for producing the
Company's share of the Eoserve Fund are subject to this
approval. (Sec. 22.)
He shall direct the accrual of a Working Capital Fund from
gross- receipts at such time as he may deem proper. (Sec. 22-G.)
He shall direct the depositing or investment of the Reserve
Fund. (Sec. 22.)
Boston
The Board of Trustees shall:
If an age and operate the Company, and the properties owned,
leased or operated by it. (Sec. 2.)
Exercise all the rights and powers of the Company and its
directors. (Sec. 2.)
Appoint, and remove at its direction, the President, Treasurer,
Clerk, and all other officers of the Company. (Sec. 2.)
Fix and regulate fares, including the issue, granting and with-
drawal of transfers and the imposition of charges therefor. (Sees.
2, 6, 7, 10.)
Determine the character and extent of the service and the facili-
ties to be furnished. (Sec. 2.)
Receive and disburse the income and funds of the Company.
(Sec. 2.)
Make contracts in the name of and in behalf of the Company.
(For limitations, sec. C, 4 (b).) (Sec. 3.)
Issue stocks, bonds and other evidences of indebtedness for the
Company. (For limitations, see C. 4 (b).) (Sec. 3.)
Collect from the Commonwealth, at stated intervals, sums suf-
ficient to make up deficiencies in the Reserve Fund, caused by the
failure of revenue to pay the cost of service. (Sec. 11.)
Repay to the Commonwealth, when the condition of the Reserve
Fund permits it, moneys received to make up deficiencies. (Sec.
11.)
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Service At Cost Agreements
t
Borrow needed sums in anticipation of payments by the Com-
monwealth to make up deficiencies in Reserve Fund. (Sec. 11.)
Maintain the property of the Company in good operating con-
dition and provide for depreciation, obsolescence and rehabilita-
tion. (Sec. 13.)
Massachusetts (General)
The Public Service Commission shall:
Determine the amount of " capital investment '' of companies
accepting the provisions of the act. (Sec. 2.)
Determine the status of the funded debt of any Company seek-
ing to come under the terms of the act, in order to determine the
amount of such debt, interest upon which shall be included in the
cost of service. (Sec. 4.)
Direct the amount of and time of payment of the funds to be
provided by the Company, for the Reserve Fund, and pass upon
the proposal of the Company for its increase. (Sec. 3.)
Approve or disapprove of the schedule of fares, submitted by
the Company, and if it disapprove, establish schedule in lieu
thereof. (Sec. 6.)
Pass upon proposals by the Company to change fare schedules,
either in regard to basis of fares or transfer privileges, or in re-
gard to "steps," between the different rates. (Sec. (J.)
Pass upon proposals by the Company to make effective higher
or lower grades of fare (when the Reserve Fund is above or below
normal) at other times than those provided in the Act. (Sec. 7.)
Pass upon the Company's plan for making improvements
through the expenditure of a special improvement fund, which
the Company is obliged to provide before it is permitted to ac-
cept the provisions of the Act. (Sec. 8.)
Require from the Company monthly statements, covering the
condition of the Reserve Fund, income and expenditures and such
other matters, as will enable it to protect the public interest
(Sec. 11.)
Divide the State into Street Railway Districts and appoint one
or more Resident Supervisors for each District. (Sec. 11.)
Make such special investigations of the affairs of the Company
as it may consider necessary. (Sec. 11.)
Service At Cost Agreements
131
Order such changes in management and operation of the Com-
pany as are, in its- opinion, necessary for the efficient conduct of
the business in the public interest. (Sec. 11.)
Require aii}^ foreign company furnishing electric light or power
to the Company to file with it a schedule of all rates charged and
such other information as the Commission may require and to
pass upon the reasonableness of such charges to the Company.
If the foreign company or companies refuse to furnish the in-
formation, or the Commission holds their charges to l)e unreason-
able, the State Gas and Electric Light Commission is authorized
by the Act, to prohibit the transmission by the foreign company
or companies of electric current for light or power. (Sec. 11.)
Order the Company to dispose of property no longer of service
to the Company and provide for its amortization over a period
not to exceed ten years. (Sec. 13.)
Permit the Company to set aside durinsr the war and for one
year thereafter, a smaller amount for depreciation than would be
considered adequate in normal times. (Sec. 13.)
The Resident Supervisors shall :
" Keep in constant touch with the operation of the companies,
and inform the Commission of all complaints and criticisms of
the service rendered." (Sec. 11.)
Tn addition to these specific powers and duties, the Public Ser-
vice Commission retains all of the powers and duties conferred
upon it by the general street railway laws of the State. (Sec. 1.)
Montreal
The Montreal Tramways Commission —
Has the power and jurisdiction over service enumerated in C-2 ;
Has the power and jurisdiction over construction, maintenance
and repairs, enumerated in C-3 ;
Has the power and jurisdiction over extensions, betterments
and permanent improvements enumerated in 0-4;
Has the power and jurisdiction over capitalization, finances and
accounts enumerated in C-5 ;
Has the power and jurisdiction over the use of tracks and
facilities by other companies enumerated in C-6 ;
Shall hear and decide all complaints made either verbally or in
writing by any person whatsoever (Art. 13) ;
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Service At Cost Agreements
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Shall make a report each year to the City, covering the Com-
pany's capital and other accounts relative to the maintenance and
renewals, reserve and toll reductions fund? (Art. 19) ;
May revoke or change any decision made by it, unless an appeal
to the Quebec Public Utilities Commission has already been taken
(Art. 21) ;
May decide whether it is necessary to remove and replace the
tracks of the Company, in order that the City may carry on street
improvements (Art. 48) ;
Shall supervise any work imposed upon the Company by the
agreement (Art. 70); "^ '
Shall pass upon any contract made by the Company involving
an expenditure of more than $.50,000, unless such expenditure is
to be charged to the money available for distribution to the Com-
pany's stockholders, or which would be available if the dividends
to be paid upon stock was not limited by the agreement to ten per
cent (Art. Tl) ;
Shall fix and amend the passenger tariffs of the Company f Art
70); r . V •
Shall decide whether or not a charge shall be made for transfer*
(Art. 77) ;
Shall pass upon the equity of agreements made the Federal
Government for the carrying of mail (Art. 82) ;
Shall decide whether the Company shall be allowed to carry
freight, and if it permits the carrying of freight, shall designate
routes and the hours of the day and night during which freight
may be carried (Art. 83) ;
Shall fix the freight tariffs of the Company (Art. 83) ;
Shall establish, with the approval of the Quebec Public Utilities
Commission rules for freight transportation, the kind of commodi-
ties that may be transported and designate loading and unloading
places (Art. 83) ;
May require the Company to establish autobus service, when
and where, in its opinion the conditions of traffic warrants and the
financial conditions permit (Art. 89) ;
Shall ^x the operating allowance each year (Art. 92, Par. 1) ;
Shall ^x the permissible average car-mile density each year
(Art. 92, Par. 1) ;
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Service At Cost Agreements
133
Shall decide whether any part or all of expenditiH-es in excess
of 102% P^r cent, of the operating allowance shall be charged to
gross revenues or taken from the guarantee fund (see H-2) (Art.
92, Par. 1) ;
May increase or decrease the maintenance allowance (see E-2-
b-61), except that it may not be decreased below an amount which
will insure a minimum of $500,000 in the maintenance and re-
newals fund (see E-2-b-61) (Art. 92, Par. 2) ;
Shall direct the disposal of worn out or obsolete property, sub-
ject to the provisions of any existing trust deed (Art. 92, Par. 2) ;
Shall supervise the extensions, betterments and permanent im-
provements, made by its orders or with its consent (Art. 92,
Par. 3) ;
Shall require the Company to provide working capital, as and
when needed (Art. 92, Par. 3) ;
Shall administer the tolls reduction fund (ese F.2) (Art. 92,
Par. 6) ;
Shall recover by proceedings before the Eecorder's Court of
Montreal, fines and penalties incurred by the Company for failure
to obey its orders (Art. 96).
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Eastern Massachusetts
The Board of Trustees shall :
^lanage and operate the company, including the receiving and
disbursement of its funds. (Sec. 11.)
Exercise all the rights and powers of the Company and its
oflicers. (Sec. 11.)
Appoint and remove in their discretion the officers of the Com-
pany. (Sec. 11.)
Eix and regulate fares, including the issue, and withdrawal of
transfers and the imposition of charges therefor. (Sec. 11.)
Determine the character and extent of service and facilities to
be furnished. (Sec. 11.)
Contract for the construction, acquisition, rental or operation of
new lines, and for the extension, sale or lease of existing lines,
subject to the consent of the Board of Directors of the Company
except when the Public Service Commission shall determine that
public necessity and convenience require such action and that the
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return upon securities authorized bj the Act will not be impaired.
(Sec. 12.)
Make such other contracts as may be necessary for the opera-
tion of the property. (Sec. 13.)
Issue, stock, bonds and other evidences of indebtedness, for and
in behalf of the Company. (Sec. 13.)
Make such allowances to the Company's Board of Directors- for
corporation expenses as it may consider necessary. (Sec. 13.)
Distribute among the security- and stockholders of the Com-
pany, as their interests may appear, any income applicable to in-
terest and dividends. (Sec. 14.)
Fix the initial rate of fare to be charged and maintain at all
times a schedule of at least four grades of fare, two above and two
below the rate of fare in effect. (Sec. 15.)
Adjust fares to meet the cost of service, in accordance with the
state of the Reserve Fund. (Sec. 17.)
Create within the two main Fare Areas, provided by the Act,
such other smaller Fare Areas as in its judgment is"^ required!
(Sec. 15.)
Provide for cities or towns, desiring to contribute to the cost of
service in order to reduce fares, a statement of the increase in the
cost of wages, supply and fuel over the average maintaining for
the year ending July 1, 1914, and make such reasonable adjust-
ment of fares- in cities and towns making such contributions as
seems to it equitable. (Sec. 15.)
Allocate the cost of service as between the different Fare iVreas,
both those instituted by the Act, and those instituted by itself!
(Sec. 15.)
Increase the amount of the Reserve Fund by accretion? from
the sale of stocks or bonds, if it deems it advisable so to do in
order to prevent too frequent fluctuations in fares. (Sec. 17.)
Suspend, during the period of the war and for two years after,
with the approval of the Public Service Commission, amortization
and depreciation charges. (Sec. 17.)
Provide the period of amortization of discount on bonds au-
thorized by the Act and sold under its authority. (Sec. 7.)
Agree with the purchasers of $4,000,000 of the $5,000,000
special issue of serial bonds, authorized by the Act, that if the
14.
Service At Cost AoREEArENTs
135
earnings of the Company is- insufficient to meet the installments
of principal, when due, that such installments shall be paid by the
State, which acting for the cities and towns served by the Com-
pany, shall purchase bonds of a par value sufficient to cover the
amount of such payment by the State, and shall hold such bonds
on account of the cities and towns, against whom their cost shall
be assessed. Bonds so held shall be repurchased as income of
Company permits. (Sec. 9.)
.Ill
'III
Westerville
The Commission shall:
Approve changes in motive power. (Sec. 3.)
Have power to grant permission for the construction of double
track, switches and turnouts, reasonably necessary in the opera-
tion of the property. (Sec. 4.)
Establish grades to which the Company shall conform, (Sec.
5.) •
In the event that the Company shall within thirty days after
the receipt of written notice, fail to perform the work in connec-
tion with construction, maintenance or repair road improvements
specified in the Grant, proceed with such work, the cost of which
shall be charged against the Company and become a lien upon its
property and franchise, (Sec. 6.)
Fix and alter schedules, increase and diminish service and es-
tablish stops, subject to the provision that service shall not be
required to an extent that would affect the Company's ability to
earn its fixed return, and subject to the further provision that
when the Grant has less than fifteen years to run control passes
from the Commissioners to the Company. (Sec. 7.)
Approve, overlapping fare zones proposed by the Company, or
proposed overlapping zones to be approved by the Company, in
addition to the fixed fare zones provided by the Grant, subject to
the reference of their decision to a Board of Arbitration. (Sec.
n.)
Pass upon commuters' rate? proposed by the Company. Such
rates can be established only if the Commissioners approve.
(Sec. 12.)
( <
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Service At Cost Agreemexts
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Lower the rate of fare at any monthly period when thq Work-
ing Capital shall equal or exceed $35,000.
Pass npon the apportionment of salaries and other expenses as
betwc-en the Westerville division, and other portions of the Com-
pany's lines, and if of the opinion that such apix)rtionment is un-
fair, submit the question to a Board of Arbitration. (Sec. 13.)
Propose such Extensions, Betterments and Permanent Im-
provements, as they believe are required, and pass upon such pro-
posals for the same purpose as may be made by the Company.
(Sec. 14.)
If at any time the County, or any governmental division
thereof, shall decide to purchase the property, serve six months'
notice upon the Company of such intention to purchase. (Sec.
15.)
Have access to the books, records and accounts of the Company,
for the purpose of ascertaining all facts in connection with the
operation of the property or the carrying out of the provisions of
the Grant. (Sec. 16.)
In the event of arbitration, select the arbitrator who shall repre-
sent the County on the Board of Arbitration. (Sec. IS.)
Baixas
The Supervisor is charged with :
The supervision of the construction, maintenance and operation
of the Company, subject to City ordinances enacted prior to or
after the taking effect of the Grant. (Sees. 3 and 4.) He must
keep informed as to all matters in connection with the construc-
tion, maintenance and operation of the Company, including the
property leased from the Northern Texas Traction Co. (Sec. 1) ;
The supervision of the expenditures and methods of the Com-
pany in regard to contracts for supplies, the employment of labor
and other matters, and if he regards such expenditures and
methode wasteful he must so notify Company and make sugges-
tions for their correction (Sec. 29) ;
The supervision of the Company's methods of vouching ex-
penditures and the keeping of accounts; the inspection and audit-
ing of records and accounts; ^he inspection of the Company's
propei-ty and its property records (Sec. 11) ;
Service At Cost Agreements
137
The approval or disapproval of the monthly operating and
financial statements required of the Company under the terms of
the Grant (Sec. 12);
The approval or disapproval (except in the case of Extensions,
or of Extensions, Betterments and Improvements submitted by
him to the Board of Commissioners) of all requisitions prepared
by the Company in reference to Extensions, Betterments and Im-
provements, whether, in the case of ordinary proposals, submitted
before the actual work has- begun, or, in the case of emergency
construction, submitted after the work (Sec. 97) ;
The preparation of requisitions for Extensions, Betterments
and Improvements, in case that the Company fails to prepare
them (Sec. 27) ;
The checking of all estimates for Extensions-, Betterments and
Improvements, and the checking of all materials used, labor em-
ployed and other cost of the same (Sec. 27) ;
The decisions as to whether the Company shall be allowed to
submit blanket requisitions- for Extensions, Betterments and Im-
provements (Sec. 27) ;
Papers and records may not be removed from the Dallas office
of the Company without the consent of the Supervisor (Sec 11) ;
The Supervisor is- required to secure from the Company from
time to time certified lists of its stockholders (Sec. 11) ;
The Board of Commissioners
Is in control of the design and equipment of cars, and the kind
of improvements to be used thereon (Sec. 10) ;
Fixes schedules, designates stops and promulgates rules and
regulations for the running of cars (Sec. 10) ;
Regulates method of selling tickets provided for in schedule of
rates provided in Grant (Sec. 23) ;
Passes upon rates proposed by Company for special car and
other service (Sec. 23) ;
Passes upon transfer regulations proposed by the Company
(Sec. 23) ;
Passes upon applications of Interurbans for permission to use
Company's tracks, and in case of disagreement as to compensa-
tion to be paid therefor, may dissent from award of Arbitration
Board and fix a sum, which must be accepted by both parties (Sec.
8);
II"
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Servk E At Cost Agreements
Passes upon the application of the four interurban Companies
which the Grant requires the Company to permit to enter into
Terminal and to participate in lease thereof during the first ten
rears after Grant takes effect irrespective of the effect upon the
Company's ability to earn its stipulated return. (Sec. 37.)
Passes upon the application of any interurban to use the Termi-
nal after the expiration of ten years, or the admission of four in-
tenirban companies thereto. (Sec. 37.)
May order additions to the facilities of the Terminal. (Sec
37.) ^ '
Must pass upon any proposed changes in Terminal lease; must
approve price to be paid for Terminal in the event that it is sold
under the option granted to lessees in lease, and the price to be
paid for any remaining property in the event of its destruction bv
fire or other calamity. (Sec. 37.)
Passes upon applications of the Company, or other Companies
or individuals in the matter of joint use of poles and fixes com-
pensation. (Sec. 3.)
Must approve any change in motive power. (Sec. 3.)
May authorize the abatement or removal by the Supervisor of
any Company building which it deems to be dangerous to life or
property, without incurring liability on the part of the City
(Sec. 4.)
Order changes in tracks or wires of the Companv, to permit of
^alterations in location of water pipes and other underjrround
stTTietures. Such changes shall be made without cost to City.
In the case of persons or corporations other than the City, com-
pensation for the expenses involved shall be made. (Sec. 5.)
Decides where and when paving shall be done in the streets by
the Company, except that the Company may not be required to
pave any part of the street unless the full width of the street is to
be paved. This authority to order pavement applies to rights of
way claimed to be owned by the Company, in the case of which,
however, the Company may, in lieu of pavement, construct what is
known as " park space." (Sec. 6.)
Shall select sites for power houses, car barns, substations, shops
and other buildings which the Company may desire to construct.
Service At Cost Agreements
139
After buildings are erected on the sites selected by the Commis-
sioners they shall not be ordered moved by the Commissioners,
unless the Company is compensated for the expenses involved.
(Sec. 30.)
Must give its approval before the removal to other locations of
existing structures. (Sec. 30.)
Must give its approval before track, or service upon track may
be abandoned. (Sec. 30.)
May require the removal of tracks from one street to another if
conditions of traffic require. No changes in track location may
be made without its approval. (Sec. 30.)
May direct the Company to sprinkle streets and fix the com-
pensation therefor. (Sec. 34.)
^lay permit the carriage of freight and express by the Com-
pany. (Sec. 32.)
Supervise and directs the expenditure of the $1,000,000 which,
under the terms of the Grant, the Company agrees to expend for
Extensions, Betterments and Improvements, within 18 months
after Grant takes effect. (Sec. 28.)
Passes upon all requisitions for Extensions. (Sec. 27.)
Passes upon all requisitions- for Extensions, Betterments and
Improvements which may be submitted to it by the Supervisor.
(Sec. 78.)
May allow or disallow proposals for Extensions, Betterments
and Improvements outside of City, except when such Extensions,
Betterments and Improvements are required to be made by law.
(Sec. 27.)
Shall agree with Company as to designation of any Extensions,
Betterments and Improvements which shall be allowed a cumula-
tive return in the event of the purchase of the property by the
City or a license of City. (Sec. 40.)
Passes upon the use of proceeds from the sale of abandoned or
obsolete property, whether it may be used for Extensions, Bet-
terments, or Improvements or for the reduction of the Company's
indebtedness. (Sec. 20.)
Shall act for the City in case of Arbitration demanding arbi-
tration on behalf of the City, appoint the City's Arbitrators and
fix the fees of Arbitrators. (Sec. 13.)
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Service At Cost Agreements
Confirms and certifies security issues when requested so to do
by the Company. (Sec. 19.)
Shall require the Company to keep its property insured and
passes upon the distribution of insurance payments received
among the Company's creditors. (Sec. 20.)
May by agreement with the Company revise the provisions of
the Grant which fix the " normal condition " of Accident, Surplus
and Repairs, Maintenance and Depreciation Reserves. (Sec
22.)
Decides as to the investment of the money in these reserves.
(Sec. 22.)
Passes upon proposals to increase the amount of Working
Capital. (Sec. 27.)
Prescribes the manner and time in which depreciation required
to be paid upon leased property shall be so paid. (Sec. 46.)
Is authorized, under the conditions prescribed, to declare the
Grant forfeit. (Sec. 42.)
Must give its approval before the Grant may be assigned by the
Company. (Sec. 44.)
Appoints and removes Supervisor. (Sec. 11.)
Audits bills of Supervisor in connection with the checking of
Extensions, Betterments and Improvements. (Sec. 27.)
ShaU appoint one of its members to act as ex-officio, in case the
provisions of the Grant relative to the Supervisor are held to be
invalid. (Sec. 43.)
The Commission:
Memphis
May provide the amount of the Renewal and Replacement and
the Injuries and Damages Reserves ;
Shall modify from time to time as is in its judgment required
the method of keeping accounts;
Shall prescribe the standard of service;
Shall approve all additions to or deductions from Capital Value •
Must approve all investments of funds in the Renewal and
Replacement Reserve;
Must approve all expenditures from the Renewal and Replace-
ment Reserve;
Service At Cost Agreements
141
Must approve all investment of funds in the Injuries and Dam-
age Reserve;
Must approve the amount and determine the method of making
payments to the Injuries and Damage Reserve;
May make investigation of the Company's aecounts, the seiTice
furnished by it, or the character or cost of the service.
Shall consider a traffic survey, which the order provides shall
be made if the City so desires and shall base recommondations as
to service thereon.
9.— ARBITRATION
(a) Machinery for
Clevelai^d
Disputes' connected with accounting methods are arbitrated by
the Committee on Standard Classification of Accounts of the
American Electric Railway Association. (Sec. 10.)
Disputes arising from the interpretation of the Company's con-
tracts with municipalities, other than the City of Cleveland, are
arbitrated by a Board consisting of one representative of the City
of Cleveland, one representative of the other municipality
aifected, and a third to be appointed as provided for general
arbitration Boards. (See next below.) (Sec. 29.)
All other arbitrable disputes are submitted to a Board consist-
ing of one representative of the City, one representative of the
Company, and a third member to be selected by agreement be-
tween the two, or in the event that they are unable to agree, by the
United States District Judge for the District in which Cleveland
is located, or in the event of his disqualification, or refusal to act,
by the United States Circuit Judge for the Cleveland District.
The party seeking arbitration, shall notify the other party of the
selection of its arbitrator and shall at the same time furnish a
statement of the question. If the party so notified does not within
ten days appoint its arbitrator, he shall be appointed by the first
party. If the third arbitrator is appointed by a United States
Judge, such judge shall give at least three days' notice of his
selection to both the City and the Company, who may file ob-
jections- to such selection. A majority of the three arbitrators
{
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Service At Cost Agreements
'i
li
decide the questions submitted. Unless the Board unanimously
agrees to extend the time, they must render a decision within
thirty days from the time of the appointment of the third arbi-
trator. If the decision is not so rendered, either party at interest
may apply to the Federal Judge for the removal of the third arbi-
trator and the appointment of a new arbitrator. The expenses of
arbitrator shall be paid by the Company as an operating expense,
unless in any six months, they shall exceed $5,000, in which case
the excess shall be paid from the Interest Fund. (Sec. 11.)
YoUNfiSTOWN
Disputes connected with book-keeping and accounting methods
shall be arbitrated by the Committee on A Standard Classification
of Accounts of the American Electric Railway Accountants' As-
sociation, or other persons to whom supervision of accounting
methods may be delegated by law. (Sec. 8.)
All other arbitrable disputes shall be arbitrated by a Board of
Arbitration consisting of one representative of the City, one repre-
sentative of the Company and a third to be selected by the two, or
in the event of their failure to agree by the United States District
Judge for the District in which Youngstown is located ; or in the
event of such Judge's refusal or disqualification to act, by the
United States District Judge of any other District.
The party seeking arbitration shall notify the second party of
its selection of an arbitrator and at the same time submit a con-
cise statement of the question to be arbitrated. If the party so
notified does not within three days appoint an arbitrator, then on
the fourth day, the party seeking arbitration may select the second
arbitrator. Within three days after the selection of the second
arbitrator, by one of these methods, the two shall select the third.
Upon failure to agree, application shall be made to the United
States Judge, as explained above, a statement of the matter to be
arbitrated, being furnished to the Judge at the time of the applica-
tion. Five days l>efore making an appointment, the Judge shall
notifv^ of his selection both the City and the Company, and either
of the parties may file objections. (Sec. 9-A.)
Service At Cost Agreements
143
A majority of the three arbitrators shall decide the question
submitted. Unless the Board unanimously agrees to extend the
time, the Board's decision shall be rendered within 20 days from
the date of the appointment of the third arbitrator. Upon failure
to agree within 20 days, either party may apply to the District
Judge for the removal of the third arbitrator and the appointment
of another person in his place. (Sec. 9-A.)
The same question shall not again be submitted to arbitration
for a period of three months from the date of the decision of the
Board. (Sec. 9-A.)
Cincinnati
Orders of the Director prescribing service may be objected to by
the Companies within ten days of the date of the order. The
Director shall give a public hearing upon such objections. His
decision after such a hearing shall be final. • In case the Company
refuses compliance, the City may bring action in a court of com-
petent jurisdiction, and the Company may defend : in the case of
orders involving Operating Expenses only on the ground that the
Budget allowances are insufficient to enable them to perform their
corporate obligations, maintain their organization and perform
the duties imposed by the Grant; and, in the case of orders in-
volving Capital Expenditure, only on the ground that it is unable,
using due diligence, to secure the necessary capital. (Sec. 8.)
In case the Company refuses to obey the orders of the Director
as to bookkeeping and accounting measures the dispute shall be
referred to the authorities upon whom the regulation of such mat-
ters may from time to time devolve. (Presumably to the Ohio
Public Utilities Commission.) (Sec. 8.)
In case of disagreement between the Company and the Director
as to the amount of the Annual Budget and the Supplements
thereto, the Companies shall choose one Arbitrator and the Di-
rector one Arbitrator, within five days of the notice by the
Director of his disapproval, or in the event that either party fails
to appoint an Arbitrator, the party who has appointed an Arbi-
trator shall notify the Trustees of the Sinking Fund of the City of
Cincinnati, who shall within five days of such notice fill the
vacancy. The two so chosen shall within five days appoint a third
' I
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Skkvk E At Cost Agreements
Arbitratorj and upon their failure so to do, either party may re-
quest the Arbitration Committee of The Cincinnati Chamlx^r of
Oomnieree to make such appointment. The Board thus appointed
Fhall he governed by the rule that the Company shall be allowed
sufficient funds to perform its corporate obligations, maintain its
organization and perform all duties of operation and maintenance
imposed by the Grant. The decision of a majority of the Board
shall l>e final, Init if such decision l>e not renderc^i within 45 davs
after the submission of the Annual Budget or Supplement thereto,
the expenditures of the Companies shall be in accordance with
such Budget or Supplement. (Sec. 8.)
In the event that the Companies and railways seeking the use
of their facilities, fail to agree as to the compensation to be
charged for such use, or the Director fails to approve of such
agi'cement, and fix the com])ensation to be paid, the right to use
sucli facilities upon the terms prescribed by the Director, may
be enforced bv the railwav seekinij the ric:ht, in anv court of com-
petent jurisdiction and the Companies may defend upon the
ground^ that the compensation fixed by the Director does not pro-
vide the total cost of such use and a reasonable return upon the
investment of the Companies. (Sec. 8.)
Tf the Companies object to any revision of their rules regu-
latinc; the issuing of transfers, made by the Director, they may
within ten days of the date of the publication of such revision,
file objections' with the Director. The Director shall then hold a
publi'* hearing. His decision after such hearing shall become
effective at the time specified in the decision. (Sec. 8.)
Objections to schedules of charges for the carriage of
freight, express matter and packages filed with the Director by
the Companies, may be made by any person, firm or corporation
interested. Within 30 days after the Companies have been served
by the Director with notices of such objection, the Director shall
hold a public hearing thereon. His decision, after this hearing
shfill become effective at the end of 30 days, unles? the Com-
panies shall file objections with the Director and begin proceed-
ings in a court of competent jurisdiction on the grounds that the
rates fixed by the Director are unreasonable. (Sec. 20.)
Service At Cost Agreements
145
Boston
'No provision is made for arbitration. In the event that the
Trustees desire to make extensions to, construct, or purchase sur-
face lines, beyond the limits of existing lines and the Board of
Directors of the Company refuses consent, on the ground that it
entails rentals, or other obligations, upon the Company after the
period of public management and control, the Trustees are
required to hold a public hearing. After such hearing they may,
however, decide that pul)lic necessity and convenience requires
the construction of tlie proposed line, under which circumstances
they may proceed with its extension, construction or purchase,
despite the failure of the Board of Directors to consent. (Sec. 3.)
Massachusetts (General)
If a majority of the State Directors of a Company believe that
a particular order or decision of the Public Service Commission,
would impair the ability to pay the six per cent return on its
stock investment, they shall so advise the Public Service Com-
mission, and if after reconsideration, the Commission persists in
its order, the Company may apply to the Supreme Judicial
Court of the State, for a reversal or a modification of the order
or regulation. The Court may appoint three commissioners to
determine the facts and questions at issue, and their report, when
confirmed by the Court, shall be final. (Sec. 14.)
Montreal
The right of appeal to the Quebec Public Ttilities Commis-
sion, from any decision of the Commission on any question of
law or jurisdiction, lies with any party to the agreement, the
Company, City, or any municipal corporation interested. Deci-
sions affecting -the following matters are specifically subject to
appeal: the expenses of the Commission to be paid by the Com-
pany for payment ; agreements relating to the use of tracks and
facilities by other companies and the connection with tracks of
other companies; the adoption or improvements and betterments
to track, rolling stock and other equipment; modifications, addi-
tions, reconstructions, alterations and repairs to pavements, roll-
ing stock and other things pertaining to the system ordered by
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Service At Cost Agreements
Service At Cost Agreements
147
the Commission, when the expenditure involved is more than
$50,000 ; the Commission's decision as to the time in which spe-
cific additions and extensions provided for in the agreement shall
be made; orders of the Commission requiring the Company to
build and operate new lines; Commission decisions involving
contracts made by the Company when the expenditure is more
than $50,000; decisions of the Commission as to passenger tar-
iffs ; decisions of the Commission involving freight tariffs ; deci-
sions of the Commiss^ion requiring materials used by the' Com-
pany to be manufactured in Company shops within the limits
of the City of Montreal; decisions of the Commission affecting
the giirantee fund, the disposition of gross revenues, the fixing
of operating and maintenance allowances and the permissible
average density of traffic per car-mile, the maintenance and renew-
als fund ; the return upon capital value, the contingent reserve
fund, the division of surplus, the infliction of penalties. (Art.
Hotice of every appealable decision must be given by the Cora-
mission without delay, to the City, Company and to any other
party in the case, by serving a copy of such decision either by
registered mail or by a bailiff of the Superior Court (Art. 11) ;
appeal shall be made within 15 days of the serving of such notice!
(Art. 15.)
Eastern Massachusetts
While there is no specific provision for arbitration, the Act
provides that in ease the Board of Directors refuses to give its
consent to contracts for the construction, acquisition, rental of
operation of new lines, or the extcAsion, sale or lease of existing
lines, the Public Service Commission shall decide, whether such
action is dictated by public convenience and necessity, and
whether the return on the securities authorized by the Act is
impaired. If the Company disagrees with the decision of the
Commission, it may appeal to the State Supreme Judicial Court
(Sec. 12.)
Moreover, the State Supreme Judicial Court has jurisdiction
to review, annul, modify, amend or enforce rulings, or orders of
the Trustees, to the same extent that it has jurisdiction over the
orders and rulings of the Public Service Commission. (Sec. 22.)
Westerville
In the event of a dispute between the Commissioners and the
Company involving a matter which may be legally arbitrated,
either party desiring arbitration shall serve notice in writing
upon the other party, stating the question upon which arbitration
is desired and naming its representative upon the Arbitration
Board. Within ten days thereafter, the party so notified shall
name its representative upon the Board and so notify the first
pai*ty. Within ten days after the appointment of the second arbi-
trator, the two arbitrators- thus selected shall agree upon the third
member of the Board. If they shall within ten days fail to
agree, or if either party shall fail or refuse to name an arbitrator,
either may apply to a judge of the Court of Appeals of
Franklin County, and such judge shall have power to designate
such arbitrator, provided that the party making the application
must give not less than five days' noti<?e to the other party, and
if this party 1^ in default, it may within the five days- name an
arbitrator, as originally entitled.
Dallas
In the event of disagreement as to any of the matter's covered
by the Grant which may be lawfully arbitrated and which are not
excluded from arbitration by the terms of the Grant, either the
City or the Company may demand arbitration. The party so
demanding arbitration shall notify the opposing party, giving
the name of an arbitrator selected by it, and a statement of the
matter upon which arbitration is desired. Within fifteen days
after such notice, the party so notified shall select and notify the
other party of the selection of its arbitrator. If it shall not so
select and notify within the fifteen days, the first party may name
the second arbitrator. Within fifteen days after the selection of
the second arbitrator, the two shall select the third arbitrator. If
they are unable to agree, either party may apply to the Chief
Justice of the Supreme Court of Texas, stating the matter to be
arbitrated and notifying the other party to the arbitration. In
the event of the disqualification, absence from the State or fail-
ure to act of the Chief Justice, application may be made in the
same manner to the Associate Justices of the Supreme Court in
ill
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148
Service At Cost Agreements
tile order of their seniority; in the event of disqualification, etc.,
to the Chief Justice of the Court of Civil Appeals for the Fifth
Supreme Judicial District of Texas; in the event of his disquali-
fication, etc., to the Associate Justices of said Court in order of
seniority; in the event of their disqualification, etc., to the
Judges of the District Courts of Dallas County, in the order of
their seniority, and in the event of their disqualification, etc., to
the Judge of any District Court of Texas. (Sec. 13.)
The arbitrators shall be persons of skill and ability in the mat-
ter to be arbitrated and not pecuniarily interested. The third
arbitrator, imless selected by the other two, shall not be a resi-
dent of Dallas. In the event that the matter submitted for arbi-
tration involves the legal interpretation of the Grant, the arbitra-
tors selected shall be attorneys entitled to practice in the Courta
of Texas. (Sec. 13.)
If during the course of an arbitration, there shall arise ques-
tions involving the legal interpretation of the Grant, such arbi-
tration shall be suspended untU the legal question shall be
decided in the manner provided in the Grant (i. e., by arbitra-
tion). (Sec. 13.)
Before makins? appointment of the third arbitrator, the Judije
making such appointment shall give ten days' notice to both par-
ties of his selection, and either party shall have the right to
object to such selection. (Sec. 13.)
Before entering upon their duties, arbitrators shall take oath
before a JSTotary Public to faithfully and impartially perform
the duties of their office. (Sec. 13.)
In the event of the death, disqualification, or failure to act of
an Arbitrator, another shall be appointed within 30 days from
the date of such event, in the manner prescribed for the original
appointment. (Sec. 13.)
Unless the time shall be extended by unanimous agreement,
the Board of Arbitration shall announce its decision, within 30
days of the date of the appointment of the third Arbitrator, fail-
ing to do so, the third Arbitrator shall ipso facto cease to be a
member of the Board, and a new third arbitrator shall be
appointed in the manner provided. (Sec. 13.)
Service At Cost Agreemexts
149
The lease, which by the terms of the Grant, the Company is
authorized to make such interurban companies, using the Ter-
minal, the purchase of which is also authorized by the Grant,
contains provision for the arbitration of matters arising under
its terms, and the Grant designates certain matters to be thus
arbitrated. The following matters are thus provided for:
The price to be paid for the Terminal by any Lessee exercising
its option to piirchase thereunder. Such arbitration to be con-
ducted in the manner provided in the lease, and the Company to
select as its Arbitrator, such person as may be selected by the
City. (Sec. 37.)
Memphis
"No provisions.
II
(b) Powers of Arbitration Authorities
Cleveland
The Board is empowered to determine all questions arising
between the City and the Company, except those expressly
exempted by the terms of the Grant. (Sec. 12.)
Such exemptions are:
Questions affecting the right of the City to control service, and
the fixing of schedules or routes, except where the Company
alleges that the City requirements would jeopardize the return to
the Company, even under the highest rate of fare provided in the
Grant. (Sec. 9.)
The right to include certain expenditures for the extension,
betterment and improvement of suburban lines, which is to be
determined by agreement between the City and the Company.
(Sec. 29.)
In addition to the general subjects for arbitration it is specifi-
cally provided for in the following cases:
When the Company claims that it cannot provide the service
required by the City under the highest rate of fare provided in
the Grant, without jeopardizing return. (Sec. 9.)
When the Company claims additional car-mile allowance for
the operation of rush hour service. (Sec. 18.)
150
Service At Cost Agijkements
ii
In the event of a dispute over the necessity of increasing or de-
creasing the Operating Allowance. (Sec. 19.)
In the event of a dispute over the necessity of increasing or
decreasing the Maintenance, Renewals and Replacement Allow-
ance. (Sec. 19.)
In the event of a dispute as to the necessity of increasing or
decreasing the rate of fare, otherwise than provided in the Grant.
(Sec. 23.)
In the event of a dispute as to proper charges against " exten-
sions, betterments and permanent improvements." (Sec. 26.)
In the event as to a dispute as to whether extensions, he'ter-
ments and permanent improvements proposed, can he made with-
out jeopardizing Company's return, or a dispute as to the ability
of the Company to raise the capital required for such purpose.
(Sec. 27.)
In the event of a dispute as to whether the methods and prac-
tices of the Company in the collection of revenue and in the grant-
ing of free transportation is wasteful. (Sec. 30.)
All matters affecting the Grant, not especially excluded from
arbitration by the terms of the Grant, may be arbitrated. (Sec.
9.) The exclusions are:
The sum fixed as Capital Value and the addition of the item-s
provided by the terms of the grant. (Sec. 9.)
The rate of return allowed to the Company under the terms
of the grant. (Sec. 9.)
The method of accounting, arbitration of which is provided for
otherwise. (Sec. 9.)
The right of the City to prescribe the service, except where it
is claimed that any rate of fare provided in the grant will not
cover the cost of the senice demanded. (Sec. 9.)
The question of putting in force intermediate rates of fare not
provided by the grant, which many only be done by agreement
between the City and the Company. (Sec. 14.)
The duty of the Company to expend within a period of five
years, the sum of $750,000 for Extensions, Betterments and
Permanent Improvements. (Sec. 15-C.)
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Service At Cost Agreements
151
The arbitration of the following matters is specifically pro-
vided for:
Disagreement as to whether service prescribed by the City will
interfere with the rate of fare in effect, or any higher rate pro-
vided in the gi'ant. (Sec. 6.)
The amount of the Operating Allowance. (Sec. 11- A.)
The amount charged as rental for the Company's Offices in the
building of the Mahoning & Shenango Railway & Light Co.
(Sec. 11-C.)
The proportion of the salaries of Officers of the Mahoning &
Shenango Railway & Light Co., to be charged to the City system.
(Sec. 11-Da.)
The allocation of damages as between interurban and suburban
lines and the City System, when interurban and suburban cars
are operated over the City tracks. (Sec. 11-E.)
The amount of the Maintenance, Repair and Renewal Allow-
ance. (Sec. 12- A.)
Charges to the Maintenance, Repair and Renewal Account.
(Sec. 12-A.)
Disputes as to methods of fare collection, purchase of materials
and supplies and compensation of employees. (Sec. 14- A.)
Disputes as to what expenditures of the Company are to be
charged as Betterments, Extensions and Permanent Improvements.
(Sec. 15.)
Claims by the Company that Betterments, Extensions and
Improvements proposed by the City, will impair the ability of the
Company to earn the return stipulated in the Grant, or that it is
unable to finance such, Betterment, etc., at the rate of return
allowed by the City. (Sec. 15-C.)
Disputes as to rates of fare to be charged, or salvage to be
allowed when Grant has less than 15 years to run. (Sec. 18.)
Disputes as to the allocation of funds in Amortization Fund, as
between reduction in Capital Value and Betterments, Extensions
and Permanent Improvements, in the event that an extension of the
Grant shall be made after the accumulation of an Amortization
Fund, under the provisions of the Grant applying when the Grant
has less than 15 years to run. (Sec. 18.)
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Service At Cost Agreements
Cincinnati
See Cincinnati C-7-(a).
Boston
Ko Arbitration Boards provided for.
Massachusetts (General)
See Massachusetts (General) C-7-(a).
ilONTREAL
The decision of the Quebec Public Utilities Commission in all
matters except that of law is final. (Art. 15.)
The Quebec Public Utilities Commission may confirm, reverse
or modify the decision of the Commission on appeal, and render
such decision as should, in its opinion, have been rendered by
the Commission. (Art. 15.)
When an appeal is not authorized under the agreement, or
when an appeal is authorized but not lodged, if the Company neg-
lects or refuses to comply with the decision of the Commission,
the latter shall report to the Quebec Public Utilities Commission,
which shall take any measure it may deem necessary to carry out
the order of the Commission, in the same manner as if the deci-
sion had been given by the Quebec Public Utilities Commission.
(Art 20.)
See C-7-(b)-2.
Eastern Massachusetts
'No Arbitration Boards provided for.
Westerville
A majority of the three arbitrators has power to decide the
question submitted. A decision must be rendered within thirty
days, unless there is unanimous agreement to an extension. The
decision of the Board is binding upon both parties. (Sec. 18.)
Specific provision is made for the submission of questions to
arbitration as follows:
Disagreement as to the institution, or limits of the overlapping
fare zones provided for by the Grant. (Sec. 11.)
i\
Service At Cost Agreements
153
The proportion of salaries and general expenses of the Com-
pany to be charged to the operation of the Westerville division,
covered by the Grant. (Sec. 13.)
The question as to whether the Company is able to finance
Extensions, Betterments and Permanent Improvements, proposed
by the Commission, or whether such Extensions, Betterments and
Permnnent Improvements, will impair the ability of the Company
to earn its fixed return. (Sec. 14.)
Dallas
Questions submitted shall be decided by a majority of the
Board of Arbitration. (Sec. 13.)
The Board shall have the power to Rx dates for hearing; to
prescribe rules for procedure, and to say when and how testi-
mony of witnesses shall be taken, except that either party to the
arbitration, may upon notice, take evidence of witnesses either
within or without the State by oral or written interrogatories,
and the procedure for such interrogatories shall follow as- closely
as possible that prescribed by the laws of Texas. (Sec. 13.)
Subject to the limitations contained in the Grant, all questions
of everjr kind, character and description arising between the City
and the Company in carrying out the provisions of the Grant
** or in the exercise by the City or the Grantee of any of its
authorized powers • and whether or not expressly committed to
determination by arbitration by the provisions of this ordinance
shall be subject to arbitration under the provisions hereof except,
however, matters relating directly to the police powers of the city
which shall not be abridged by anything herein contained."
(Sec. 14.)
The findings of a Board of Arbitration, except as to service
and extensions, which decisions are subject to the provisions of the
ordinance, shall be final and binding on both parties. (Sec. 14.)
The finding invalid of any provision of the Grant, relative to
arbitration, shall not affect any other provision of the Grant rela-
tive to arbitration. (Sec. 14.)
If any of the subjects designated for arbitration are found to
be improper subjects therefor, the Commissioners retain the
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Service At Cost Agreements
i
authority over such matters prescribed by the City Charter, and
the Company is entitled to apply for review to the Courts. (Sec.
14.)
The Board of Arbitration shall have the power in any order
filed by it to fix or change the time any requirement thereof shall
be performed. (Sec. 16.)
The following matters are specifically excluded from arbitra-
tion :
The decision of the Board of Commissioners as to the amount
to be added to property value on account of the purchase or acquisi-
tion by the Company of the property of any other railway com-
pany. (Sec. 2.)
Kequirements of the Board of Commissioners, under the Grant,
as to grading and paving. (Sec. 6.)
Refusal of the Board of Commissioners to allow proceeds from
the sale of property to be applied to the reduction of indebtedness.
(Sec. 20.)
Refusal of the Board of Commissioners to allow the Company
to pay to creditors, monies received on account of insurance cover-
ing losses. (Sec. 20.)
Order of the Board of Commissioners requiring the removal of
tracks in the so-called *' Fair Park Terminal." (Sec. 30.)
Order of the Board of Commissioners as to the use of the Termi-
nal by at least four intenirbans, within the ten years next after
the taking effect of the Grant. (See. 37.)
An order of the Board of Commissioners, requiring the Com-
pany to return to the method and basis of selling tickets provided
in the Grant, after a change has been made in such basis and
method by agreement between the Commissioners and the Com-
pany. (Sec. 24.)
Arbitration is specifically provided for as- to the following mat-
ters :
The amount of compensation to be paid the Company for the
use of its tracks by interurban railways entering the City, with
the permission of the Board of Cofnmissioners. In this case, the
interurban is substituted for the City as a party to the arbitration,
and the award of the Board of Arbitration is subject to review by
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Service At Cost Agreements
155
the Board of Commissioners, which may finally fix the compensa-
tion to be paid. (Sec. 8.)
The jeopardization of the Company's ability to earn, under
the highest fare allowable, the return stipulated in the Gram, by
requirements of the Board of Commissioners as to Service. The
provision for arbitration does not, however, bar the City's right
to require service under the provisions of the Dallas City charter.
(Sec. 10.)
The jeopardization of the Company's ability to earn, iinder the
highest fare allowable, the return stipulated in the Grant, by
requirements of the Board of Commissioners, or Supervisors as to
the making of Extensions, Betterments and Improvements. (Sec.
27.)
The propriety of work done in the way of Extensions, Better-
ments and Improvements, under the Emergency provisions of the
Grant. (Sec. 27.)
The action of the Board of Commissioners upon proposals of
the Company for increase of working Capital. (Sec. 28.)
Disagreement with the Supervisor^ as to wastefulness in
expenditures or methods, or the means suggested by the Super-
visor for the correction of such methods. (Sec. 29.)
Orders of the Commission requiring the change of tracks from
one street to another. (Sec. 30.)
The question as to whether the cost of removing tracks in the
so-called " Fair Park Terminal " shall be added to Capital Value.
(Sec. 30.)
The question as to whether the admission of any new inter-
urban, other than the four whose admission is required by the
terms of the Grant within ten years, will overcrowd the Terminal,
and as to whether the provision of facilities to prevent such over-
crowding will jeopardize the ability of the Company to earn the
return stipulated in the Grant, under the highest fare allowable.
(Sec. 37.)
The allocation of the value of property outside the city, which
the City may not have legal authority to buy, in case of the pur-
chase by the City of the property of the Company. (Sec. 38)
Orders of the Commission requiring the furnishing of addi-
tional facilities in connection with the Terminal. (Sec. 37.)
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Service At Cost Agreements
Memphis
No provisions.
(c) Penalties
Clevelaxd
In the event of the failure of the Company to abide hj the deci-
sion of a Board of Arbitration, or to carry out the orders of such
Board, the return upon the stock of the Company may be reduced,
but not more than one per cent, until such time as the Company,
shall have in the opinion of the Board, carried out its orders.
(Sec. 14.)
YotJNGSTOWN
Upon failure of the Company to fulfill the award of a Board of
Arbitration, the rate of return allowed to the Company shall be
reduced in such amount as the Board may decide, but not to
exceed one per cent. In the event of the failure of the City to
comply with the award of the Board, such rate shall be increased
in such amount as the Board may decide, but not to exceed one
per cent. Such increase* or decrease shall continue in force until
the Board shall have decided that its award is being complied with.
(Sec. 9-E.)
CiNCINNITI
Wo provision except as specified in C. 7 (a).
BosToir
1^0 arbitration Board provided for.
Massachusetts (General)
No provisions.
MONTHEAL
For failure to conform to the decisions, or for infringement of
the orders of the Commission, the Company is liable to a fine
of $40 a day, and, in the discretion of the Recorder's Court of
Montreal in which such penalty is to be recovered in the manner
provided for, the collection of other fines imposed by municipal
ordinances, to the payment of costs, for each and every day during
which it shall fail to conform or continue the infringement of
Service At Cost Acreemexts
157
orders. In the case of infractions within the City limits, suits
may be brought by the City or any officer thereof, and the fines
so collected become the property of the City. In the case of
infractions outside of City limits, suits may be brought by the
municipalities affected, or by their officers, before any court of
competent jurisdiction and the fines so collected become the
property of the municipality (Art. 96). Fines levied against the
Company are paid from the guarantee fund (see H-2) (Art. 92).
If the provisions of the contract are infringed, by any person
other than the Company, such person shall be liable to a fine
of $40, or in the event that the fine is not paid to imprisonment,
until it be paid, but for not more than 30 days. If the offense be
committed within the City limits, the fine becomes the property
of the City ; if committed outside the City limits, it becomes the
property of the mimicipality in which the offense is committed.
The method of its collection is the same as in the case of an offense
hj the Company. (Art. 97.)
'No action for the recovery of a fine against a person other
that the Company may be brought after the expiration of six
months after the date of the offense. (Art. 97.)
Eastern Massachusetts
ISTo Arbitration Board provided for.
Westervillb
"Ko penalties provided.
Dallas
Upon the failure of the Company to comply with the terms of
any award made by a Board of Arbitration, such Board may,
as a penalty, reduce the rate of return, which the Company is
under the terms of the Grant entitled to earn upon its Property
Value, in any amount, not exceeding 1 per cent, per annum of
the Property Value, and such diminution in the rate of return
shall continue, until the award has been complied with, or until
modified or vacated by the Board. Whatever the number of
co-existent defaults may be, the penalty shall not exceed the
limit prescribed. For the purpose of seeing that its awards are
complied with, or to modify, or vacate its orders, the jurisdiction
11
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Seevice At Cost Agreements
Seevice At Cost Agreements
159
of the Board of Arbitration shaU continue, until all matters
arising from its award shall have been disposed of. In the case
of a vacancy, it shall be filled in the manner provided for consti-
tuting an original Board. (Sec. 11.)
^0 pr'
Memphis
ovisions.
(d) Expenses of Arbitration
Cleveland
Paid as part of cost of semce.
YOUNGSTOWN
The expenses of arbitration shall be fixed by the Board and
«i Z /" ^P"™*'°S ^'^'' ^^«^Pt that any expenses in excess of
?1,000 for any six months' period shall be paid from the Stabil-
izing Fund. (Sec. 9-B.)
Cincinnati
The expenses of each arbitration shall be fixed by the arbitrators
m their decision and shall be included as an item in the Budget
or Supplementaiy Estimate and be paid by the operating com-
pany from the gross receipts. (Sec. 8.)
Boston-
Xo Arbitration Board provided for.
Massachusetts (General)
Xo provisions.
Montreal
^ Xo provision is made for the expenses of arbitration, such pro-
vision being unnecessaiy because no special arbitration boards are
provided for.
Eastern Massachusetts
^0 Arbitration Board provided for.
Westerville
Expenses of arbitration shall be fixed by the Arbitration Board
and charged as an operating expense. (Sec. 18.)
Dallas
All expenses of arbitration including the fees of Arbitrators,
which shall be fixed by the Board of Commissioners, shall be
presented by the Arbitrators in their award and paid (except as
to expenses of arbitrations involving Extensions, Betterments and
Improvements to be paid as a cost of the same) from Operating
Expenses. (Sees. 13 and 27.)
No provisions.
1.— INITIAL VALUE
Memphis
D. RETURN
Clevelat^d
The initial capital value was fixed by agreement. (Forty-five
per cent of the par value of the outstanding stock was wiped out
by the settlement.) It consisted of
(a) The bonded indebtedness of the company.
(b) The floating indebtedness of the company and certain
specified obligations of underlying companies, and the sum of
$500,000, contributed to the Interest Fund.
(c) Such remaining amount as brought the total to the agreed-
upon initial value. (Sec. 16.)
YOUNGSTOWN
The Initial Capital Value was fixed by agreement. In general
the property included is that used for the operation of the City
System, including the Company's Haselton Shops, located in East
Youngstown. The Company's City Power is included, as well
as the steam heating plant, and the direct current distribution
lines. Arrangement for interchange of current between the Com-
pany's Youngstown power house and its power houses outside the
city, as well as for the furnishing of steam for the steam heating
lines, is provided for as previously explained.
The value of this property is placed at $3,900,000. (Sec. 10.)
In addition the following amounts were added to Initial Cap-
ital Value:
M
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Service At Cost Agreements
1
The value of the stores, an inventor)^ of which having Ijcen fur-
nished by the Company, the Commissioner decided were neces-
sary to the administration of the property; the sum of $100,000
set up as a Stabilizing Fund ; the sum of $50,000 to be used in pay-
ment of claims and judgments arising before the taking effect of
the Grant, and the sum of $50,000 to be used in payment of
increased wages, from September 1, 1918, until the ordinance
became effective. (Sec. 10.)
wI^wiT'^^® total valuation of the property as allowed hv the citv and on
h^ng5sirmn^^ '^ ^^* * ''^'*^*" '''^"'■" *' $4,370,480.37, the car mileage
Cincixxati
No specific value for purposes of allowing return is placed upon
the property by the terms of the Grant. Certain rentals, and other
returns are allowed, which amount to approximately six per cent
on a value of $30,000,000, which is practically the amount of a
tentative valuation made in 1916, plus the capital put into the
property after that data
Boston
1^0 initial value is fixed. The act provides for the payment of
rentals, interest on all indebtedness, fixed dividends on preferred
stock, and dividends on common stock at stipulated rates. The
capitalization of the Company at the time of the taking effect of
the act was thus recognized. (Sec. 6.)
Massachusetts (General)
The Initial Value of the property upon which return is to be
allowed is fixed by the Public Service Commission in accordance
with the provisions of the Act. " Capital Investment '' is defined
as " the amount of cash or fair value of the property paid in for
stocks, bonds and other evidences of funded indebtedness and prop-
erly expended for capital purposes," as determined by the Com-
mission. It is, however, provided " that if the Commission has
heretofore approved the issue of any such securities, no further
determination in regard to the ' Capital Investment ' represented
by such securities shall be necessary.*' (Sec. 2.)
Service xIt Cost Agreements
161
In addition, before the Company can secure the benefits of the
Act, its unfunded debt must be passed upon by the Commission.
Interest upon that portion of the unfunded debt, allowed by the
Commission, is to be considered as a part of the cost of service.
Interest upon that portion disallowed by the Commission must be
paid from the return allowed upon the " Stock Investment."
(Sec. 4.)
Montreal
The initial value of the property is fixed at $36,286,295, as
of June 30, 1917; being the sum found by a valuation made by
L. A. Herdt, D. W. Ogilvie and A. H. Lapierre. (Art. 1, d, e.)
m
Eastern Massachusetts
The Act authorizes the organization of a new Company to take
over the property of the Bay State Street Railway Co. (The
New Company is called the Eastern Massachusetts Streets Rail-
way Co.) For the purpose of this purchase, the New Company
is authorized to issue stocks, bonds and other evidences of indebted-
ness in such amount as will represent a capital, bearing an annual
interest and dividend charge (dividends on common stock being
computed at six per cent), not in excess of six per cent or $42,-
282,340 (which is the investment value placed upon the property
by the Public Service Commission, as of August 1, 1916), and,
in addition, such further amounts as the Public Service Commis-
sion determines, were added to the property in the way of better-
ments and improvements between August 1, 1916, and the date
of purchase, except that additions and improvements paid for
from the proceeds of Receiver's certificates, provisions for the
retirement of which are made by the Act, shall not be so included,
while the value of property sold or disposed of by the Receiver
before the organization shall be deducted. The Public Service
Commission is further directed to adjust Initial Capital Value,
so that rentals paid by the Company, for the lease of lines not
owned by it, shall represent the present value of such properties
on a six per cent basis. (Sec. 4.)
tr
162
Service At Cost Agreemexts
Westerville
The value of the property coming under the terms of the Grant
is fixed by agreement and the Grant at $350,000. This is exclu-
sive of Minerva Park, and embraces but 15 per cent of the value
€f roadbed, track and overhead distribution system and equip-
ment between 17th Avenue in the City of Columbus and the ]^orth
Corporation line of the Village of Linden Heights as it was con-
stituted at the time of the passage of the Grant. For the first ten
years of the Grant, the Company waives right to earn interest on
$75,000 of this $350,000 Initial Value. (Sec. 12.)
Dallas
The Initial Property Value fixed for the purpose of determin-
ing fares and purchase price, was by the terms of the Grant placed
at $4,100,000, exclusive of the value of the property leased from
the I!^orthem Texas Traction Company and the property to be
acquired from the Dallas Interurban Terminal Association.
(Sec. 18.)
Memphis
The order of the State Railroad and Public Utilities Commis-
sion, fixes the initial " investment '' as of July 1, 1919, upon
which a retui-n is to be allowed at $11,846,034. Engineers em-
ployed by the Commission, the City and the Company airreed
upon $9,305,042 as the value of the physical property, overhead,
working capital and cost of financing. There was disagreement as
to the cost of development, and the vnlue to }>e al]<)we<l for super-
ceded property. The final figure represents the judgment of the
Commission after a consideration of the reports of the engineers
representing the three difierent interests.
2.— ADDED VALUE
Cleveland
Additions to capital value, consist of the par value of bonds and
stocks, issued and sold with the approval of the City, for exten-
sions, betterments and permanent improvements. (Sec. 17.)
YOUNGSTOWN^
The par value of stocks and bonds sold, or debts created, with
the approval of the City, for new lines, tracks, cars, buildings,
Service At Cost Agreemexts
163
r
lands or construction of any kind, Extensions, Betterments and
Permanent Improvements shall be added to Capital Value. (Sec.
10-B.)
If bonds or stock are sold at a premium, such premium shall
not be added to Capital Value. (Sec. 10-B.)
The expense incident to the floating of new capital shall be
added to Operating Cost. (Sec. 10-B.)
The cost of paving, necessitated by the extension of the system.
(Sec. 5.)
Seventy-five per cent of the cost of rebuilding certain new cars
as provided by the Grant. (Sec. 15-A.)
Cincinnati
No provision is made for added value, other than the provisions
covering the amount of return to be allowed upon securities issued
hj the Company, with the approval of the City, after the date
when the Grant became effective.
Boston
No provision is made for added value. The Trustees h?ve the
power to issue stocks, lx)nds and other evidences of indebtedness
and may fix the rate of return thereon, excepting that the return
on common stock is limited by the provisions of section 6. (See
D. 4, Return on Common Stock.) (Sec. 3.)
ILissACHFSETTS (General)
There is no direct provision covering added value. Under
existing laws, the Commission has complete control over the
issuance of securities by electric railways, and it is to be pre-
sumed that added value will consist of the amount of such securi-
ties as are issued with the approval of the Commission.
In addition, the Commission is directed to pass upon the un-
founded debt of the Company, and interest as a part of the cost
of service is allowed only upon that portion, which has the
approval of the Commission. (Sec. 4.)
Montreal
There shall be added to initial value (knowTi as Capital Value),
from time to time, such money, except that payable from thij
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164
Service At Cost Agreements
Maintenance and Renewals Fund, as shall be supplied by the
company, and expended under the supervision of the Conmiis-
sion, for bettenncnts, additions and extensions of plant, required
by the contract, or approved by the Commission, together with net
interest during construction. (Art. 92; Par. 3.)
The amount, as ascertained by the Commission, expended by
the Company for physical assets added to its system between.
December 31, 1917, and the date that the contract became eifec-
tive. (Art. 02; Par. 8.)
Such working capital as is required by the Coimnission and
furnished by the Company. (Art. 92; Par. 3.)
Money furnished by the Company, to make up the difference
between the actual cost and the reproduction cost of any unit or
article replaced, or for which a substitute is provided. (Art. 92 ;
Par. 2.)
Eastern Massachusetts
The Xew Company is authorized to issue $5,000,000 of serial
bonds, secured by a mortgage of the entire property, subject only
to certain mortgages securing the bonds of companies purchased
by, or consolidated with the Bay State Street Railway Company.
Such mortgage may further cover property to be acquired by the
Company, with the exception that additional property may be
acquired subject first to purchase money mortgages, conditional
sale agreements and equipment trusts. The annual installments
of such serial bonds, shall constitute a lien upon any surplus of
the ]N"ew Company, applicable to dividends. (Sec. 5.)
To the extent that revenue applicable to dividends is used in
payment of installments on the serial bonds, or other evidences of
indebtedness, it shall be capitalized, stock at par to be issued to
the stockholders to take the place of bonds and other evidences of
indebtedness, to the extent that revenues applicable to dividends
were used in retiring such securities. (Sec. 6.)
The expenses of the organization of the 'New Company and of
transferring the property of the old company to the new shall be
capitalized to the extent approved % the Trustees and the Pub-
lie Service Commission, providing that such expenses shall be
amortized within fifteen years from the date when thev were
incurred. (Sec. 6.)
Service At Cost Agreements
165
I
The Trustees are further authorized, with the approval of the
Public Service Commission, to issue such bonds, stocks and other
evidences of indebtedness, as may be necessary to provide for
extensions, improvements and betterments (See. 13), and upon
the securities thus issued are directed to pay a return. (Sec. 14.)
Westerville
The sum of $25,000 to be used as Working Capital is added to
Initial Value. (Sees. 12 and 13.)
Sums invested for Extensions, Betterments and Permanent
Improvements, " including highway improvements, equipment
and other investments properly chargeable to Capital Account."
(Sec. 12.)
Dallas
Under the Grant, the Company was to lease certain property
of the Northern Texas Traction Co. and to purchase the property
of the Dallas Interurban Terminal Association. Accordingly,
provision was made for the addition to Property Value of the
following items:
Item 1:
(a) One Hundred Thousand dollars of working capital pro-
vided by the Company ;
(b) Sums expended in organizing the new Company, as deter-
mined bv the Board of Commissioners and exclusive of the cost
of acquiring the money;
(c) Sums expended on account of Extensions, Betterments and
Improvements, subsequent to September 30, 1915. (The date of
the original valuation) ;
(d) The cost of Extensions (as distinguished from Better-
ments and Improvements) made to the property of the Northern
Texas Traction Co.;
(e) Additions to Working Capital authorized by the Board of
Commissioners. (Sec. 18.)
Item 2 :
(a) $1,301,516, being the value as of September 30, 1916 of
the Terminal of the Dallas Interurban Terminal Association to
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Service At Cost Agreements
Service At Cost Agreements
167
the extent that the property had been paid for on that date by the
Terminal Association ;
(b) Payments made on account of construction by the Dallas
Terminal Assoination, subsequent to September 30, 1016;
(c) Payments on account of Extensions, Betterments and Im-
provements to the terminal. (Sec. 18.)
Item 3 :
(a) $1,665,607.14, being the value of the property leased from
the Xoi-thern Texas Traction, as of September 30, 1015. (Sec.
18.)
Item 4:
(a) The cost of completing the viaduct over the Trinity river
and bottomlands, the completion of which is provided for in the
lease between the Company and the Northern Texas Traction Co.
(Sec. 18.)
Item 5 :
(a) All sums expended by the Northern Texas Traction Co.,
subsequent to September 30, 1915, for the Betterment and
Improvement (as distinguished from Extensions) of property
leased to the Company ;
(b) All sums exi>ended by the Northern Texas Traction Co.,
for the construction of the Trinity River viaduct, on or before
September 30, 1916;
(c) All sums exj^ended by the Company for Betterments and
Improvements (as distinguished from Extensions) to the prop-
erty leased from the Northern Texas Traction Co. (Sec. 18.)
Item 6:
(a) The difference between the cost of obsolete or worn out
property (cost to l>e reckoned as cost new at the time of replace-
ment) and the cost of the property with which it is replaced,
should such cost be in excess. (iSec. 26.)
(b) In the case of obsolete ^nd worn out property, acquired
previous to September 30, 1915, and replaced within two and one-
half years from the date when Grant took effect, the difference
between the value of such property as of September 30, 1915 and
the cost of the property w^th which it was replaced. (Sec. 26.)
(c) The total amount of expenditures made under the pro-
visions of the Grant requiring the Company to expend $1,000,000
in Extensions, Betterments and Improvements within 18 months
after the taking effect of the Grant. (Sec. 28.)
(d) The cost of moving tracks from one street to another, when
ordered by the Board of Commissioners, and if the Board of
Commissioners agree, or a Board of Arbitration shall order it.
(Sec. 30.)
(e) The cost of removing tracks from " Fair Park Terminal."
(Sec. 30.)
(f ) Any items of Property Value covering the property of the
Northern Texas Traction Co., which may have been deducted
from Property Value, because of the termination of the lease, shall
be restored in the event that the lease is renewed. ('Sec. 36.)
Memphis
The amounts to be added to Initial Value from time to time in
order to ascertain the ]>asis of return, is determined in accordance
with accounting methods to l)e prescri])ed by the Commission.
For the present the I. C. C. Classification of Accounts is in use.
8.— DEDUCTIONS FROM VALUE
Cleveland
From the Capital Value shall be deducted all the proceeds re-
ceived from the sale of property included in capital value, except
tuch portion as is used in the making of extensions, betterments,
or permanent improvements, or deposited with trustees to secure
mortgages. (Sec. 17.)
YoUNGSTOWIJf
Proceeds from the sale of property included in Capital Value,
unless used for Extensions, Betterments and Permanent Im-
provements, shall be deducted from Capital Value. (Sec. 10-D.)
If any property included in Capital Value be sold for or super-
seded by pro])erty of less cost, the difference shall be paid from
the Maintenance, Repair and Renewal Account over such a period
as may be agreed upon by the City and the Company, the amount
to be amortized before the date for the expiration of the Grant.
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Service At Cost Agreements
1'
lidi
If the amount so received shall be used for any other purpose than
Extensions, Betterments and Permanent Improvements, it shall
be deducted from Capital Value. (Sec. 10-D.)
There shall be no revaluation of the Company's property.
(Sec. 10-E.)
CmcmNATi
Xo provisions are made for deductions from value. Through
the operation of certain sinking funds, values upon which return
is allowed automatically decrease.
Ko provisions.
BosToiq-
Massachusetts (General)
" The Commission may order any Company accepting this
Act to dispose of any property no longer of service to the Com-
pany. Any loss thereby incurred may be distributed over a
period not exceeding ten years, as provided for in Section four,
Part IT, of Chapter three hundred and seventy- three of the Spec-
ial Acts of A^'ineteen Hundred and Seventeen." (Sec. 13.)
Montreal
Proceeds from the sale of abandoned or obsolete property except
real estate, sold, listed in the schedule upon which initial value
is based, if not paid into the Maintenance and Renewals Fund,
with the consent of the Trustees for the bondholders of the Com-
pany, shall be deducted from Capital Value. (Art. 92; Par. 2.)
The proceeds from land and buildings sold shall be deducted
from Capital Value. (Art. 92; Par. 2.)
The Company is required within five years from the coming
into effect of the Agreement to sell certain specified real estate
covered in the schedule upon which Initial Value was based, and
the selling price is to be deducted from Capital Value. If, within
the five years, this is not done, the value of such real estate as
shown in the schedule shall be deducted from Capital Value.
(Art. 90.)
Eastern Massachusetts
¥o provisions other than as stated under added value. The rule
laid down by the Massachusetts Public Service Commission, is
Service At Cost Agreements
1G9
that investment shall fix the value of electric railway pro^^erties
and this investment is represented by the outstanding securities.
As these securities are retired, the value decreases.
Westerville
The fair value of all proj^erty withdrawn from the public use.
(Sec. 12.)
Dallas
A sum equal to the proceeds of property sold, if applied, with
the consent of the Board of Commissioners, to the reduction of the
Company's indebtedness, shall be deducted from Property Value.
If the price received for property so sold shall be less than its
actual cost, the difference shall be made good out of the Repair,
Maintenance and Depreciation Reserve, or the Surplus Reserve,
and if not so made good shall be deducted from Property Value
(Sec. 20.)
In the case of property acquired prior to September 30, 1915
(date of original valuation), and sold within two and one-half
years of the date when Grant became effective, any deficit as l)e-
tween the value of such property on September 30, 1915, and the
price received upon sale, shall be made good out of the Repair,
Maintenance and Depreciation Reserve, or the Surplus Reserve,
and if not so made good shall be deducted from Property Value
(Sec. 20.)
If in the case of the sale, by permission of the Board of Com-
missioners, of any or all of the property embraced in the Terminal,
the proceeds shall be used to pay the indebtedness of the Com-
pany, a sum equal to such proceeds shall be deducted from Prop-
erty Value ; in case the whole of the property is sold any deficit
as between the value of the Terminal as set forth in the Grant,
or, in case of the sale of part of the Terminal property, any deficit
as between its cost and the sale price, shall be made good out of
Repair, Maintenance and Depreciation Reserve, or Surplus Re-
serve, and if not so made good shall be deducted from Property
Value. (Sec. 20.)
If property mortgaged in any other way than under a general
mortgage, or acquired subject to a mortgage, is sold under fore-
closure, or at a judicial sale, any deficit as between the amount at
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170
Service At Cost Agreements
which such property is included in Proi)ei-ty Value, and the sum
received at such sale shall be deducted from Property Value, and
the proceeds of such sale shall be used for Extensions, Better-
ments, or Improvements. (Sec. 20.)
In the case of the destruction of or loss to pro|)erty insured,
amounts received on account of such insurance may, with the con-
sent of the Board of Commissioners, be use«l to pay oli" the indeb-
tedness of the Company, and in such case shall be deducted from
Property Value. Losses sustained through the destruction of
projjerty, whether or not insured, shall be made good from the
Repair, Maintenance and Depreciation Resei-ve, or the Surplus
Reser\^e, and if such Reserves are insufficient to make good such
losses they shall be held in suspense until they can be amortized
out of Gross Earnings, (Sec. 20.)
In the event that the lease of the property of the Xorthern
Texas Traction Company shall be terminated, the value of all
property includc^d in Property Value, on account thereof, shall be
deducted from Property Value. (iSec. 36.)
In the event of the purchase of the Property of the Company
by the City, there shall be deducted from Property Value, the
value of such property lying outside the City limits, as the City
may not have the legal right to purchase. (Sec. 38.)
In the case of purchase by either the City or Licensee of the
property of the Company, and in the event that the Company shall
not have acquired the property of the Northern Texas Traction
Co., leased by the Company, the value of such leased property
included in Property Value, shall be deducted from Property
Value. (Sees. 38 and 39.)
Property included in the value of the property leased from the
Northern Texas Traction Co., as fixed by the Grant, sold and not
replaced by property of equal value shall be deducted from Prop-
erty Value. (Sec. 46.)
Mempjiis
The amounts to be deducted .from Initial Value from time to
time in order to ascertain the basis of return, is determined in
accordance with accounting methods to be prescribed by the Com-
mission. For the present the I. C. C. Classification of Accounts is
in use.
Service At Cost Agreements
171
4.— RATE OF RETURN, NORMAL
Cleveland
Upon the bonded indebtedness of the Company (see (a) supra) ^
^ve per cent. When such bonded indebtedness is refunded such
interest as the new bonds may bear, plus such rate as will amor-
tize the discount, if the bonds be sold at a discount, the total
not to exceed six per cent. (Sec. 16.)
Upon the other indebtedness of the Company (see (b) supra),
six per cent.
Upon the capital stock of the Company six per cent. (Sec. 16.)
Note: As the result of the decision of a Board of Arbitration this rate
\»a8 in 1920, increased to seven per cent.
It is further provided that there shall be paid from the Interest
Fund, all taxes assessed, by the United States, the State of Ohio,
or any County, Municipal or Township authorities in that State,
against such stock, so that the six per cent shall be tax free
(Sec. 17.)
Youngstown
Upon Initial Value, seven per cent per annum, paid in twelve
monthly instalments.
Upon added Capital Value, the rate of return fixed in the
resolution authorizing the issuance of stocks, and bonds or the
creation of floating debt, which shall in all cases be the lowest
rate at which the capital can be secured. (Sec. 10-E.)
Cincinnati
Xo rate of return is specified. The Company is allowed cer-
tain sums fixed in the Grant, covering rentals, interest and prin-
cipal upon equipment notes and return upon moneys invested in
the property. (See E. 1.)
Boston
On Rented Property — rents stipulated in lease. (Sec. 6.)
On Indebtedness— interest fixed by securities or other evi-
dences of indebtedness. (Sec. 6.)
On preferred stock — fixed dividends. (Sec» 6.)
On special issue of preferred stock, authorized by act to pro-
vide $2,000,000 for betterments and improvements and $1,000,000
to provide a Reserve Fund — fixed dividends not to exceed seven
per cent. (Sec. 6.)
172
Service At Cost Agreemei^ts
^
On Common Stock — five per cent, for the first two years of
the ten-year period of public management and control; five and
one-half per cent, for the next two years, and six per cent there-
after. (Sec. 6.)
Massachusetts (General)
On Kented Property — rents as fixed in the lease. (Sec. 2.)
On Indebtedness — interest fixed in securities or other evi-
dences of indebtedness. (Sec. 2.)
On Preferred Stock — dividends fixed at the time of issuance.
(Sec 2.)
On Stock Investment (defined as the difference between the
sum of the "Capital Investment" (see D-1) and the amount
paid in for outstanding preferred stock, bonds and other evidences
of funded indebtedness) — On Stock Investment included in
original value, six per cent; on stock investment hereafter issued
with the Commission's approval, six per cent. (Sec. 2.)
MoNTBEAJL
On Initial Value — six per cent. (Art. 92; Par. 3.)
On Added Value — six per cent (on money borrowed by the
Company from Maintenance and Eenewals Fund, from Contin-
gent Reserve Fund and from Tolls (Reduction Fund, the Company
is required to pay six per cent interest into such funds).
On new capital supplied during the war and for two years
thereafter (the additional return to be paid for a period of five
years after the close of the war, only) — six per cent, plus an
additional one per cent. (Art. 92; Par. 3.)
On working capital supplied by the Company under the direc-
tion of the Commission — six per cent. (Art. 92; Par. 3.)
Easteiin Massachusetts
On Bonds, and other Evidences of Indebtedness — stipulated
interest. (Sec. 14.)
On Preferred Stock — stipulated dividends. (Sec. 14.)
On Common Stock — six per cent. (Sec. 14.)
Service At Cost Aoreemexts
173
Westerville
Six per cent on Initial Value, including $25,000 of Working
Capital, and excluding, for the first ten years of the Grant,
$75,000 of the agreed upon value of $350,000 ;
Eight per cent on additional capital in general;
Fifteen per cent on new capital invested in the part of the
enterprise located in the incorporated Village of Linden Heights.
(Sec. 10.)
Dallas
The return allowed the Company is based on the Property
Value as fixed by the Grant, irrespective of securities and varies
as the rate of fare varies.
AVhen the base fare rate is five cents, 22 tickets for $1, the
allowable rate of return is seven per cent;
When the base fare rate is five cents, six tickets for 25 cents,
the allowable rate of return is eight per cent;
When the base fare rate is five cents, seven tickets for 25 cents,
the allowable rate of return is eight and one-half per cent;
When the base fare rate is five cents, eight tickets for 25 cents,
the allowable rate of return is nine per cent. (Sec. 23.;
Memphis
The return upon the investment shall not l>e more than 71/^,
nor less than 6^/^ per centum, per annum.
For any month in which the Fare Index Fund balance is less
than $60,000, the return shall not be greater than at the rate of
^V2 P^i* centum per annum.
In any month when the Fare Index Fund balance is more than
$60,000, the return may be at any rate, between 6^ and 71^ per
centimi per annum, which the Company is able to pay after pro-
viding the remaining costs of service, without reducing the Fare
Index Fund below $60,000.
If in any month, it is not possiblo to pay the minimum return
of 6 14 per centum per annum to the Company, then such deficit
shall be accumulated, and with interest at 6^^ per eentiun per
annum, paid to the Company from future earnings l)efore any
amounts are added to the Fare Index Fund.
174
Service At Cost Agreements
5.~ADDITI0NAL ALLOWANCES
Kona
E'one.
Cleveland
YOUNGSTOWN
Cincinnati
When fare is six cents, twenty per cent of surplus receipts
remaining after payments specified in E 1 (Sec. 22 of Grant)
shall be paid to Company.
When fare is &ve and one-half cents, thirty per cent shall be
paid to Company.
When the fare is five cents or less, forty-five per cent shall be
paid to Company. (Sec. 22 H.)
None.
None.
Boston
Massachusetts (General)
Montreal
If, during the year, the Company keeps within 102i/^ per cent
of the Operating Allowance (see E-2), fixed by the Commission,
or if, upon decision by the Commission after examination of a
statement to be filed by the Company during the year, or imme-
diately after the close of the year, that any excess expenditures
were unnecessary and unavoidable— one-eighth of one per cent
of average capital value for the year (known as Operating Profit)
shall be allowed the Company, except that in the case the Com-
mission shall find any part of any excess to have been the result
of unnecessary and avoidable expenditures, then such part as it
finds to have been unnecessary and avoidable shall be deducted
from the Operating Profit. (Art. 92; Par. 1.)
For expenses incurred in securing new capital, including dis-
counts, commissions, printing and engraving, exchange, legal and
other expenses in connection ' with the issuing of bonds; and
printing, engraving, transfer and registration fees, and the listing
on stock exchanges, of stock — annually, $181,431.37 (being one
half of one per cent of initial value), provided that this money
Service At Cost Agreements
175^
is to be used for no other purpose and the surplus kept in a special
account, not to be disturbed until the termination of the contract.
(Art. 92; Par. 3.)
After the payment of all charges provided for in the contract^
the surplus of gross revenues remaining (known as the Divisible
Surplus) are divided, thirty per cent to the city, twenty per cent
to the Company and fifty per cent to the Tolls Reduction Fund*
(Art. 92; Par. 6.)
'None.
None.
No provisions.
No provisions.
Eastern Massachusetts
Westerville
Dallas
Memphis
6.— ASSURANCE OF RETURN
Cleveland
The only assurance of return contained in this grant, is the-
provision for the automatic regulation of fares. If the Company
believes that the service demanded by the City, is so great as to
jeopardize the return to the Company, even though the highest
rate of fare be in force, it may appeal to a Board of Arbitration^
which shall decide the question. (Sec. 9.) See also under A, 2,
provisions for control of rates and service, when grant has lesa
than fifteen years to run.
Youngstown
Only such assurance of return as is given by the automatic regu-
lation of fares. If the Company believes that the service prescribed
by the City is so great as to jeopardize its return under any rat&
of fare stipulated in the grant, or that the proposals for Extensions^
Betterments and Permanent Improvements made by the City,
jeopardize such rate, it may submit the question to a Board of
Arbitration. (Sees. 6 and 15-C.)
Wlhen the Grant has less than 15 years to run, the Company maj
charge such rate of fare as will insure its stipulated return, and a
I ♦!!'
H'
•SwncE At Cost AoREEirEWTs
'i™
mliewitt adclitioiial amount to amortize the entire value of the
property iJiirrag the remaining life of the franchise. (See. 18.)
ClXClNXATI
f he assurance of return given is that provided b^ the automatic
regulation of fares. If the Company believes that the service pre-
scribed by the city cannot be performed under the budget allow-
ance, the determination is left to a court of coinj^etent jurisdiction.
Similarly orders of the City providing for capital expenditures
may be disputed by the Company. ( Sec. 8. )
The obligation of the City is further limited by the following
paragraph : « I^othing in this Paragraph 22 shall l>e construed
to make any payment or payments, or cumulative payment or pay-
ments obligations of the City or to make any cumulative payment
or payments obligations between the City and the Companies pay-
able from any source other than gross receipts and the sum or sums
from time to time in the aforesaid Keserve Fund. (Sec. 22.)
BOSTOX
If, on the last day of June, or the last day of December, in any
year, the amount in the Beserve Fund, shall be insufficient to make
good any deficiency in the cost of service, the Trustees shall notify
the Tieasurer and the Keeeiver General of the State of the amount
of such deficiency, less any amount remaining in the Reserve Fund,
and the State shall thereupon pay over to the Trustees the amount
so ascertained, which shall be used for the purpose of paying such
cbficiency. (Sec. 11.)
Pending the payment of this sum by the State it shall be the
duty of the Tnistees to borrow such sums as will enable them to
meet all deficiencies, including dividend payments. (Sec. 11.)
If on tlie last day of June, or the last day of December of any
year, the Reserve Fund shall exceed the original $1,000,000, the
Trustees shall apply the excess, bo far as necessary, to the reim-
bursement of the State for the money advanced to the Trustees to
meet deficiencies. (Sec. 11.) '
The Treasm-er and Receiver General of the State may borrow
if necessary the money with which to pay the deficiencies ascer-
tained by tfee Receiver "General. (Sec. 11.)
Service At Cost Agreements
17T
The amounts so paid to the Trustees shall be assessed upon the
cities and towns in which the Company operates by an addition
to the State tax next levied, in proportion to the luimber of persons
in said towns and cities using the service of the company at the tinie
of the payment, this proportion to be ascertained by the Trustees
and certified to the Treasurer and Receiver General. (Sec. 14.)
Massachusetts (General)
Only such as is afforded by a scale of fares, automatically ad-
justed to cover the cost of service.
Montreal
Assurance of return is given through provisions making it
mandatory upon the Commission to increase rates of fare in such
amount as will provide for the payment of all charges set forth in
the agreement. (Art. 92; Par. 6.)
Eastern Massachusetts
The I^ew Company is authorized to issue $5,000,000 of serial
bonds, to provide for the retirement of Receiver's Certificates, and
other evidences of indebtedness, a Reserve Fund of $500,000, and
the improvement and betterment of the property. Of this amount
$1,000,000 was provided by the stockholders of the old Company^
with no special assurance of return. For the remaining $4,000,000,
the Trustees were authorized to enter into an agreement with the
purchasers, whereby, if the earnings of the Company applicable to
dividends were insufficient to pay installments falling due, the
State Treasurer should advance the necessary money, taking in
exchange serial bonds to the amount thus advanced. ' These bonds
are thus purchased by the State on account of the various cities
and towns served by the Company, in proportion to the number
of persons in such cities and towns using the service of the Com-
pany. The Trustees may borrow sufficient money to pay install-
ment of serial bonds due in anticipation of purchase by the State -
the State Treasurer may borrow in anticipation of contributions
from the cities and towns, and the cities and towns may borrow
in disregard of their debt limit for this purpose. If on June 30,.
or December 31, of any year, earnings of the Company applicable
ii
n
178
Service At Cost Agreements
Service At Cost Agreements
179
to dividends are in excess of any sums needed to pay installments
due on serial bonds, such excess shall be used in purchasing
serial bonds held by the State on account of cities and towns
(Sees. 9, 10.)
Further assurance of return is afforded by a flexible, automatic
system of fares, adjusted by the Trustees to\he cost of the service.
(Sec. 17.)
Westebville
Assurance of return is provided by the automatic regulation of
fares (Sec. 12) ; by the provision that when the Grant has less than
fifteen years to run, control of service and fares passes to the Com-
pany (Sec. 7) ; by the prohibition against the Commissioners
requiring service that jeopardizes the return upon the investment
(Sec. 7) ; and by the prohibition of requirements for Extensions,
Betterments and Permanent Improvements that would do the same
thing. (Sec. 14.)
Dallas
There is no other assurance of return than that provided by the
sliding scale of fares, and the authority given the Company to
demand arbitration in regard to requirements for Service, or Exten-
sions, Betterments and Improvements which it believes will
jeopardize its ability to earn the stipulated return, under the
highest fare permitted by the Grant.
Memphis
There is no assurance of retui-n, other than the provision for a '
fiexible rate of fare.
E. COST OF SERVICE
1.— DEFINITION OF
Clevelai^d
There is no separate definition of the elements of the cost of
service in grant. Authorization for the following payments, are,
however, found in various provisions of the ordinance:
Operating expenses (including insurance, payments of claims,
salary and expenses of City Street Railroad Commissioner, which
:ahall not exceed one per cent of operating allowance for the year ;
expenses of Commissioner in supervising plans for extensions,
betterments and permanent improvements, when such are not
actually made, (if made such expenses are charged to construc-
tion) ; the expenses of Boards of Arbitration, not to exceed $5,000
in any six months (excess expenses are charged to the Interest
Fund), and transportation provided for employes of the Company
other than office employes) ;
Maintenance, depreciation and renewals;
Rentals ;
Taxes ;
Interest ;
Dividends.
There is no recital of the elements which go to make up the
cost of service in the grant. Provision is made for the payment
of:
Operating Cost (inasmuch as the method of keeping accounts
prescribed by the American Electric Railway Accountants' Asso-
ciation is adopted, it may be taken for granted that the provisions
of the I. C. C. Standard Classification of Accounts is followed).
(Sec. 1.)
Return to capital. (Sec. 13.)
Specific provisions are made for the payment of the following
items as Operating Costs:
The cost of paving, repaving and street repairs other than that
necessitated by the extensions of the present lines. (Sec. 5.)
The salary of the Commissioner, not to exceed $600 a month.
(Sec. 8.)
The ordinary expenses of the Commissioner, not to exceed
$900 a month. (Sec. 8.)
The expenses of the Commissioners in preparing plans for
Extensions, Betterments and Permanent Improvements, proposed
by the City, and in checking similar plans proposed by the Com
pany, when such plans are not carried out When they are
carried out they become part of the cost of the improvement.
(Sec. 15-D.)
180
Service At Cost Agreements
I
The expenses of Boards of Arbitration, except that expensee
m e^^ of $1,000 for any period of six months, shall be paid
iBom the Stabilizing Fund. (Sec. 9-B.)
Expenses incident to the i«ue and sale of stock and bouas or
the creation of floating debt. (Sec 10-B.) '
The difference between the estimated value of any property
as n appears in Original Capital Value, and the price at which
n IS 80ld, ,f It be sold. (This difference to be amortized over a
pmod of time, to be completed before the expiration of the grant.)
The rental agreed upon, for the Company's offices in the build-
ing^ the Mahoning &Shenango Railway* Light Co. (Sec 11-C )
The expenses of the Commissioner in investigating the Com-
pany s methods of fare collection, purchases and the compensation
paid to employes. (Sec. 14- A.)
Twenty-five per cent of the cost of rebunding certain of the
Company s cars as provided for in the grant. (Sec. 15-A.)
CmcxasA-n
Tkwc is no reeital of the elements of cost of service but pro-
vision ,8 made for the payment from gross receipts of the f oUow-
ing Items, in the order named :
First.— Operating expenses and maintenance, including taxes
«cept the special Percentage Tax on gross earnings; Deprecia-
tion (until 1922 at the. rate which was formerly charged bv the
Company and after 1922 at a rate to be fixed by the Ohio Public
Ltilities Commission). From the amount allowed for l>epre-
muon 8haU be paid, until the Ohio Public Utilities Commission
shall otherwise order, the principal payments on $1,159,000 of
equipment notes, outstanding at the time the Grant became
effective. During the period of six years from April 1 1919
m quarterly installments, to the City and the Company, the costs
ofraluation proceedings and a traffic survey formerly made.
C«tam rentals for tracks, poles and other construction on three
eity viaducto, amounting to $6,500 a year. The payment of the
legal «xp««,s of both the City and the Company in cases grow-
ing out of the resistance or enforcement of ordinances, orders
or decisions in connection with the provisions of the Grant.
Service At Cost Agreements
181
Second.— The payment to the Cincinnati Street Eailway Co.,
of the sum of $1,134,337, annually, being the amount of rental
provided for in its lease to the Cincinnati Traction Company,
or suck otker rental as may be later agreed upon between the two
companies, subject to the approval of the Director of Street Eail-
roads. The payment to the Cincinnati & Hamilton Traction Co.,
of $100,600 annually, being the amount of rental paid for the
use of the tracks of the aforesaid company. (Sec. 22.)
Third.— The payment to the Company, annually of $215,000
interest and $82,445 sinking funds on $4,000,000 expenditures
made by the Company prior to 1917, and interest on the equip-
ment notes, provision for the payment of the principal of which
is made in paragraph first The $4,000,000 above referred to
and the $1,159,000 Equipment notes are to be known as the Re-
ducible Debt, and payments on account thereof shall cease when it
is fully retired. (Sec. 22.)
Jourth.- The payment of the annual interest, dividend, sink-
ing fund or retirement payments on securities issued with the
approval of the City, for capital expenditures, ait^r the taking
eifeet of the ordinanca The payment of interest on loans made
by the Company after the taking effect of the Grant, until such
loans shall be paid from gross receipts, or from the sale of securi-
tiw issued with the approval of the City. The payment of inter-
est on floating debt and for money borrowed to produce the Com-
pany's portion of the Reserve Fund. The payment of interest on
equipment notes issued after the taking effect of the Grant, pro-
vided such notes are issued with the approval of the City. The
payment of principal on equipment notes provided for in the
first paragraph, if the Ohio Public Utilities Commission shall
decide that they may not be paid from depreciation reserve. The
payment to the City of expenditures in connection with the
placing of tracks and poles on the Hopple street viaduct. (Sec
22.)
Fifth. — The payment annually to the Company of $416,000
return on capital invested by it, between the time of the taking
effect of the leases, given to the Cincinnati Traction Co., by the
Cincinnati Street Railway Co. and the Cincinnati & Hamilton
)
182
Service At Cost Agreements
Service At Cost Agreements
183
Traction Co., and the time the Grant took effect. This Capital
is considered to be in addition to that known as the Reducible
Debt. (Sec. 22.)
Sixth. — The payment to the City annually of a Gross Earnings
Tax of $350,000. The payment to the City of certain arrears in
the Gross Earnings Tax. (Sec. 22.)
Seventh. — The accumulation of a Working Capital Fund.
This shall be accrued under the direction of the Director of
Street Railroads at such time and in such amount as he shall
approve, and shall be sufficient for the usual purpose of such a
fund. It shall be increased or decreased at his direction, upon
notice being given at least 45 days before the end of any calendar
year, and if decreased, the amount taken shall be expended for
improvements and betterments, or extensions.
Eighth. — The payment into the Reserve Fund, of such an
amount as will, added to the $250,000, provided by the Company
from capital, bring the amount up to $400,000, which shall be
known as the IS'ormal Condition of the fund. (Sec. 22.)
When the rate of fare shall be more than six cents, the payment
into the Reserve Fund of all surplus remaining after the items
heretofore mentioned have been paid.
When the rate of fare shall be six cents, the payment into the
Reserve Fund of eighty per cent of the surplus and to the Com-
pany of twenty per cent.
When the rate of fare shall be five and one-half cents, the pay-
ment into the reserve fund of seventy per cent of the surplus and
to the Company of thirty per cent.
When the rate 9f fare shall be five cents or less, the payment
into the Reserve Fund of fifty-five per cent of the surplus and to
the Company of forty-five per cent. (Sec. 22.)
Boston
The cost of the service includes :
Operating expenses,
Taxes,
Rentals,
Interest on indebtedness,
Depreciation,
Obsolescence,
Losses in respect to property sold, destroyed or abandoned,
All other expenditures and charges which, under the laws of the
Commonwealth now or hereafter in effect, may be properly charge-
able against income or surplus.
Fixed dividends on preferred stock.
Dividends on par value of common stock, at five per cent, for
first two years of period of public control and management, five
and one-half per cent, for next two years and six per cent there-
after. (Sec. 6.)
Massachusetts (General)
The Cost of the Service shall include:
Operating expenses,
Taxes,
Rentals,
Interest on all indebtedness approved by Public Service Com-
mission,
Dividends on preferred stock.
Interest at six per cent on stock investment.
Such allowance for depreciation, obsolescence and for losses in
respect to property sold, destroyed or abandoned as may be fixed
by the Commission,
All other expenditures and charges recognized under I. C. C.
Classification of Accounts, and the Laws of Massachusetts, as
proper charges against income or surplus. (Sec. 2.)
Montreal
The term " cost of service '' is not used in the grant, but pro-
vision is made for the payment of the following charges in the
order given. (Art. 92.)
Operating expenses, including, among other things, the expenses
of the Commission, insurance, payments for claims and damages
and a reserve, fixed by tin; Commissioner, to recover claims and
damages liabilities. (Art. 92; Par. 1.)
Taxes. (Art. 92; Par. 1.)
Operating Profit. (Art. 92; Par. 1.)
184
Service At Cost Agreements
ii.
♦
Maintenance, renewals, replacements and substitutions.
(Art. 92; Par. 2.)
Eetuni on Initial Value. (Art 92; Par. 3.)
Return ou Added Value. (Art 92; Par. 3.)
Eetum ou Working Caprtal. (Art. 92; Par. 3.)
Allowance for the expenses of securing new capital ($181,-
431.47). (Art. 92; Par. 3.)
Rental to the City at $500,000 a year. (Art. 92; Pai\ 5.)
EasTEKN MASSACHUSETTa
The cost of the service includes:
Maintenance,
Other operating expenses,
Taxes,
Rentals,
Interest on bonds, serial bonds and other interest payments.
Stated dividends on preferred stock,
Six per cent on common stock,
Allowance for depreciation, obsolescence, rehabilitation and
losses, as deemed adequate by the Trustees,
Other expenditures and charges, which, under the Massachu-
setts laws, now or hereafter in effect, may be chargeable against
income or surplus. (Sec. 14.)
Westekvilxe
There is no formal definition of the cost of service. Provision
is made, however, for the payment of the following items:
(a) Each month, one-tweLfth of the estimated annual cost of
all taxes, to be accrued until due;
(b) Each month one-twelfth of annual interest to be retained
by the Company, on the then Capital Value;
(c) Wages,
Salaries,
Power costs, '
Current repairs,
Maintenance (current and deferred),
Service At Cost AoREE^rENTs
185
Damage claims, due to operation of passenger service on West-
erville line north of Seventeenth avenue, or of freight line at any
point,
Proportionate share of expenses of Company's Claim
Department,
All other expenditures properly chargeable to operating costs,
Interest on indebtedness incurred in the construction, main-
tenance or operation of the line.
Dallas
It is provided that the monthly Gross Receipts (defined as
including all sums received from the conduct of the business car-
ried on under the Grant and from the Terminal, profits derived
from the sale of merchandise, rentals from real estate, buildings,
tracks, sidings and equipment, and miscellaneous revenues from
whatever source (Sec. 1) shall be devoted to the following pur-
poses and in the following order :
1. Payment of Operation Expenses, defined as including all
expenditures usually so classified by the American Electric Rail-
way Accountants Association, but in any event all expenditures for
Labor and materials used in repairing, maintaining, preserv-
ing, renewing, replacing and operating Company's property,
including that held under lease, insofar as they are not chargeable
to Property Value, or paid from Repair, Maintenance and Depre-
ciation Reserve;
Insofar as they are not chargeable to Property Value, all insur-
ance premiums, legal expenses, accounting and office expenses,
rentals for property or rights, except rentals paid under lease
from Northern Texas Traction Co., losses, taxes and charges
imposed by governmental authorities, expenditures and liabilities
(insofar as they are not paid out of Accident Reserve) fox
injuries and damages to persons and property;
Officers' salaries and expenses;
Expenses for advertising;
All expenses not chargeable to Property Value, properly made
and incurred;
Interest on Working Capital. (Sec. 1.)
I
m
186
Service At Cost Agreements
2. Ten per cent of Monthly Gross Receipts to apply to the
creation and maintenance of the Repairs, Maintenance and
Depreciation Reserve;
3. Until there has been accumulated an amount equal to six
per cent of Railway Gross Receipts for the twelve months, then
next preceding (with which amount the Reserve shall be con-
sidered as " normal " unless the Company and the Board of Com-
missioners otherwise agree), six per cent of the monthly Railway
Gross Receipts, to constitute the Accident Reserve;
4. Payment to the Company of five-twelfths of one per cent of
the Property Value, on account of stipulated return. This is at
the rate of five per cent per annum;
5. Further payments to the Company on account of stipulated
return, it being provided that for every one-twelfth of one per
cent on Property Value so paid to the Company, there shall be
paid into the Repair, Maintenance and Depreciation Reserve, in
addition to the payments provided by 2 three per cent of Rail-
way Gross Receipts of the month ;
6. The balance of Gross Receipts, remaining after the pay-
ments in 1 to 5, inclusive, shall be paid into the Repair, Main-
tenance and Depreciation Reserve, until that Reserve shall for
the calendar year equal eighteen per cent of the total Railway
Gross Receipts for the year;
7. If in any calendar year, subsequent to the taking effect of
the Grant, there shall have been less than eighteen per cent of
Railway Gross Receipts paid into the Repair, Maintenance and
Depreciation Reserve, then after the monthly payments provided
in 1 to 6, inclusive, shall have been made, the balance of Gross
Receipts shall be paid into the Repair, Maintenance and Deprecia-
tion Reserve, until such deficits shall have been made good.
8. Any balance remaining of Gross Receipts, after the pay-
ment of 1 to 7, inclusive, shall be paid into Surplus Reserve^
when the amount in the Surplus Reserve shall equal eight per
cent of the then Property Value, its condition shall be considered
"normal," unless the Company and the Board of Commissioners
shall agree upon another percentage;
Payments into the Repair, Maintenance and Depreciation
Reserve may cease when the amount of the Reserve is '^ normal.'^
Service At Cost Agreements
187
When the highest rate of fare provided in the Grant is in effect,
the Reserve shall be considered "normal," when it amounts to
six per cent of the then Propertv Value. When the next highest
fare is in effect, it shall be considered normal when it amounts
to ten per cent of the then Property Value. When the condition
of the Reserve is "normal," the Company may pay to itself,
from Gross Receipts, the full return allowed it by the Grant.
(Sec. 22.)
Memphis
The cost of service shall include —
Operating expenses, including allowances for both a Renewals
and Replacement Reserve and a Injuries and Damage Reserve;
Taxes ;
Return on investment.
8.— ALLOWANCES
(a) Operating
Cleveland
The Operating Allowance is fixed by the original grant at 111/4
cents per revenue car mile, exclusive of car-house and car-yard
miles, and of cars used in carrying materials for the construction
and repair work of the Company, for each motor car, and of 60
per cent of lli^ cents, for each revenue car mile made by trailer
cars. (Sec. 18.) In the Renewal Grant the operating allowance
was fixed at 191^ cents.
The Operating Allowance may be decreased or increased by
agreement between the City and the Company, or by the action
of a Board of Arbitration. (Sec. 20.)
Youngstown
* The Operating Allowance is fixed by the Grant at 22 cents per
car mile, for cars equipped with motors and 60 per cent, of 22
cents for trailer cars. (Sec. 11.)
The Operating Allowance may be changed by agreement between
the City and the Company, or by a Board of Arbitration. (Sec
11-A.)
* Note : The operating allowance has already been increased, effective May
Ist, 1919, to 27 cents per car mile.
188
Sertice At Cost Agreemekj^ts
ClNCnSTKATI
A budget plan is provided by the terms of the Grant. Forty-
five days before the end of each year, the Company shall submit
to the Director of Street Railroads, an estimate of gross receipts
and operating expenses covering the ensuing yesiT, The form pro-
vided by the I. C. C. Uniform System of Accounts for Electric
Railways to be followed. The Director shall within ten days,
either approve or disapprove such Budget. In case of disagree-
ment, the controversy shall be submitted to arbitration. (See C6
(a), Par. 3. Sec. 8 of Grant.)
At any time during the year the Company may submit a Supple-
mentary Budget or estimate, which follows the same course as the
original Budget. (Sec. 8.)
Expenditures for operation shall not be made except under the
General I. C. C. accounts, and shall not exceed the amounts under
each account named in the Budget, except that with the approval
of the Director transfers may be made from oiie aecount to
another. (Sec. 8.)
Boston
Ko allowances are fixed by the Act. Expenditures are made in
the judgment of the Trustees.
Massachusetts (General)
1^0 allowance provided for in the Act. Under general laws,
Public Service Commission has extensive jurisdiction.
Montreal
The Operating Allowance is a sum fixed by the Commission for
each revenue ear mile, exclusive of car-house and car-yard miles,
operated by motor cars, except Company cars, with additional
sums for revenue car miles run by trailers, and freight cars,
again exclusive of car-house and car-yard miles. The Operating
Allowance is fixed each year by the Commission in connection
with its fixing of the permissible average density of traffic per
car-mile, and the agreement provides that it shall be based upon
the actual and necessarj^ expenses of operation for the previous
year, and modifications of service, changing costs, or any circum-
stances which influence the cost of operation. If in any jear
•r I
Service At Cost Agreements
189
there shall be an excess in cost of the Operating Allowance, which
shall be determined by the Commission to have been necessary,
such fact shall be taken into consideration in fixing the allowance
for the following year. (Art. 92; Par. 1.)
Eastern Massachusetts
No allowance fixed by the Act. It is left to the judgment of
the Trustees.
Westerville
Operating expenditures are left to the judgment of the Com-
pany, except that the Commissioners may object to the propor-
tion of salaries and other expenses, allocated to the Westerville
line, in which case the dispute is arbitrated. (Sec. 13.)
Dallas
No operating allowance is provided for in the Grant.
Memphis
There is no provision for an operating allowance. The Injuries
and Damage allowance is fixed by the Commission, and is paid into
the Injuries and Damage Reserve, minus only such amounts as may
be expended on account of payments for injuries and damages as
prescribed in the I. C. C. Standard Classification of Accounts.
The Injuries and Damage Reserve, which shall consist of the
amount in the Company's reserve for this purpose at the time
the order became eifective, plus the monthly credits on account
of the allowance for injuries and damage as directed by the Com-
mission. The balance in the fund shall be deposited or invested
in the bonds of the Company as prescribed by the Commission.
(b) Maintenance
(&-i) Definition
Cleveland
There is no attempt to define the dividing line between Main-
tenance and Depreciation and Renewals. A " Standard of
Repair " is, however, established as follows :
la
I
f I
Service At Cost Agreements
" The intent ... is to enable the Company to maintain,
renew, replace, preserve and keep its railway system and property,
and every part thereof, and all extensions, betterments and per-
manent improvements . . . in good condition, thorough repair
and working order, the standard of such condition, repair and
working order being an average for the entire system of 70
per cent, of its reproduction value. (Sec. 20.)
YOUNOSTOWN
A " Standard of Repair " is set up as follows:
The intent hereof with r^ard to the sum authorized by Sec-
tion 12 to be set aside fro Maintenance, Repair and Renewal is to
enable the Company to maintain, repair and renew, replace and
preserve, and keep its railway system and property enumerated
in Section 10 and schedules thereof, and all extensions, better-
ments and permanent improvements hereafter made pursuant
hereto, in good condition, thorough repair and working order "
(Sec. 12-B.)
Disputes as to the definition of Extensions, Betterments and
Permanent Improvements in distinction to Maintenance, Repair
and Renewal shall be arbitrated. (Sec. 15.)
Cincinnati
The Company is required by the terms of the Grant to keep its
property " in such repair and condition as shall be sufficient at
all times for the safe and convenient operation of cars and traffic
therein and thereon and for the safety and accommodation of
passengers and property carried and for the protection of the
City from liability to the public and shall restore and replace
every necessary part which may wear out or cease to be useful."
(Sec. 8.)
Inasmuch as the Grant provides for the submission of the
Budget under the form set forth in the I. C. C. System of
Accounts, the definitions used therein may be considered to hold.
Boston
'No allowance provided for.
Service At Cost Agreements 191
Massachusetts
No allowance provided for.
Montreal
The agreement provides that "the entire plant and property
of the Company used and necessary to provide the public trans-
portation service shall at all times be maintained at the highest
practicable standard of operating efficiency." The Maintenance
Allowance shall be used " for the purpose of maintenance, renewals,
replacements and substitutions made necessary by wear and tear,
age, obsolescence, inadequacy, accident or other cause." (Art
92; Par. 2.)
Eastern Massachusetts
Act contains no definition.
II
^
Westerville
Grant contains no definition.
Dallas
See C. 3. (a).
Memphis
The order contains no definition of maintenance in contra-
distinction to Renewals and Replacements, but provides, as to
the Renewal and Replacement Reserve, that it " shall be used for
the sole purpose of providing renewals and replacements (other
than ordinary maintenance) due to ordinary depreciation, obso-
lescence or abandonment, as may be prescribed by the Commis-
sion from time to time, and in accordance with the accounting
methods prescribed herein."
(h-2) How Fixed
Cleveland
The Maintenance, Depreciation and Renewal Allowance was
fixed by the terms of the original grant, upon the basis of revenue
car mileage, as for the operating allowance, as follows :
In January, February, March, April, May and December, four
cents per oar mile for motor cars ; 60 per cent of four cents a car
mile for revenue trailers.
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Service At Cost Agreements
t
In November, five cents a car mile, for motor cars; 60 per cent
of ^Ye cents a car mile for revenue trailers.
In June, July, August, September and October, sLx cents a car
mile for motor cars; 60 per cent of six cents per car mile for
revenue trailers. (Sec. 19.) In the Kenewal Agreement one cent
per car mile was added for each month.
The Maintenance, Depreciation and Renewal Allowance may
be decreased or increased by agreement between the City and the
Company, or by the action of a Board of Arbitration. (Sec. 20.)
The allowance for Maintenance, Depreciation and Renewals
is credited to a separate fund. No expenditures from this fund,
can be made without the approval of the City. (Sec. 20.) All
amounts not needed for maintenance or renewals, are accumulated
and invested in the bonds of the Company, or in such of its float-
ing indebtedness, as forms part of its capital value. If any part
of the amount so invested is needed for maintenance and renewals,
the Company may issue new bonds or floating indebtedness to the
amount of such investment, which bonds or floated indebtedness
becomes a part of capital value. (Sec. 20.)
The Maintenance, Depreciation and Renewals Allowance, shall
not be diminished, until such time as the value of the Company's
property together with the amount accumulated in the Mainte-
nance, Depreciation and Renewals fund, shall equal 70 per cent of
the reproduction value of the value of the entire system. (Sec.
20.)
YOUNOSTOWN
The Maintenance, Repair and Renewal Allowance is fixed by
the Grant at eight cents a car mile for motor cars and 60 per cent
of eight cents for trailers. (Sec. 12.)
The Maintenance, Repair and Renewal Allowance may be
changed by agreement between the City and the Company, or by a
Board of Arbitration. (Sec. 12-a.)
Changes to the* Maintenance, Repair and Renewal Account,
must be approved by the City. In the event of disagreement,
arbitration shall be resorted to.' (Sec. 12-A.)
Cincinnati
Allowances for Maintenance, Repairs and Renewals are fixed
by the Company in the Budgets and supplements thereto, subject
to the approval of the Director of Street Railroads. (Sec. 8.)
Service At Cost Agreements
I9:i
Boston
No allowances fixed by the Act. Expenditures are made in the
judgment of the Trustees.
Massachusetts (General)
No allowance provided for in the Act. Public Service Com-
mission now has certain jurisdiction.
Montreal
The Maintenance Allowance is a sum fixed by the Commission
for each revenue car-mile, exclusive of car-house and car-yard
miles, operated by motor cars, with additional sums for revenue
car-miles operated by trailers and freight cars, again exclusive of
car-house and car-yard miles. (Art. 92 ; Par. 2.)
The Maintenance Allowance is paid into the Maintenance and
Renewals Fund. To this fund is also added moneys received from
the sale of property listed in the schedule upon which the Initial
Value was based, when the Trustees for the Bondholders give their
consent to such addition. (Art. 92; Par. 2.)
In the case of property replaced subsequently to the date of
Initial Value, when the cost shall be less than the actual, or the
reproduction cost, or when any such property is sold and not
replaced, moneys so received shall be credited to the Maintenance
and Allowance Fund, and expended for the making of additions,
betterments and extensions, and that proportion of the cost of
such additions, betterments and extensions paid for by such
moneys shall not be charged to Capital Value. (Art. 92 ; Par. 2.)
In addition there shall be paid from the Maintenance and
Renewals Fund :
The actual and necessary expenses of maintenance and renew-
als. (Art. 92; Par. 2.)
The cost of the replacement or substitution of any unit of the
property listed in the valuation upon which Initial Value is based,
up to the full reproduction cost of said unit. (Art. 92; Par. 2.)
The actual cost of the replacement or substitution of any item
added to the property subsequent to the valuation upon which
Initial Value is based. (Art. 92; Par. 2.)
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Service At Cost Agreements
>
Money not required for these purposes shall be held in the
Maintenance and Eenewals Fund, until it is required, or for
investment in additions, betterments and improvements. (Art.
92; Par. 2.)
The Commission may, from year to year, increase or decrease
the amount of the Maintenance Allowance as is required to pro-
vide such an allowance ajs will keep, except temporarily, the
Maintenance and Renewal Fund at $500,000, or more. (Art
92; Par. 2.)
The Fund is under the control of the Commission, and money
therein may not be paid out, loaned, or invested, except with the
Commission's permission. Bank or other interest thereon, is
added to and becomes a part of the fund. (Art. 92 ; Par. 2.)
If, in the judgment of the Commission, the condition of the
fund warrants the loan, the Company, when it is compelled to
furnish new capital, must first borrow from the Maintenance and
Renewals Fund, in which case the return of six per cent, received
by the Company thereon, is paid into the Maintenance and Renew-
als fund. (Art. 92; Par. 3.)
In case the City acquires the property of the Company at the
termination of the agreement, the Maintenance and Renewals
Fund becomes the property of the City, and its amount shall not
be added to the purchase price. Any money borrowed by the
Company from the fund and due at the time of purchase, if not
be repaid by the Company, shall be deducted from the purchase
price. (Art. 92;Pai-. 2.)
Eastern Massachusetts
Ho allowance fixed by the Act. It is left to the judgment of
the trustees.
Westerville
Ko allowance fixed by grant.
Dallas
See provisions for Repair, Maintenance and Depreciation
Reserve, under E. 1.
Memphis
*
1^0 provision for Maintenance allowance.
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Service At Cost Agreements 195
(c) Depreciation
Cleveland
Included in Maintenance and Renewals.
YOUNGSTOWN
Included in Maintenance and Renewals.
Cincinnati
Provision is made for the accumulation of a Depreciation
Reserve, the amount to be paid into such reserve for the first five
years of the Grant, being fixed as that previously allowed by the
Companies themselves. After five years the amount of Depre-
ciation allowance is to be fixed by the Public Utilities Commission
of Ohio. Until the Commission shall otherwise order, payments
sufficient to retire $1,159,000 of Equipment notes, as th^ mature,
shall be paid from the Depreciation Reserve. (Sec. 22.)
Depreciation funds shall be invested or deposited by the Com-
pany as approved by the Director of Street Railroads and shall
be used for renewals and replacements. (Sec. 22.)
Boston
The allowance for depreciation is specifically left to the judg-
ment of the Trustees. They are, however, required to provide for
obsolescence and " losses in respect to property sold, destroyed or
abandoned." (Sec. 6.)
The Trustees are further required to maintain the property in
" good operating condition and to make such provision for depre-
ciation, obsolescence and rehabilitation, that, upon the expiration
of the period of public management and operation, the property
shall be in good operating condition." (Sec. 13.)
Massachusetts (General)
Allowance for " depreciation, obsolescence and losses in respect
to property sold, destroyed or abandoned," fixed from time to time
by the Public Service Commission. (Sec. 2.)
During the period of the war and for one year thereafter, the
allowance may, in the discretion of the Commission, be smaller
than would be considered adequate in normal times. (Sec. 13.)
ii
196
Service At Cost Agreements
Service At Cost Agreements
197
The Public Service Commission may order Company to dispose
of property no longer useful, the loss +o be amortized over a period
of not more than ten years. (See 1^^
Montreal
See Montreal (E-2-(b-2)
Eastern Massachusetts
Fixed by the Trustees. (Sec. 14.) Subject to the approval
of the Public Service Commission the Trustees are authorized
for the period of the war, and for a time, not exceeding one year
thereafter, to waive the setting aside of any depreciation allow-
ance. (Sec. 17.)
Westerville
There is no direct provision for the accumulation of a Depre-
ciation Reserve. In the cost of the service, Deferred Mainten-
ance is one of the items provided for.
Dalias
" The Grantee covenants that it will at all times keep all its
property, including the property embraced in said lease from
JJ^orthern Texas Traction Company, in good and businesslike order
and repair and as a whole in condition to give effective service. To
this end, and to the end also that replacements and renewals may
be made from time to time as necessary to maintain the property
in such condition and to offset depreciation in the physical con-
dition of the property as a whole, and that new types of equipment
may be introduced to supersede those that become antiquated or
obsolete according to commonly accepted commercial standards in
the business, the Grantee will set up in the manner hereinafter
provided, a Repair, Maintenance and Depreciation Reserve, and
will use the same when and to the extent necessary for such pur-
poses and for those purposes only, save as herein otherwise pro-
vided." (Sec. 17.) '
The Grant sets up three Reserves — " Repair, Maintenance
and Depreciation," "Accident " and " Surplus."
In addition to the general provision for the use of the Repair,
Maintenance and Depreciation Reserve, just quoted, the Grant
provides for the following uses:
In case any property included in Property Value is sold for
less than its cost (or in the case of property acquired prior to the
date of the valuation of the Company's property and sold within
two and one-half years of the- taking effect of the grant, its value
as of that date, the loss so incurred may be made good out of the
Repair, Maintenance and Depreciation Reserve. (Sec. 20.)
In case any of the Company's property is destroyed by fire, or
other calamity, the loss sustained, may be made good out of the
Repair, Maintenance and Depreciation Reserve. (Sec. 20.)
When old or worn out property, including pavement and street
improvements but not repairs thereto, is replaced by new prop-
erty such difference between the cost of the new property and
that of the old property, as cannot be charged to Extensions,
Betterments and Improvements under Section 26 of the Grant,
shall be charged to the Repair, Maintenance and Depreciation
Reserve, or to Operating Expenses. (Sec. 26.)
If at the expiration or termination of the lease of the property
of the I^orthem Texas Traction Co., the Company is obligated to
make good any depreciation, the amount thereof shall be paid
from the Repair, Maintenance and Depreciation Reserve, or from
the Surplus Reserve, or shall be amortized from Gross Receipts.
(Sec. 46.)
The Surplus Reserve is created as an equalizing fund " to pro-
mote the orderly and economical operation and development of
the Grantee's business and to provide for any unexpected or
unusual contingencies or reverses therein." (Sec. 21.) The Grant
states the following specific purposes for which it may be used :
1. Temporarily carrying the charges or burdens, except inter-
est and charges during construction, of the unprofitable stages of
extensions or additions (Sec. 21.);
2. Carrying the burdens incident to reduction of fares or other
changes seriously affected profits of the business for the time
being (Sec. 21) ;
3. Preventing frequent or violent fluctations in fares (See
21);
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Service At Cost Agreements
i
4. Promoting the periodic payment of return to the Company
(Sec. 21) ;
5. To bring either the Accident Reserve, or the Repair, Main-
tenance and Depreciation Reserve, up to " normal," when either
or both shall be below " normal " and the Surplus Reserve, is
more than ten per cent above "normal." (Sec. 25.)
6. In case any property included in Property Value is sold for
less than its cost (or in the case of property acquired prior to
that date of the valuation of the Company's property and sold
within two and one-half years of the taking effect of the Grant,
its value as of that date), the loss so incurred may be made good
out of the Surplus Reserve. (Sec. 20.)
7. In case any of the Company's property is destroyed by fire,
or other calamity, the loss sustained may be made good out of the
Surplus Reserve. (Sec. 20.)
8. If at the expiration or termination of the lease of the prop-
erty of the Northern Texas Traction Co., the Company is obli-
gated to make good any depreciation, the amount thereof may
be paid from the Surplus Reserve. (Sec. 46.)
The Accident Reserve is established as an equalizing fund, for
the purpose of meeting losses, not charged to Operating Expenses,
on account of persons killed or injured and property damaged
and destroyed, where such losses are not covered by insurance as
provided by Section 20 of the Grant, as well as the legal expenses
involved. Losses occuring from these causes in Connection with
Extensions, Betterments and Improvements, are a charge against
such Extensions, Betterments and Improvements and may not
be charged to Accident Reserve. (Sec. 21.)
Moneys in any of the three Reserves, may be used for increas-
ing the facilities for serving the public (in which case the amount
shall not be added to Property Value), or may with the approval
of the Board of Commissioners be invested in high grade Texas
securities. Earnings of these funds shall be applied at the dis-
cretion of the Company either to increase the Accident Reserve
or the Repair, Maintenance and Depreciation Reserve, if either
is below " normal," or as a credit to Operating Expenses. (Sec.
B2.)
Service At Cost Agreements
199
Memphis
A Renewal and Replacement Resei^e is provided for. This
consists of the amount reserved for renewals and replacements at
the time the order took effect (April 1, 1920), plus allowance paid
into the fund monthly as a cost of the service. This allowance
is based on the Company's investment in depreciable property,
which is declared to be, as of July 1, 1919, the date of the Initial
Investment, $7,600,000 as compared to total investment of $11,-
846,034. Until there shall be accumulated in the Renewal and
Depreciation Reserve the amount of $500,000 and thereafter,
when the balance in the fund shall be more than $300,000, but
less than $500,000, there shall be paid into the Fund monthly
as a part of the cost of service, one-twelfth of 3 per centum of the
investment in depreciable property.
When the balance in the Renewal and Replacement Reserve
shall be more than $500,000, the monthly payments shall be one-
twelfth of 2 per centum, and when it shall be less than $300,000,
the monthly payments shall be one-twelfth of 4 per centiun.
The Renewal and Replacement Reserve shall be used only for
the purpose of providing renewals and replacements, other than
ordinary maintenance, and payments therefrom are to be made
with the approval of the Commission, in accordance with the
methods prescribed by the I. C. C. Classification of Accounts.
The balance in the fund shall be invested in the bonds of the
Ccinpany, or deposited as the Commission may approve and
intei'est thereon shall be credited to the Reserve.
8.— SPECIAL TAX AND IMPOST FEATURES
Cleveland
By the terms of the grant the Company is exempted from the
payment of the " car-license fee " which was before exacted from
street railway companies. (Sec. 6.)
The Company is required to maintain the pavement between
its tracks and one foot outside thereof, but is not required to
repave. (Sec. 7.)
The Company is required to carry free, firemen and policemen
in uniform, while on duty. (Sec. 30.)
^1
I
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Service At Cost Agreements
%
I 'I;
■ t :
r !
I
I;'
The Company is required to operate hospital, supply and other
special cars for the City. The City supplies and maintains the
cars, and pays the wages of employes in charge thereof, and for
current, but no fixed charges, or track maintenance or renewals,
(Sec. 23.)
YOUNGSTOWN
The Company is required to pave, repave, and maintain pave-
ment between its tracks and one foot outside thereof, on all streets
and bridges with the same material as the rest of the street is
paved with, except that it is not required to use sheet asphalt, the
City having the privilege to designate some other material, no more
expensive. (Sec. 5.)
The Company is required to sprinkle the space between its tracks
and one foot outside. (Sec. 5.)
The Company is required to transport free, policemen, firemen
and sanitary policemen of the City. (Sec. 14-D.)
The Company is obliged to provide and operate, at actual cost,
cars for municipal purposes. (Sec. 14r-E.)
Cincinnati
(a) Taxes:
The Company is required to pay an annual Gross Earnings Tax
of $350,000. (Sec. 22-F.)
'(Note. — This is in lieu of paving taxes and assessments, excepting that
the Company is required to replace paving which it disturbs.)
(b) Imposts:
The Company is compelled to carry free, policemen and firemen,
when in uniform. (Sec. 12.)
The Company shall operate cars for such exclusively municipal
purposes on such terms, conditions and compensation as shall be
authorized by Council and agreed upon between the City and the
operating company. (Sec. 20.)
Boston
'No special taxes or imposts are provided for but the Act contains
the following declaration: "Nothing herein contained shall be
held to affect the right of the Commonwealth or any subdivision
Service At Cost Agreements
201
thereof to tax the Company or its stockholders in the same manner
and to the same extent as if the Company had continued to manage
and operate its own property." (Sec. 2.)
Massachusetts. (General)
No provisions.
Montreal
An annual rental of $500,000 is paid from gross revenues to
the City. (Art. 92; Par. 4.)
The City receives 30 per cent of surplus remaining after costs
provided for in the Agreement are paid. (Art. 92 ; Par. G.)
The Company shall pay for the cost of pavement between its
tracks and eighteen inches outside thereof. (Art. 42.)
The Company shall maintain pavement between its tracks and
eighteen inches outside thereof. (Art. 46.)
The Company must renew wooden poles with iron poles, and
in new construction use iron poles. (Art. 45.)
The Company is forbidden to use T rails, in streets paved with
permanent pavement, including asphalted macadam. (Art. 52.)
The City shall have the right to use the Company's poles for
stringing City wires and for signs giving information of public
interest. (Art. 65.)
The Company is required to keep its tracks free from snow and
ice, and if the City itself elects to remove the snow and ice from
the entire street the Company shall pay one-half the cost thereof.
(Art. 66.)
If the City elects to open a street across the Company's right of
way, it may cross the lands of the Company, without being liable
for damages and without payment for such land. (Art. 67.)
The Company shall make connections between its tracks and
sidings and municipal establishments and yards at cost price.
(Art. 69.)
In the case of firo, the wires of the Company may be cut on the
order of the Chief of the Fire Department, and the Company may
not claim damages therefor. (Art. 73.)
Policemen and firemen, employed by the City or by any munic-
ipality served by the Company, shall be transported free, as shall
the members of the Commission and its employes. (Art. 80.)
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Service At Cost Agreements
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203
The Company shall at the request of the City have special tickets
printed to he used exclusively by City employes. The regular
price shall be charged therefor. (Art. 81.)
Eastern Massachusetts
For the period of the war and for two years, thereafter, the
Company is relieved, unless the Public Service Commission after
a hearing decides otherwise, from paying the cost of the construc-
tion, alteration, maintenance, or repair of streets, bridges, or of
structures in connection therewith ; for the abolition of grade cross-
ings, or the undergrounding of wires, except that it must restore
street surfaces disturbed by it in connection with railway work
and shall not be relieved from certain obligations incurred before
the passage of the Act. It is provided further, however, that any
work of construction for which the Company may have been obli-
gated shall be postponed for two years after the war, unless in the
opinion of the Trustees public necessity requires the continuance of
the work covered by such obligations. (Sec. 20.)
Westerville
The Company is required, where its tracks are in an improved
highway located south of the Corporation of Linden Heights to
maintain the roadway between its tracks and one foot outside, in
the same manner as the rest of the highway is maintained.
(Sec. 6.)
When the highway in which the tracks of the Company north
of the Corporation of Linden Heights is improved, the Company
is required to construct and maintain between its rails and one
foot outside " boulevard construction." (Sec. 6.)
The Company is required to maintain and keep in repair all
culverts and drains beneath its roadbed and one foot outside its
tracks. In the case of new drains and culverts it shall pay for
the construction of that portion under its roadbed and one foot
outside its rails. (Sec. 6.)
Dallas
By the terms of the Grant the Company is relieved from all
municipal charges, fees, rentals, pole rentals, wire taxes, inspection
or other charges, and taxes of every kind, except ad valorem taxes
and special assessments for public improvements. (Sec. 47.)
The Company is required to make any changes in traeks and
wires, ordered by the Board of Commissioners, to permit the con-
struction or alteration in pipe lines or cables owned by the City,
and shall assume the expenses thereof. (Sec. 5.)
The Company is obliged to pave and maintain paving between
its tracks and twenty-four inches outside. (Sec. 6.)
The Company is obliged to furnish free transportation to police-
men and to firemen when required by the City, to the extent per-
mitted by law. (Sec. 24.)
The City is given the right to string its wires upon the poles
of the Company, providing the use of the poles is not interfered
with by the City, and no expense to the Company is involved.
(Sec 3.)
Memphis
^o provisions.
F. FARES
1.— SCHEDULES OP
Cleveland
The Schedule of Fares as amended by action of the City Coun-
cil, August 3, 1918, follows:
1. Six cents cash ; nine tickets for fifty cents ; one cent transfer,
no rebate.
2. Five cents cash ; five tickets for twenty-five cents ; one cent
transfer, no rebate.
3. Five cents cash ; eleven tickets for fifty cents ; one cent trans-
fer, no rebate.
4. Five cents cash; six tickets for twenty-five cents; one cent
transfer, no rebate.
6. Four cents cash; five tickets for twenty cents; one cent trans-
fer, no rebate.
, It is provided by the Grant that the Company shall under any
rate of fare in force sell reissuable tickets. (Sec. 21.)
Provision is made for the sale or issuance of transfers good
between all routes of the Company, except those in an opposite
direction, or parallel or substantially parallel. Such transfers are
\
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2'04
Service At Cost Agreements
It
good only on the next car, or within five minutes of their issu-
ance. Pas&engers are required to use sudh transfers upon lines,
which will take them most directly to their destination without the
use of a second transfer. (Sec. 21.)
A child under six years of age, is carried free, hut two children
under six years of age travelling with a single passenger, are
charged a single fare, for hoth. (Sec. 21.)
The fares provided for by the schedules provided for in the
Grant, are for rides within the limits of the City of Cleveland, as
they existed at the time of the adoption of the schedule. (Sec. 21.)
Younostown
Kate A. — Three cents cash, nine tickets for 25 cents, one cent
for transfer.
Rate B. — Five cents cash, eight tickets for 25 cents, one cent
for transfer.
Eate C. — Five cents cash, seven tickets for 25 cents, one cent
for transfer.
Rate D. — Five cents cash, six tickets for 25 cents, one cent
for transfer.
Rate E. — Five cents cash, no tickets, one cent for transfer.
Rate F. — Six cents cash, nine tickets for 50 cents, one cent
for transfer.
Rate G. — Seven cents cash, eight tickets for 50 cents, one cent
for transfer.
Rate H. — Eight cents cash, seven tickets for 50 cents, one cent
for transfer.
Rate I. — E^ine cents cash, six tickets for 50 cents, one cent for
transfer.
When Rate B becomes effective the City shall establish a rate
of fare lower than Rate A and bearing the same relation to
Rate A that Rate A bears to Rate B. When Rate H becomes
effective the City shall establish a rate of fare higher than Rate I,
and bearing the same relation to Rate I that Rate I bears to
Rate H. (Sec. 14.)
School or special tickets, not good before 7 a. m. or after 5 p. m.
on week days, or at all on Sundays or legal holidays, shall be sold
at a price to be agreed upon between the City and the Company.
Service At Cost Agreements
205
The holders thereof shall pay one cent additional for transfer.
(Sec. 14-A.)
Children under six years of age accompanied by a person pay-
ing fare shall be carried free. (See 14-A.)
The City and the Company may agi-ee upon any rate of fare
not specified in the schedule, but the matter of the installation
of such a fare is not subject to arbitration. (Sec. 14.)
. Tickets shall be sold upon all cars. Tickets sold under a
different rate of fare than that at the time in force shall not be
accepted, but shall be redeemed at any office of the Company for
the price paid therefor. (Sec. 14-A.)
Transfers shall be issued from one route of the system to any
other routes, except in a substantially opposite direction, or to a
route substantially parallel. They are good on the car of the
second route next passing the point of transfer. The Company
shall, subject to the approval of the City, make reasonable rules
for the issuing of transfers. (Sec. 14-A.)
The Grant provides that Rate E, five cents cash, no tickets,
one cent for transfer, becomes effective upon the taking effect of
the Grant. (Sec. 14-B.)
The fares provided for and the transfers to be issued are for a ride within
the City limits of Youngstown and within certain specified limits outside
thereof. (Sec. 14-B.)
Cincinnati
The schedule of Fares provided in the Grant is as follows:
a. Initial fare:
For passengers over ten years of age, five cents.
Children under ten years, two and one-half cents.
Children in arms, free.
Passengers on inclined plane, two and one-half cents. (No
transfers issued.) (Sec. 20.)
Fares to be increased or decreased as cost of service varies, as
follows :
For passengers over ten years of age, by one-half cent stage.
For passengers under ten years of age, by one-half the amount
of increase provided for passengers over ten years of age.
For passengers on inclined plane, by one-half the amount of
increase provided for passengers over ten years of age. (Sec. 20.)
14
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206
Service At Cost Agreements
Tickets shall be sold at all times — For passengers over ten
years of age, in strips of six at six times the fare then m force
and for passengers less than ten years old in strips of four at
four times the single fare then in force. (Sec. 20.)
When the fare in force produces a fraction of a cent, the cash
fare shall be the whole number above the rate of fare producing
the fraction. (Sec. 20.)
When fare is decreased or increased outstanding tickets shall
be void, but shall be redeemed by the Company at the price paid
therefor. (Sec. 20.)
The Company is authorized, subject to the approval of the
Director of Street Railroads, to make rules and regulations for
the collection of fares and the issuance of tickets. (Sec. 20.)
The Grant provides that passengers shall not be carried for
a less fare to points outside the city than to points within.
(Sec. 20.)
The Grant provides that the Company shall issue free transfers
under rules and regulations made by it, subject to the approval
of the Director of Street Railroads, who may order changes and
revisions therein. Such rules and regulations, including the
fixing of transfer points and the designation of transfer routes,
shall become effective within ten days, after being approved by
the Director, unless the Company shall file objections, in which
case the Director shall hold a public hearing. His decision after
such hearing shall be final, and the Company shall issue transfers
to all destinations "on each and all of the routes and all new,
changed and extended routes," as the Director shall decide.
(Sec. 9.)
Transfers are not transferable and shall be used within five
minutes of the time that passenger arrives at the transfer point.
(Sec. 10.)
Boston
The Trustees were required, within sixty days of the taking
effect of the Act, to put. into operation rates of fare, which in
their opinion were sufficient to pay the cost of the service, and
within sixty days thereafter to adopt a schedule of eight different
grades of fare, four above and four below the rate first established,
and to at all times keep the schedule so that there shall be four
Service At Cost Agreements
207
grades above and four below the rate in effect at the time
(Sec. 7.)
The Trustees may at any time change the schedule so as to
alter the rates, or the method and basis of charges for fares and
transfers. (Sec. 7.)
Massachusetts (General)
A Company accepting the Act, files with the Public Service
Commission a schedule of nine different grades of fares. One
of these it shall designate as the initial fare, as being, in its
opinion, sufficient to meet the then cost of the service. Of the
remaining fares, four shall be above and four below the initial
fare. Each fare shall be so fixed in relation to the fare above
or below, as to provide, so far as possible, for an increase or
decrease of thirty per cent, in the (Reserve Fund. The Com-
mission shall either approve the schedule so filed, or shall estab-
lish a schedule of its own, in place thereof. If by reason of
changes from the initial fare, there shall be at any time less
than four fares above or below the fare effective, then the Com-
pany shall file an additional grade. This is also subject to the
approval of the Commission, which if it does not approve, shall
establish a grade of its own. (Sec. 6.)
If at any time, the interest of the public or the Company
demands, the Company may, with the approval of the Public
Service Commission, change the schedule of fares either in re-
gard to the method of establishing fares and transfers privileges,
or in regard to the steps between the different grades, or in other
respects. (Sec. 6.)
" Except as thus provided, the Commission shall have power
to modify such schedule only after it has been in effect for a period
of one year; provided, however, that no modification of the
schedule which diminishes the rate of return on the Stock Invest-
ment provided for in Section 2 shall be continued in effect for a
period exceeding four months." (Sec. 6.)
Montreal
No schedules of fares are provided for in the Agreement. The
Commission is authorized to fix fares from time to time in accord-
ance with the provisions of the agreement.
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208
Service At Cost Agreements
For this purpose, the territory is divided into "Uniform-
Tariff Territory," comprised of the City as it existed at the time
of the taking effect of the Agreement, six towns immediately
adjacent and portions of two parishes, also immediately adjacent,
and " Territory Outside Uniform Tariff Territory," comprising
such territory lying outside of Uniform-Tariff Territory as is
served by the Company. (Art. 76.)
For Uniform Tariff Territory, the Commission must establish
and maintain uniform rates. (Art. 70.) :
For territory outside, the Commission may establish different
lariffs for different municipalities and traffic between, it being
provided, however, that such tariffs must not burden the rest
of the system and that any municipality, or municipalities, may
assume part of the cost of service for the sake of securing low
rates. (Art. 76.)
The Commission has the power of establishing different rates
for travel at certain hours of the morning or evening, or both,
and higher fares to be .charged between midnight and 5 a. m.
(Art. 76.). i i, .
The Commission may put into effect reduced rate tickets for
school children and apprentices on week days, but for school chil-
dren such rates will apply only from 8 a. m. to 6 r. m., and for
apprentices from 6 a. m. to 7 p. m. (Art. 76.)
Children under five years of age shall be carried free.
(Art. 76.)
The Company is compelled to sell tickets of denominations
fixed by the Commission. (.Art. 76.)
When a new tariff becomes effective, tickets sold under the old
tariff are not usable, but must be redeemed bv the Companv.
(Art. 76.)
Tariffs become effective eight days after publication, for two
consecutive days, in one English and one French newspaper
(Art. 76.)
Tariffs shall provide for the issue of transfers, either free or
at a charge as determined by the Commission (Art. 77), under
the usual restrictions, and it is forbidden to sell, exchange or
give away a transfer, to receive, offer or 'to use for passage a
transfer not regularly issued to the holder, or to throw away a
transfer without first having destroyed it. (Art. 78.)
Servjce At Cost Agreements
209
No other persons, than the policemen and firemen of the City
cr of any municipality served by the Company, members and
employees of the Commission, and officers and employees of the
Company shall be carried free. (Arts. 79, 80.)
The Company may, with the approval of the Commission, con-
tract with the Federal Government for the carriage of letter car-
riers and mail, and with the Provincial Government for the trans-
portation of its officers and for service to and from the Bordeaux
jail. (Art. 82.)
Eastern Massachusetts
The Trustees are required, within sixty days after the A^ew
Company has acquired the property of the Old Company, to estab-
lish rates of fare which in their opinion will provide sufficient
revenue to pay the cost of the service, and thereafter to maintain
flt all times at least four grades of fare, two of which shall be
above and two of which shall be below the grade in effect.
(Sec. 15.)
Westerville
Three Fare Zones are fixed by the Grant. In addition, there
shall be established by the Company, with the approval of the
Commissioners, or by the Commissioners, with the approval of
the Company, overlapping zones, providing that the establishment
of such overlapping zones shall not jeopardize the interest
on the Company's investment. If the Company so thinks, it
may submit the question to arbitration. If the decision is against
its contention the overlapping zones shall be immediately estab-
lished, but the Company at the end of three months may again
protest to the Commissioners and again submit the question to
arbitration. (Sec. 11.)
The fare collected in any zone shall be for a single ride to the
end of that zone. (Sec. 11.)
The fare for all zones shall at all times be equal. (Sec. 11.)
^ The fare for the part of the trip, south of I7th Avenue (on
city lines) shall always be the same as the city fare with the
same transfer privileges. (Sec. 11.)
The following schedule of rates of fare by ticket, is established
in the grant:
(a) Four tickets for 10 cents, or 2%-cent fare.
(b) Five tickets for 15 cents, or 3-cent fare.
,ij
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210
Service At Cost Agreements
(c) Ten tickets for 35 cents, or 3V^-cent fare.
(d) Five tickets for 20 cents, or 4-cent fare.
(e) Ten tickets for 45 cents, or 4V2-cent fare.
(f) Five tickets for 25 cents, or 5-cent fare.
(g) Ten tickets for 55 cents, or 514-cent fare.
(h) Five tickets for 30 cents, or 6-cent fare. (Sec. 12.)
Each ticket sold shall be good for one continuous ride in any
one zone. (Sec. 12.)
The maximum fare in any one zone shall be six cents. (Sec.
12.)
When the ticket fare is 4 1-2 cents or less, the cash fare shall
be five cents. When the ticket fare is more than 4 1-2 cents, the
cash fare shall be six cents. (Sec. 12.)
Commuters' rates may be established. (Sec. 12.)
Dallas
Four rates of fare are provided by the Grant as follows:
A. Cash fare, five cents, 22 tickets for $1 ;
B. Cash fare, five cents, six tickets for 25 cents ;
C. Cash fare, five cents, seven tickets for 25 cents;
D. Cash fare, five cents, eight tickets for 25 cents. (Sec. 24.)
When Fare A. is in effect tickets shall be sold at the Company's
office in the City of Dallas ; when any of the other specified fares
are in effect, they shall be sold on the Company's cars as well as
at its office. The manner, time and place of selling tickets, may,
however, be changed by agreement between the Company and the
Board of Commissioners ; •
Under all rates of fare, children under five years of age shall
be carried free;
Children not more than twelve, but more than ^ve years of age
shall be carried at two and one-half cents, and children's tickets
shall be sold on all Company cars ;
Students in any institution of learning as defined by the laws
of Texas, not more than 17 years of age, shall be carried at two
and one-half cents, upon tickets purchased at Company's office
upon presentation of certificates of indentification ;
} I
Service At Cost Agreements
211
Special rates for charted cars and special service may be made
by the Company with the approval of the Board of Commission-
ers;
The Company is obligated to give universal transfers, under
rules and regulations made by it and approved by the Board of
Commissioners, which shall prevent their abuse ;
If at any time territory is annexed to the City, and the Com-
pany shall operate a line therein, the City may, in accordance with
the provisions of the City Charter, establish reasonable fares,
thereon, which in no event shall be less than those charged in the
rest of the city. (Sec. 24.)
Memphis
The following schedule of rates of fare is provided:
No. 1 — Eight cents cash ;
No. 2 — Eight cents cash, 10 tickets for 75 cents ;
No. 3. — Seven cents cash ;
No. 4 — Seven cents cash, 10 tickets for 65 cents ;
No. 5 — Six cents cash ;
No. 6 — Six cents cash, 10 tickets for 55 cents^
No. 7 — Five cents cash.
Whenever fare Number 2 or fare Number 6 is put into effect
the Commission will extend the list of fares upwards or down-
wards as the case may be and will at all times provide in the
schedule two rates of faro which shall be below or above that
which is in effect.
Children five years old or less may be carried free when accom-
panied h)^ a fare paying pa-ssenger. Transfers shall be given in
accordance with regulations in effect at the time the ojder took
effect.
The initial rate of fare was fixed at seven cents, 10 tickets for
65 cents.
Note. — ^At the instance of the City authorities, the Receivers of the Com-
pany consented, with the approval of the United States District Court having
jurisdiction, to a trial period of three months from April 1, 1920, under a
six-cent fare, it being provided that if insufficient revenue was secured under
such rate then at the end of the three-month period the fare should go to
seven cents, ten tickets for sixty-five cents, and if at the end of the next three
months such fare provided insufficient, the regulation of fares under the terms
of the order should proceed. The order of the Commission was accordingly
modified to this extent.
n
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212
2.— HOW FIXED
Service At Cost Agreements
I ■'
Cleveland
The rate of fare, within the limitations fixed by the Grant, is
regulated by the Condition of the Interest Fund, except when the
City and Company agree, or a Board of Arbitration decides, that
the fare should either be increased or decreased, irrespective of
the condition of the Fund. (Sec. 22.)
The Interest Fund, was inaugurated by the Company provid-
ing the sum of $500,000, made by the terms of the Grant a part
of Capital value and maintained separately from the other funds
of the Company, being credited with such interest as it may earn
(Sec. 16 (b), Sec. 18.)
To this fund is credited monthly all of the gross receipts of the
Company remaining, after the payment of the Operating Allow-
ance and the Maintenance, Renewals and Depreciation Allowance.
(Sec. 18.) From the fund shall be paid:
Taxes ;
Rentals ;
Return upon Capital Value;
Federal, State and Municipal Assessments against the stock of
the Company;
Expenses of Arbitration in excess of $5,000 for any six months'
period. (Sees. 16, 17, 22.)
Payments from the Interest Fund for return upon Capital
Value are Cumulative, and shall be paid without any deductions
for any purpose. (Sec. 17.)
It is the intention of the Grant to keep the Interest Fund al-
ways at the normal sum of $500,000. In Determining the
amount in the Fund at any time, the accrued obligations for
taxes and dividend payments, shall be proportioned over the var-
ious months as follows ;
For January, seven per cent of the total payments ; foi Feb-
rmij, six; for March, seven; for April, eight; for May, nine; for
June, nine; for July, ten; for August, ten; for September, nine;
for October, nine; for November, eight; for December, eight.
(Sec. 22.)
Service At Cost Agreements
213
If
Whenever the amount in the Interest Fund, less the propor-
tionate accrued payments to be made therefrom, shall be less than
$250,000, this fact shall be prima facie evidence of the necessity
of raising the fare to the next highest rate provided in the Sche-
dule. (See F.l.)
Whenever the amount in the Interest Fund, less the proportion-
ate accrued payments to be made therefrom shall be more than
$750,000, this fact shall be prima facie evidence of the necessity
of lowering the rate of fare to the next lowest rate named in the
Schedule. (See F. 1.) (Sec. 22.)
YOUNGSTOWN
The rate of fare in effect is controlled by the condition of the
stabilizing Fund. (Sec. 14-C.)
The Stabilizing Fund was inaugurated by the Company's pro^
vidmf^ the sum of $100,000, less certain stipulated deductions for
expenses m connection with the passage of the Grant This
$100,000 is charged to Capital Value. To this sum is added the
interest received thereon, either from the banks in which it is
deposited, or the securities in which it is invested, and the sum
remaining each month after the deduction from the GVoss Re-
ceipts of the Company, the Operating Allowance, and the Main-
tenance, Repair and Renewal Allowance.
From it shall be deducted each month the monthly return on
Capital Value and one-twelfth of the estimated yearly taxes.
(Sec. 13.)
Also, such amounts as are needed to make up deficits in Gross
Revenue, sufiicient to cover the Operating Allowance and the
Maintenance, Repair and Renewal Allowance. (Sec. 11.)
Also, the expenses of arbitration, in excess of $1,000, for any
period of six months. (Sec. 9-B.)
The Initial Rate of Fare provided in the Grant, shall remain
effective, until at the end of any calendar month, the amount in
the Stabilizing Fund shall either be in excess of $150,000, or less
than $50,000. In the former event the next lowest rate of fare
shall become effective, and successive lower rates shall become
effective at the end of each calendar month, until the amount in
tl >
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214
Service At Cost Agreements
the Stabilizing Fund shall be below $150,000, in which event the
rate then in effect shall remain effective, until the amount in the
Fund shall be less than $50,000, or more than $150,000, a lower
or a higher rate, as the case may be, shall become effective.
In the latter event, the rate shall be successively increased at
the end of each calendar month until the amount in the stabiliz-
ing fund shall be in excess of $150,000, in which case the fare
shall be decreased. The operation of the Stabilizing Fund is
thus described in the Grant:
It being the intent of these provisions that by a regular and
orderly monthly decrease of fare the amount in the Stabilizing
Fund shall not be permitted to remain above $150,000, and by a
regular and orderly monthly increase of fare the amount in the
Stabilizing Fund shall not be permitted to remain below $50,000,
and it being the further intent and purpose that the fare in effect
at the time said Stabilizing Fund does not show an increase over
$150,000 shall remain in effect until such Stabilizing Fund is
reduced to $50,000, and that the fare in effect at such time as the
Stabilizing Fund does not show a decrease under $50,00(> shall
remain in effect until the Stabilizing Account shall exceed $150,-
000. (Sec. 14-C.)
Free transportation is limited to motormen, conductors, line-
men, shopmen, trackmen going to or returning from work, and all
policemen, firemen and sanitary policemen of the city. (Sec.
14-D.) .
Cincinnati
The rate of fare in effect is controlled by the condition of the
Reserve Fund. The intention of the Grant is to establish a fund,
consisting of $250,000, contributed by the Company and charged
to capital account, together with such payments from Grosi Earn-
ings as will bring it up to $400,000, which amount is known as
the " l^ormal " condition of the Fund. Into the Reserve Fund is
to be paid all surplus remaining after the payment of the items
set forth in E-1 (Sec. 22 of Grant), and from it is to be paid any
amount needed to make up any deficiency in these items, which
deficiency is cumulative in the order named in the Grant. (Sec.
22-H.)
t I
Service At Cost Agreements
215
Two provisions are made for the regulation of fares, as fol-
lows :
Before the accumulation of the Normal Sum of the Keserve
Fund :
If at any time the Gross Eeceipts shall not be sufficient to pay
the Items named in Section 22 of the Grant, together with any
accruafs of such expenses, fares shall be increased in accordance
with the first step of the Fare Schedule. (F. 1 ; Sec. 20 of Grant.)
If at the end of the next two months, or at the end of any subse-
quent period of two months, the Gross Receipts shall still be
insufficient to pay such items, the fare shall each time be increased
one step of the Fare Schedule. Such Increases shall continue
at the intervals stated, until the Gross Receipts shall be sufficient
to pay the aforesaid items, together with all accruals therein.
(Sec. 22-H.)
After the Accumulation of the Normal Sum of the Reserve
Fund:
If the amount in the Reserve Fund be increased to $650,(»00 the
next lowest fare of the schedule shall be put in force, and if
at the end of the first two months thereafter, or at the end of anv
subsequent two months, there shall still be an accumulation in
the Reserve Fund, the fare shall be reduced by like steps in the
a are Schedule until such accumulation ceases. (Sec. 22-H)
If the amount in the Reserve Fund be decreased to $250 000
then the next highest fare in the Fare Schedule shall be put in
force, and if at the end of the next two calendar months, or at the
end of any two calendar months thereafter, the Reserve Fund shaU
be still further reduced, the fare shall be increased by like suc-
cessive steps until no further drafts from the Reserve Fund for
payments on account of the items mentioned, or accruals thereof
are necessary. (Sec. 22-H.) '
Boston'
The Company was required, before the act took eflFect, to provide
the sum of $1,000,000, through the sale of its preferred stock
to be used as a Reserve Fund. (Sec. 5.) This fund can be used
only for making good any deficiencies in cost of service or for
reimbursing the Commonwealth for moneys advanced to meet
such deficiencies. (Sec. 8.)
It
216
Service At Cost Agreements
1 4
Into the fund is paid any surplus remaining after the cost of
service is paid and from it is taken any amount needed tc meet
deficiencies in the cost of service. (Sec. 9.)
If at the termination of the period of public management and
operation, the Keserve Fund shall contain less than the amount
contributed thereto by the Company, the State shall pay to the
Company the deficiency. If, on the other hand, there is a surplus
in the fund, it shall become the property of the State, which
shall distribute among the cities and towns served by the Company
in proportion to the number of people in such cities and towns
using the Company's service at the date of the termination of the
perioii of public management and operation. (Sec. 13.)
If on the last day of any September, December, March, or
June, the amount in the Reserve Fund shall exceed by thirty
per cent, the amount originally established, and for the preceding
three months income shall have exceeded the cost of service, the
Trustees are required to put into eifect the next lowest rate of
fare in the fare schedule, and if on the same dates the amount in
the fund shall be less than seventy per cent, of the original sum,
and for the preceding three months income shall have been less
than the cost service, they are required to put in effect the next
higher fare. In like manner the fare shall continue to be increased
or decreased, as the case may be, on succeeding quarterly dates.
In determining the state of the Reserve Fund, money received
from the State and paid thereinto, and for which the State has
not been reimbursed, shall first bs deducted. (Sec. 10.)
Massachusetts (General)
Before they are permitted to accept the Act, Companies are
required to provide, through the sale of bonds, stock, or preferred
stock, a Reserve Fund in amount not less than six per cent., nor
more than twelve per cent, of the Company's gross earnings for
the preceding year; the amount of the fund to be paid in over
a period not exceeding two years, as the Public Service Commis-
sion may direct. The fund may be increased with the consent of
the Commission. Until it is used, it may be invested in the bonds
of the United States, Massachusetts, or any city or town thereof.
(Sec. 3.)
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Service At Cost Agreements
217
The Reserve Fund as originally provided or afterwards in-
creased is considered the " N^ormal " Reserve Fund. (Sec. 3.)
Into it is paid any surplus remaining after the cost of service
has been paid, and from it shall be taken any deficit in the cost
of service. (Sees. 3, 5.)
If on the last day of any March, June, September or December,
the Reserve Fund shall exceed by thirty per cent, the IN'ormal
Reserve Fund, and during the preceding three months, income
shall have exceeded the cost of service, fares shall within 30 days,
by the Company be reduced to the next lower grade below the fare
then in effect. (Sec. 7.)
If on the last day of any March, June, September, or December
the Reserve Fund shall be less than seventy per cent, of the
Normal Reserve Fund, and during the preceding three months,
the income shall have been less than the cost of service, fares,
shall, within 30 days, by the Company, be increased to the next
higher grade above the fare then in effect. (Sec. 7.)
The Company, with the consent of the Public Service Com-
mission, may put into effect the next higher or lower grade of fare
at any time when the Reserve Fund is above or below the normal
amount. (Sec. 7.)
Montreal
A Contingent Fund is established by the setting aside annually
of one per cent, of gross revenues until $500,000, is accumulated,
at which time such accumulation shall stop, to be resumed when-
ever, by reasons of payments for the purpose for which it is cre-
ated, the amount in the Contingent Fund shall be below $500,000.
From this fund is taken any sum necessary to meet the payments
for cost of service as enumerated in E-1, when Gross Revenues
are insufficient, payments to be cumulative and in the order named.
(Art. 92; Par. 5.)
If, in the judgment of the Commission, the condition of the
Fund warrants the loan, the Company, when it is compelled to
furnish new capital, must first borrow from this Fund, in which
case the return of six per cent received by the Company for the
money is paid into. the fund. (Art. 92 ; Par. 3.)
Upon the termination. of the Agi-eement, the Company shall
repay any money so borrowed, and the Fund shall be divided,
I
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218
Seevice At Cost Agreements
Service At Cost Agreements
219
I
i
■r
30 per cent to the City, 20 per cent to the Company and 50 per
cent to the Tolls Reduction Fund. (Art. 92; Par. 5.)
A Tolls Reduction Fund is established, by the setting aside
of fifty per cent of the gross revenue, remaining after the payment
of charges enumerated under E-1, and the one per cent of gross
revenue provided for the Contingent Fund. When the Tolls
Reduction Fund shall exceed $1,000,000, the Commission may,
and when it shall exceed $2,500,000, the Conmiission must,
reduce fares on the system. This is to be done by taking from
the Tolls Reduction Fund an amount equal to one-quarter of the
total amount in the fund at the end of the year preceding that in
which the reduction is made, and adding it to Gross Revenue.
Tolls shall thereupon be so reduced that gross revenue earned
shall be lessened by an amount equal to the sum paid from the
Tolls Reduction Fund into gross revenue, but not so as to prevent
there being accumulated in Divisible Surplus an amount equal to
seventy-five per cent of that accumulated during the preceding
year. Annually thereafter, an amount equal to the first amount
so taken shall be transferred from the Tolls Reduction Fund
to Gross Revenues, until the amount remaining in the Tolls
Reduction Fund shall be less than the amount taken, when such
process shall cease. Fares shall not, however, be increased until
it shall become necessary, as indicated in the following paragraphs.
(Art 92; Par. 6.)
If, in spite of its depletion, under the process described above,
the Tolls Reduction Fund shall again increase until it shall con-
tain in excess of $2,500,000, there shall be a further reduction of
tolls made in the same manner. (Art. 92; Par. 6.)
If in any year the Gross Revenues are insufficient to pay the
charges enumerated under E-1, together with the one per cent pro-
vided for the Contingent Fund, and if that Fund be at the time
less than $300,000, the Commission shall transfer from the Tolls
Reduction Fund to the Contingent Fund a suflficient sum to bring
it up to $500,000, including the payments of any accumulated
deficits in the payments enumerated under E-1, or if there be
not sufficient money in the Tolls Reduction Fund, to accomplish
this purpose, then the fares shall be immediately increased in
order to provide sufficient revenues to make the payments
enumerated under E-1, together with the one per cent of Gross
Revenues paid to the Contingent Fund. (Art. 92; Par. 6.)
The Tolls Reduction Fund shall be held in trust for the patrons
of the Company for the reduction of tolls and shall be admin-
istered by the Commission as provided in the Agreement. (Art
92; Par. 6.)
If, in the judgment of the Commission, the condition of the
Fund warrants the loan, the Company, when it is compelled to
furnish new capital, must first borrow from this fund, in which
case the return of six per cent received by the Company on the
money is paid into the fund. (Art. 92; Par. 3.)
At the termination of the Agreement, the Tolls Reduction Fimd
shaU become the property of the City, and the City shall repay
any money borrowed therefrom if the City demands, and in the
event that moneys are still due from the Company to the Fund
it be deducted from the purchase price. (Art. 92; Par. 6.)
Eastern Massachusetts
The Act provides for two Fare Districts, the first consisting
of the Company's lines north of Boston and the second of its lines
south of Boston. The Trustees are further authorized to create,
after hearings, further Fare Districts, within the two major divi-
sions. They must allocate the cost of the service as between these
various Fare Districts, on a basis which fairly distributes the cost
and avoids the levying upon any such Fare Districts of costs
incurred outside thereof. They are further authorized from time
to time after hearings, to revise the boundaries of such Districts.
(Sec. 15.)
During the war and for two years thereafter any City or town,
by the action of a majority of its electorate, may, for the purpose
of securing lower fares, assume all or any part of the difference
in the cost of operation due to increased wages, supplies, or coal,
over the average prevailing .for the year ending July 1, 1914, as
determined and allocated by the Trustees. In case a part but
not all of tfie cities and towns in a Fare District, shall decide upon
such contribution, the Trustees shall make such readjustment of
fares as they shall consider equitable under the circumstances.
No town may contribute for any one year an amount in excess of
220
Service At Cost Agreements
one dollar for each $1,000 of its preceding year's assessed valu-
ation, and no city may contribute an amount in excess of fifty
cents for each one dollar of its previous year's assessed valuation.
(Sec. 15.)
From the $1,000,000 which the Act provides shall be paid in
for new securities by the holders of the securities of the Old
Company, $500,000 is set aside as a Reserve Fund (Sec. 8), to
be used only for the purpose of making good any temporary
deficiency in income pending an increase of fares. (Sec. 16.)
Pending such use, the fund may be invested, in the discretion of
the Trustees, in income producing securities, and income there-
from received shall be treated as a part of the general income of
th)^ Company. (Sec. 16.) Any surplus remaining in the revenue
of the Company after the full cost of service has been paid shall
be credited to the Reserve Fund. (Sec. 16.) In the discretion
of the Trustees, the Reserve Fund may be increased from time
to time, by the sale of the Company's Stocks, bonds and other evi-
dences of indebtedness. (Sec. 17.)
If on the last day of any December, March, June or September,
the amount in the reser\^e fund shall exceed by fifty per cent the
sum of $500,000, plus any increase made in the fund by the
Trustees through the sale of the Company's securities and the
income of the Company shall have exceeded the cost of the service
for the preceding three months, the Trustees shall, within thirty
days, put into effect a lower grade of fares. If at the same periods
the reserve fund shall be less than half the sum of $500,000, plus
additions made by the sale of the Company's securities, and the
cost of the service for the preceding three months shall have been
more than the income of the Company, the Trustees shall, within
thirty days, put into effect a higher grade of fares. The Trustees
shall continue to increase or decrease fares, thereafter, in accord-
ance with the condition of the Reserve Fund, as stated above.
YSec. 17.)
Westerville
The Rate of Fare is fixed "by the condition at the end of each
month of Working Capital. (Sec. 12.)
This fund is established by the provision by the Company of
the sum of $25-000 which is a part of Capital Value. Into the
Service At Cost Agreements
221
fund is paid all receipts from passenger service, and all propor-
tional receipts for freight originating or terminating on the
Westerville line, as well as other receipts arising from the opera-
tion of this line. From it shall be paid all expenses enumerated
under " Cost of Service." (See E-1.) (Sec. 13.)
The initial fare under the Grant was fixed at Grade (d), five
tickets for 20 cents, 4-cent fare. A monthly report of the condi-
tion of Working Capital is submitted to the Commissioners bv
the Company. Upon the receipt of such a report showing that
the amount in Working Capital equals or exceeds $35,000, the
Commissioners shall lower the fare. If the report so filed with
the Commissioners, shows that Working Capital is $15,000 or
less, the Company may order an increase in fare. (Sec. 12.)
Dallas
The Grant provides that whenever, the rate of return permitted
has l)een paid and the Accident Reserve and the Repair, Main-
tenance and Depreciation Reserves are not less than "normal,"
and the Surplus Reserve shall exceed " normal " by fifty per cent.,
then the next lowest item of fare provided in the schedule of
fares shall be put in effect. If at the end of six months, the
return having been paid and the Accident and Repair, Mainten-
ance and Depreciation Reserves being at not less than " normal,"
the Surplus Reserve, still exceeds normal by at least thirty per
cent., then the fare shall be further reduced to the next rate in
the schedule ; and fares shall be reduced at six months' intervals,
thereafter, providing rate of return has been paid and the Acci-
dent and Repair, Maintenance and Depreciation Reserves are
at " normal," until the Surplus Reserve shall be 4ess than ten per
cent in excess of "normal." The return provided for in the
Grant is cumulative to the extent that fares cannot be reduced
until arrears in return have been made up. (Sec. 25.)
Whenever the Surplus Reserve is less than fifty per cent of
" normal," the Company may increase its fares to the next high-
est rate in the schedule of fares provided in the Grant, and if
at the end of six months the Surplus Reserve is less than eightv
per cent of. " normal," it may put the next highest fare in eflFect,
and so continue to increase fares (but, for rides within city
15
ju22
Service At Cost Agreements
Service At Cost Agreements
223
limits, not higher than the highest rate named in the schedule)
at six-month intervals until the Surplus Keserve equals ninety
per cent of "normal/' after which it may not again increase
fares, until the Surplus Eeserve is less than fifty per cent of
"normal"; except that where the Company, after protesting
that extensions, or service ordered by the Board of Commissioners
will jeopardize its ability to earn its stipulated return at the
maximum fare, has been ordered by a Board of Arbitration to
make such extensions, or perform such service, it shall, if less
than the maximum fare be in effect, have the right to put the
maximum fare in effect, and such maximum shall not be reduced
for at least six months and then only in the manner provided for
other reductions. (Sec. 25.)
Memphis
All revenues of the Company remaining after the cost of the
service as defined by the Commission's order have been paid, are
placed in the Fare Index Fund. From this Fund shall be paid
all deficits as between revenue and the cost of the service.
Whenever on January 1 or July 1 of any year, there shall be
a balance in the Fund in excess of $200,000, and such balance
shall have been increasing during the preceding two months, fares
shall be reduced to the rate in the schedule next lower to that in
effect: if on the same dates the balances in the Fare Index Fund
shall be less than $60,000, and such balance shall have been
decreasing during the preceding two months, fares shall be
increased to the rate in the schedule next higher to that in effect.
In the event that the balance in the Fare Index Fund continues
to increase for two successive months after a decrease in the rate
of fare, or continues to decrease for two successive months after an
increase in fares, then the Commission may put into eff'ect an
emergency change of rate without waiting for the succeeding
regular date of January 1 or July 1.
0. TRANSPORTATION OP PREIGHT, EXPRESS, ETC.
Cleveland
!N^o provisions.
YOUNGSTOWN
Permission is granted to carry freight upon the interurban and
suburban cars of the Company, which may make "reasonable
charges" therefor. It may carry mail for the United States
Government. It may operate funeral, observation and other spe-
cial cars and express passenger service, the rates therefor to be
fixed by agreement with the City, but no lower than the rates
provided in the ordinance, and it may transport such supply cars
for its own use as are needed in the maintenance, construction
and operation of its road. Freight cars shall be of a type
approved by the City, and operated at such times of the day and
night as the City may direct.
Cincinnati
The language of the Grant, relative to the transportation of
freight and express, is as follows:
" If and when the Companies may be authorized by law so to
do, they may transport along and upon the routes, and all new,
additional, changed and extended routes, freight, express matter
and packages, and charge and collect, from time to time, reason-
able rates therefor, but such transportation shall not be permitted
to interfere with or delay passenger traflic. (Sec. 20.)''
The Company is required to file a schedule of rates for freight
and express service with the Director of Street Railroads, and
may change such schedule from time to time, filing new schedules.
Schedules become effective 30 days after the date of filing, except
that the Director may, for good cause, allow them to become
effective sooner. When objection is made by any person or persons
to the Company's schedule, the Director shall upon notice to the
Company hold a public hearing, and shall decide thereafter the
charges to be made. The charges so fixed shall be binding upon
the Company, at the end of thirty days, unless within that period
1
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224
Service At Cost Agreements
Service At Cost Agreements
225
^ t
the Company shall begin in a court of com|)etent jurisdiction pro-
ceedings to enjoin such charges on the ground that they are un-
reasonable. (Sec. 20.)
Boston
Ko provisions are made for the transportation of freight,
express, etc., such matters being under the jurisdiction of the
Trustees. (Sec. 2.)
Massachusetts (General)
No provisions.
Hontreai.
" The Commission may allow the Company to carry freight
over all or any part of the territory of the City as it now exists
f»Jid as it may hereafter be enlarged, as well as over all or any
part of the territory outside of the City, provided that such
transportation of freight shall not, in any way, interfere with nor
hinder the transportation of passengers, or the carrying out of
any work, or the transportation of garbage, waste, rubbish or
snow, which the Company may be called upon to undertake for
the City under the present contract." (Art. 83.)
If permission to carry freight is granted, the Commission shall
determine the routes on which freight shall be transported, specify
the hours during which freight cars shall run, fix the tariffs, so
that they shall not burden the passenger tariff, establish rules for
the transportation of freight, which when approved by the Que-
bec Public Utilities Commission shall be binding, determine the
commodities which may be transported and order the establish-
ment of loading and unloading places. (Art. 83.)
The transportation of live stock, carrion or manure or other
offensive substances can be effected only in cars approved by the
Board of Health of the Province of Quebec. (Art. 83.)
The Company is granted the right, irrespective of the Com-
mission, to transport for itself or for the City, material used in
the construction of its lines, or for construction work being done
by the City or any municipality served, including surplu? from
excavations made in the pursuance of such work. (Art. 83.)
The Commission may not authorize the Company to permit its
freight car& to remain stationary in the streets for the purpose of
unloading or loading, except when used in the work of the Com-
pany, City, or any municipality served by the Company. (Art.
83.)
Eastern Massachusetts
Ko special provision is made for the transportation of freight,
express, etc., the matter being within the jurisdiction of the
Trustees and the Public Service Commission.
Westervillb
There are no provision? as to the transportation of freight and
express, except that receipts from freight originating or termi-
nating on the Westerville line, shall be credited to Working Capi-
tal. (Sec. 13.)
Dallas
" No cars for the carriage of freight or express (other than
for the use of the Grantee) shall be operated by the Grantee over
any part of its system, unless formal consent be given by the
City by resolution or ordinance of the Board of Commissioners.
Such resolution or ordinance may provide such regulations relat-
ing thereto as the Board of Commissioners may deem necessary."
(Sec. 32.)
Memphis
No provisions.
H. SPECIAL PROVISIONS
When Grant Expires:
Boston
•
When the period of public management and operation expires,
the Company is given the right to fix its own fares, so as to pro-
vide for the cost of service, including a six per cent, return upon
the par value of its common stock outstanding, and may establish
an automatic scale of fares, but the Commonwealth is released
from its obligation to make up deficiencies in the cost of service.
The Company shall under such conditions be subject to such reg-
ulation as! the Legislature may decide upon, but such regulation
shall not be exercised so as to reduce its income below the rea-
sonable cost of the service as defined in the Act. (Sec. 15.) But
III
226
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Service At Cost Agreements
I /I
I i
is
,*1 t
:l|
this provision is declared not to be a contract binding upon the
Commonwealth. (Sec. 18.)
Massachusetts (General)
Acceptance of Act:
A Company desiring to accept the Act, applies to the Public
Service Commission, for a determination of its Capital Invest-
ment, and the approval of its unfunded debt. Upon the determi-
nat'on of Capital Investment and approval of unfunded debt,
the Act may be accepted by the filing with the Commission, an
acceptance, authorized by a vote of at least a majority of its capi-
tal stock, and evidence that the Reserve Fund and Improvement'
l?und has been raised or will be raised. (Sees. 4, 12.)
The Public Service Commission may permit \ Company to
hogin operation under the Act before its Capital Investment has
been determined, provided the other provisions of the Act have
been complied with, but there shall be no distribution of dividends
on common stock, until such detennination of Capital investment
has been made. (Sec. 12.)
Montreal
Control Outside City:
The present agreement annulled the privileges, rights and
franchises which the Company held in the City, and ''the
privileges, rights and franchises which it possesses or will possess
in other territories for the same purpose shall be annulled by the
mere fact of the annexation of such territories to the City, which
territories shall then be subject to the present contract." ' (Art
24.) ^
"All provisions of the contracts, compacts or agreements passed
between the Company and any municipal corporation outside of
the City, inconsistent with the provisions of this contract, shall be
and shall remain without effect from the coming into force of the
present contract." (Art. 95.)
In specific provisions, the Commission is given control of fare?,
w^rvice, betterments, extensions and improvements outside of City!
Service At Cost Agreements
227
Gvarantee Fund:
Within five yeiars after the coming into effect of the agreement,
the Company is compelled to provide out of its own resources, by
which is meant those outside the jurisdiction of the Commission,
the sum of $500,000 in yearly installments of not less than
$100,000, the total to be known as the guarantee fund. This
is- to be used to meet all liabilities and debts, other than mortgage
debts, incurred by the Company before the agreement took effect,
to pay for any excess in expenditures over 1021/^ per cent, of the
operating allowance, when required by the Commission; to pay
imy penalties inflicted upon the Company for failure to conform
with the Commission's orders and to guarantee the fulfillment of
the terms of the agreement. The fund is at all times to be main-
tained by the Company at $500,000, and shall be deposited in
some bank or chartered trust company, so as to be readily avail-
sble. The interest on the fund is the property of the Company,
nnd at the termination of the agreement the amount in such fund
shall be the property of the Company. (Art. 92.)
Labor:
"The C Company shall not, directly or through any other person,
do anything to prevent its employes from organizing a labor union
authorized by law. Each class or category of employes may form
a separate union. (Art. 88.)
" The employes of the Company shall be entitled to one day's
rest per week, the same to be fixed by the regulations of the Com-
pany." (Art. 88.)
Eastern Massachusetts
At Expiration of Public; Management:
"After the expiration of the ten-year period of management and
operation of Trustees as herein provided for, the New Company
shall have all the powers and privileges and be subject to all thb
liabilities and restrictions of a street railway organized under the
general laws now or hereafter in force, and with the consent of
the Public Service Commission, may exercise any additional
powers and privileges conferred by special acts applicable to the
Bay State Street Eailway Company, until the General Court shall
othervN'ise provide." (Sec. 18.)
nil
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228
Service At Cost Agreemen
TS
I
r
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Apportionment of Stock and Bonds:
The general laws of Massachusetts provide that a street rail-
stock. In the case of the special issue of serial bonds, authorized
by the Act, and ,n the case of equipment, notes, payable serially
^ond Discmini:
c^^^V""^"^"" ?' *^' '"'" "f ^""^ «* « 'J'^^"""*. «««* diB-
mm to be amortized as the Trustees, with the approval of the
dial! be deducted from the amount of bonds outstanding for the
purpose of detennining the proportion between bonds and stock,
otitr n '^' ^r"' '"^' "^ Massachusettes, must, in the case
of street railways, be equal. (Sec. 7.)
Hemphis
Traffic; Survey:
The Company is directed, if the city of Memphis so elects to
co^rate m the making of a traffic survey, the cost of which is
to be borne, on^half by the city and one-half as a cost of the ser-
vice. The purpose of such survey is to determine if service can be
improved and its cost lessened and the report is to be submitted to
the^omm,ss,on for such action as it may decide to take in relation
Skip-stop:
r;f"^'T!.*V'' niodifications as may be agreed upon by the
City and the Company, the order directs that the skip-stop plan in
force previous to the making of the order be continued
SERVICE AT COST PLANS NOT IN EFFECT
An ldent.^1 Analysis of Ordinances and Agreements which
Have Been Proposed in the Cities of Chicago, Phila-
delphia, Denver and Minneapolis, but which for
Various Reasons Have Not Became Operative.
In addition to the cost of service agreements at preset effec-
tive m ten cities of the United States and Canada, similar agree-
ments have been prepared to cover the operation of electric rail-
way systems in several other cities, but for various reasons have
not been put into effect.
Agreements proposed in Chicago, Philadelphia, Minneapolis
and Denver are analysed a^d summarized in the following pages
The object of the Chicago ordinance was to provide for Theln-
struction by the City of a subway system, the consolidation of the
surface and elevated lines into a unified system and the operation
of all local transportation lines, including the Citv^wned sub-
ways by a single company, organized for that pur'pose and not
rf. l^r'^^f P'"*^*" "' "^ "^J^*- The Ordinance was
adopted by the Chicago City Council on August 14, 1918 by a
vote of 48 to 20 and was vetoed by Mayor Thompson a few dlys
later. On August 22, 1918, it was respassed over the Mayoi
vetoe by a vote of 51 to 19. It was submitted to a vote of the
people on November 5, 1918, and defeated. Opponents of the
ordmance were recruited from public ownership advocates, from
those who favored extension of elevated lines rather than the
building of subways, as well as those who believed that the Initial
Value of the property wa^ too high and that the rate of return
was too great. The cry that the adoption of the ordinance would
mean an immediate increase in fares was also raised
The Philadelphia ordinance which aimed to provide a unified
^stem of local transportation for the City of Philadelphia, and
ts operation by the Philadelphia Rapid Transit Companv, wa,
supplementary to a contract entered into between the Ciiy and
[229J
230
Service At Cost Agrxements
Service At Cost Agreements
the Company in 1907. It provided for the construction of tran-
sit facilities both by the City and the Company and the furnishing
of equipment for both City and Company lines by the Company.
It was adopted by the City Councils and approved by the Mayor
on January 3, 1918. Approval by the Pennsylvania Public Serv-
ice Commission was, however, necessary before the contract
became effective. On January 15, 1919, the Public Service Com-
mission disapproved the contract, mainly on the gi'ound that it
established a fare basis, and conceded certain preferentials to
the Company, without a valuation of its property.
The Denver Service at Cost ordinance was drafted by a Com-
mittee of fifty-five, appointed by Mayor Mills in January, 1919,
and representing all of the business, civic and labor organizations
of the City. The appointment of the Committee was inspiied by
the desire to secure a satisfactory plan for determining rates and
service, after the Colorado Public Utilities Commission had
granted the Company a seven-cent fare as an emergency measure.
A few days after the Committee was named the Colorado
Supreme Court handed down a decision denying the Commission
jurisdiction over the rates or service of public utilities in so-called
" Home Kule " cities, of which Denver is one. The City Coun-
cil, afterwards permitted the Company to charge a six-cent fare,
which was insufficient and owing to wage awards made by the
National War Labor Board an acute situation was presented.
On August 22, 1919, the Committee of Fifty-five filed with the
City a petition embodying the Ordinance, with the signatures of
16,150 citizens. The ordinance was passed by the Council and
submitted to a vote of the people on October 22, 1919, when it
was defeated by 235 votes in a total of 21,245.
At the same election, the Denver Elastic Six-cent Fare Ordin-
ance, proposed by City Auditor Stackpole, which aimed to base
fares upon the wages paid to its employes by the Company was
defeated by 6,304 votes out of a total of 15,461. Some 100,000
were entitled to vote on these two propositions and the small vote
recorded may be taken as indicative of the lack of interest mani-
fested by the ordinary citizen in matters of the kind.
The Minneapolis Ordinance was an attempt to adjust transit
conditions in Minneapolis in advance of the expiration of some
231
of the Company's franchises. It was fathered by the Street EaU-
way Committee of the City Council and prepared by City Attor-
ney C. D. Gould and Stiles P. Jones. It was passed by the City
Council in September, 1919, and submitted to the voters on
December 9, 1919, when it was defeated by a vote of 22,977 for
and 30,549 against. The opposition to the ordinance was led by
Mayor Meyers and the Socialist party. The Mayor announced
himself in favor of service at cost, but disagreed with the valua-
tion placed upon the Company's property, although this valuation
was based on the estimates of the City Engineer.
1.— LIFE
A. GENERAL CONDITIONS
Chicago
The Grant expires only when the property of the Company is
purchased by the City.
Philadelphia
The Grant continues until July 1, 1957, unless —
Terminated by the City on account of default by the Company.
Terminated by reason of the purchase by the City of the prop-
erty of the Company. (Art. 37. )
Denver Service at Cost Ordinance
The Denver Ordinance was neither a Grant nor a Franchise. It
was an ordinance giving the City certain control over the service
of the Company and prescribing a method for fixing fares. By
Its provisions it was declared to be binding upon both the City
and the Company " for the remaining life of any of the Com-
pany's franchises," (Art. 17.)
Denver Elastic Six-cent Fare Ordinance
For the remaining life of the Company's franchises. (Sec. 5.)
Minneapolis
Twenty-five years from January 1, 1920. (Sec. 2.)
232
Sebvice At Cost Agreements
n
S.— RENEWAL
Chicago
No provisions.
Philadelphia
Upon sLx months' notice, prior to the date of expiration, the
City may renew the Grant as well as the 1907 Contract to which
it is supplementary, for a ten-year period and may again renew
it for a like period prior to the termination of any such exten-
sions, by giving six months' notice. (Art. 38.)
Denver Service at Cost Ordinance
No provisions.
Denver Elastic Six-cent Fare Ordinance
No provisions.
Minneapolis
There are no specific provisions covering the renewal of the
Orant. The power to renew the Grant rests in the City Council,
however. The Company is required by the terms of the Grant
to continue to operate its City System after the Grant has expired
under such reasonable terms and conditions as the City Council
may impose. Such continued operation does not extend or renew
the Grant, but the obligation of the Company to sell to the City
at any five-year period is continued. (Sec. 2.)
8.>-F0SF£ITUS£
Chicago
No provisions.
Philadelphia
If the Company defaults in performing its obligations under
the Grant, the Citv mav —
Operate the Unified System under rates of fare provided by
the Grant for the remainder of the life of the Grant on such
terms as may be decided by the Court, such operation to be under
the terms of the Contract, and by orders of the Court pending a
determination of the rights of the parties or the curing of the
default, and the property shall be restored to the Company as soon
as the default shall have been cured or the Court shall so order ; or
Service At Cost Agreements
233
Enter into a contract with some third party to operate the Uni-
ded System, subject to the same conditions, as if operated by the
City; or
Apply for the appointment of a receiver to operate the Unified
System and at the same time ask for an order of the Court to
protect the rights of the parties to the Grant ; or
Apply for a cancellation of the Grant and the lease which is
a part thereof; or
Avail itself of such other remedies as may be legally possible.
Any of these actions shall not invalidate*^ the lien of bonds or
other securities which the Company may have issued under the
terms of the Grant. (Art. 30. )
Denver Serice at Cost Ordinance
No provisions. The instrument if merely a rate regulation
would presumably be revocable at the pleasure of the City Council.
Denver Elastic Six-cent Fare Ordinance
No provisions. The instrument if merely a rate regulation
would presumably be revocable at the pleasure of the City Council.
Minneapolis
If the Company shall fail to comply with any of the terms and
conditions of the Grant, and if such default shall continue for
a period of ninety days (exclusive of all times during which the
Company may be delayed or interfered with, without its con-
nivance, by unavoidable accidents, strikes or court actions) after
written notice of such default has been served upon it by the
City, then the City Council may declare the Grant forfeited. In
case, however, there shall be outstanding bonds issued in com-
pliance with the provisions of the Grant secured by a lien against
the property of the Company including the rights and privileges
granted by the ordinance, the owners thereof shall be privileged
to foreclose on the property, including such rights and privileges.
The purchasers at such foreclosure sale shall be entitled to con-
tinue the operation of the property under the terms of the Grant
including the right of the City to purchase and to forfeit the
Grant for failure to comply with its terms, which forfeiture shall
ii "
I
234
Service At Cost Agreements
^1
be conclusive and shall terminate the rights and privileges of the
purchaser thereunder as well as those of parties claiming there-
under. If the Company is unable to comply with the terms of
the Grant for reasons beyond its control such as acts of God,
strikes, war, riots or inability to obtain materials and supplies
within the time specified, " if all reasonable diligence is exercised
in ordering and purchasing the same," it is relieved of obligations
under the Grant as to time of performance. (Sec. 32.)
B. MUNICIPAL PURCHASE
1.— BY THE CITY
If
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I
(a) When Purchase Can Be Made
Chicago
On the first day of January, or the first day of July of any
year after the Grant becomes effective, upon giving six months'
notice in writing of intention to purchase. (Sec. 24.)
Philadelphia
Under the 1907 Contract upon July 1, 1957, or upon any July
1, thereafter, provided that six months' notice be given to the
Company. (Sec. 11, 1907 Contract; Sec. 37 of Grant.)
Under the additional rights conferred by the Grant, at any time
after July 1, 1927, upon six months' notice to the Company of
its intention to purchase. ( Art^ 27.) *
Denver Service at Cost Ordinance
At any time after the taking effect of the ordinance upon six
months' notice to the Company. (Art. 12; Sec. 1.)
Denver Elastic Six-cent Fare Ordinance
Ko provisions.
Minneapolis
During the life of the Grant, any extension thereof, or any con-
tinued operation of the system under the terms of the Grant, but
Service At Cost Agreements
235
without an extension thereof, the City shall, upon giving one
year's notice in writing of its intention, have the right to purchase
at the end of each five or ten-year period. (Sees. 2 and 18.)
During the life of the Grant and any extension thereof the
City shall have the right to purchase on January 1, of any year,
providing that it has given the Company one year's notice of its
intention so to do. (Sec. 18.)
Under its right of eminent domain, the City shall have power
to purchase at any time. (Sec. 18.)
(b) Terms of Purchase
Chicago
The purchase shall include all property of the Company, includ-
ing money and securities in the Special Funds created by the
Grant, all receipts of the system, including amounts reserved for
taxes and other operating expenses, less any amount needed to
pay the items constituting Cost of the Service. (Sec. 24.)
The purchase price shall be the amount of the then Capital
Account of the Company, less the amount of any outstanding and
unpaid liens (except liens then callable, which shall be called and
paid by the Company) subject to which the Company acquired
the property, franchises and rights of the surface or elevated lines
which comprise the system, which liens shall be assumed by the
city. (Sec. 24.)
Upon the payment in cash to the Company, or the deposit of
the purchase price in cash in the depositories named in the Grant,
the City shall have the right to take over and possess the property.
Liens under mortgages, deeds of trust or other instruments, made
subsequent to the taking effect of the Grant, and rights of the
holders of debentures or other obligations issued in part payment
for the surface or elevated lines comprising the property, shall be
paid out of such purchase price, such debentures or other obliga-
tion being subject to the lien of the aforesaid mortgages, deeds of
trust or other instruments. (Sec. 24.)
Philadelphia
The property, leaseholds and franchises of the Company, sub-
ject to its indebtedness, may be acquired by the City, upon the
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236
Service At Cost Agreements
payment to the Company by the City of an amount paid in upon
its capital stock at the date of purchase, plus —
First, unpaid dividends on New Capital issued under the terms
of the Grant, and
Second, accumulated unpaid dividends at five per cent per
annum on all Capital Stock. (Art. 27.)
Denver Cost of Service Ordinance
The City may at its own election, purchase either the City lines
of the Company, alone, or its City and interurban lines together.
In the event that the City lines alone are purchased, the Com-
pany shall be awarded severance damages, fixed either by agree-
ment between the City and the Company, or by arbitration, and
in addition existing arrangements, for the use of tracks and facili-
ties as between the interurban and City lines are continued.
(Art. 12.)
The purchase price is the Stipulated Fair Value of the Com-
pany's property at the time of Purchase. (Art. 12.)
Stipulated Fair Value is defined as meaning the Basic (Initial)
Value plus the total cost of additions, betterments and improve-
ments made after the date of Basic Value, minus the value of
property retired, both as defined by the Rulings and Uniform
System of Accounts of the Interstate Commerce Commission,
and determined from the records of the Company, authenticated
by the Board of Tramway Control. (Art. 4, Sec. 2.)
Included in the property covered by the purchase price, are
all amounts in the Renewal and Depreciation Reserve Fimd and
all surplus above the " normal " amount in the Fare Control
Fund. If, however, the Fare Control Fund, shall be less than
"normal," the amount of the deficit shall be added to the pur-
chase price and paid to the Company. (Art. 12.)
In the event of purchase the property may be delivered to the
Citv free and clear of all liens or incumbrances, in which case
the full amount of the purchase price shall be paid to the Com-
pany in cash, or the City may assume certain mortgage liens, the
face or par value of securities thereunder not to exceed the Stipu-
lated Fair Value, and in such case only the difference between
the value of such securities and the Stipulated Fair Value of the
Service At Cost Agreements
237
Company shall be paid to the Company, while the value of such
securities shall be set aside to discharge said mortgage liens.
(Art. 12.)
In the event of purchase the City shall assume and carry out
all contracts with other railway companies for the joint use of
tracks and existing agreements for the purchase of supplies and
equipment contracted for, and undelivered. (Art. 12.)
* Denver Elastic Six-cent Fare Ordinance
No provisions.
Minneapolis
The giving of notice by the Company of its intention to pur-
chase constitutes an obligation upon the part of the City to buy
and on the part of the Company to sell, which obligation may be
enforced by mandamus or other appropriate legal proceeding.
(Sec. 18.)
Upon the purchase of the property, the City shall assume and
carry out all contracts for the joint use of tracks and for the pur-
chase of undelivered equipment and supplies. (Sec. 18.)
The property shall be transferred to the City free and clear of
liens or all other incumbrances. If, however, the City shall
purchase the property prior to the retirement of any existing
mortgage, the Company shall furnish satisfactory security that
such mortgage shall be retired. If the City elects to require cash
security, it shall assume the payment of the difference in interest
charges as between the interest paid on the mortgage bonds and
that required for the cash deposit, and such difference shall be
charged as an operating expense. (Sec. 18.)
All unexpended balances in any Funds created under the pro-
visions of the Grant, as well as cash on hands and bills and
accounts receivable become the property of the City. (Sec. 19.)
The City assumes and shall pay all liabilities on account of
damages and injuries to persons and property occurring subse-
quent to the taking effect of the Grant and prior to the conveyance
of the property. The City shall fulfill all outstanding obliga-
tions and contracts of the Company and pay all bills and accounts
payable, providing that such obligations have been incurred with
lo
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238
Skevice At Cost Agreements
the approval of the City Council and further providing that it
shall pay nothing on account of any sums claimed hy the Company
on account of payment of return. (Sec. 19.)
The price to he paid hy the City to the Company for the prop-
erty shall be:
The sum of $24,000,000 (Value of property as of January 1,
1919) J plus--
The sum necessary to retire securities issued, or debt incurred
on account of the Stablizing Fund, and Capital Expenditures, and
Any accumulated deficiency in the items constituting the Cost
of Service, except payments to the Company on account of return,
and minus —
Capitalization retired with sums taken from the Amortization
Fund, and
Loans made to the Company by the City or bonds guaranteed
by the City and used for Capital purposes. (Sec. 19.)
H at the time of purchase the City shall have the legal power
to assume the payment of existing mortgages or other liens upon
the property, or to purchase the proj^erty subject to such
mortgages or liens, it may elect to assume such mortgages or liens,
in which case their amount shall be deducted from the purchase
price. (Sec. 19.)
1.— BY LICENSEE OF QTY
(a) When Purchase Can Be Made
Chicago
1^0 provisions.
Philadelphia
At the same periods provided for purchase by City. (Sec. 11
of 1907 Contract.)
Denver Sebvice at Cost Ordinance
1^0 provisions.
Denver Elastic Six-cent Fare Ordinance
IsTo provisions.
Service At Cost Agreements
239
Minneapolis
After January 1, 1925 (five years after taking effect of grant)
at the same periods provided for purchase by the City. (Sec. 18.)
(b) Terms of Purchase
Chicago
K'o provisions.
Philadelphia
The City's right to purchase may be assigned to an individual,
firm or corporation, and may be put up at auction and sold to the
highest bidder, in which case the Company shall have a right to
bid. The purchase by an assignee of the City shall be made
under the same terms as those provided for purchase by the City.
(Sec. 11 of 1907 Contract.)
Denver Service at Cost Ordinance
"No provisions.
Denver Elastic Six-cent Fare Ordinance
"No provisions.
Minneapolis
The Licensee must have lawful authority to acquire, own and
operate street railways in the city of Minneapolis. (Sec. 18.)
The City may designate the Licensee only after receiving bids
for the right to purchase said property, which bids may be based
upon a lower rate of return, a reduction in Capital Value, or a
cash bonus to the City. Bids may be received for operation
under the tei-ms of the existing contract or such contract as modi-
fied, but in the absence of a new contract, the bidder shall agree
to take over the property subject to all existing terms and obliga-
tions, including the right of the City to purchase or to designate
a purchaser. The City may reject any or all bids. (Sec. 18.)
A Licensee so designated shall acquire the right to purchase the
property under terms and conditions provided for its purchase
by the City, except that ten per cent shall be added to the pur-
chase price as well as an amount that shall take into account the
240
Service At Cost Agreements
sum or sums transferred to tlie Company or to the holders of its
securities from the Amortization Fund. Licensee shall not add
the ten per cent to Capital Value, but it shall be considered as a
bonus to the City. (Sec. 18.)
C. CONTROL
1.— CORPORATE AUTONOMY
Chicago
The Orant provides for the organization of a Company for the
purpose of consolidating the surface and elevated lines of
Chicago, the building of additional surface and elevated lines
and the construction of subways as well as the operation of sub-
ways built by the City, and the management and operation of
the system so created, " not for pecuniary profit.'' The original
Board of Nine Trustees is to be constituted by ordinance of the
City Council approving previous selections and at the expiration
of the term of office of each his successor is to be named by the
Board from nominations made by the City Council. Practically
all of the acts of the Board are prescribed by the terms of the
Grant (Sec. 1.)
Philadelphia
"Nothing in this article (providing for a supervising Board)
shall deprive the Company's officers and directors of the manage-
ment of the Company's properties, nor shall anything herein con-
tained be deemed a delegation to the Board of any of the powers
vested in the Director (Director of the Department of City
Transit) or the Commission. (Pennsylivania Pvhlic Service
Commissi4)ii,) * * *" (Art. 31, Par. 7.)
The Mayor, ex officio, and two citizens of Philadelphia to be
chosen from time to time by the Councils, to serve for four years
and tiU their successors are appointed, shall, as representatives of
the City, be members of the Board of Directors of the Company,
and as such exercise all the powers of directors, and vote upon
all questions which may come before the Board, as if they had
been elected by the stockholders of the Company, but without
incurring any liability as directors. (Sec. 4, 1907 Contract.)
Service At Cost Agreements
241
Denver Service at Cost Ordinance
No surrender of corporate autonomy is required by the terms
of the ordinance. It is specifically provided that the purpose of
the ordinance is "without prejudice or waiver of any conten-
tions by the City and County of Denver or the Denver Tramway
Company as to the validity, scope or duration of any franchise,
grant or right of way." (Art. 14, Sec. 1.)
Denver Elastic Six-cent Fare Ordinance
No provisions.
Minneapolis
There are no specific provisions relative to Corporate
Autonomy. The restrictions put upon the Company by the terms
of the grant are concerned only with the operation of the Com-
pany as it affects the City of Minneapolis.
2.— OF SERVICE
(a) Within Municipality
Chicago
" The Company by accepting this ordinance agrees to comply
with all lawful regulations of the service of the said local trans-
portation system which may be prescribed from time to time bv
the City." (Sec. 9.)
Certain enumerations of matters in connection with service
are contained in the Grant and in addition the City reserves its
full police power and the right to make regulations to secure the
comfort, health, safety, welfare and accommodation of the public
(Sec. 9.)
Philadelphia
Except as to stopping places, the establishment, omission or
changing of which is placed entirely in the hands of the Super-
vising Board, the initial control of " rules and standards of main-
tenance, service, routing and adequacy and suitability of equip-
ment " is with the Company, but the Supervising Board is em-
powered to "pass upon, adopt, and alter" the acts of the
Company relative thereto. (Art. 31; Pars. 4 and 5.)
rtj
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•II
242
Service At Cost Agreements
Denver Service at Cost Ordinance
The ordinance gives the City " control, regulation and super-
vision of the Tramway service on all routes of the City system,
including the right to fix the schedules, transfer regulations and to
^Xy change and extend routes." It should be noted, however, that
this control is vested in a body upon which the Company is
represented. (Art. 3; Sec. 1.)
Denver Elastic Six-cent Fare Ordinance
No provisions.
Minneapolis
The City reserves the right to control and regulate service and
specifically to
Fix the type of caJrs,
Fix and amend schedules,
Control stops, routes, headway and speed,
Provide rules and regulations for heating, lighting, ventilation
and sanitation. (Sec. 4.)
(b) Outside MnnicipaHty
Chicago
The rights conferred upon the Company by the Grant cover
lines in the City of Chicago and suburban territorv^ (but not out-
side the State of Illinois) extending not more than 20 miles from
the City limits. (Sec. 1.) Before the Grant became effective, its
confirmation by the Illinois State Legislature wajs necessary
(Sec. 34) so that the control of the City would have extended to
all lines operated by the Company.
Service At Cost Agreements
243
Philadelphia
'No provisions.
Denver Sekvice at Cost Ordinance
No provisions, but the " City System " is defined by the ordi-
nance to include certain lines extending beyond the City limits.
(Art. 1; Sec. 2.)
Denver Elastic Six-cent Fare Ordinance
No provisions.
Minneapolis
The City exercises no control outside of City limits, except as
to that part of the system in the village of Columbia Heights and
on the Fort Snelling Military Keservation, which are included.
Tracks on Park property are . subject to reasonable niles and
regulations of the Board of Park Commissioners. (Sec. 2.)
I.— EXTENSIONS, BETTERMENTS AND PERMANENT IMPROVEMENTS
(a) Definitioiis
Chicago
Betterments and Extensions are defined to "designate and
include all betterments, extensions, additions, equipment and
other property (including original pavement of the right of way)
acquired by the Company after the effective date of this ordi-
nance, through construction, reconstruction, alteration, purchase
or otherwise, as a part of or for use in connection with its local
transpoitation system.'^ (Sec. 3.)
Philadelphia
There is no general definition. The Company was not removed
from the control of the Pennsylvania Public Service Commission
by the term of the Grant, so that the rulings of the Commission
as to what constituted capital expenditures would prevail. The
Grant was for the purpose of securing the operation by the Com-
pany of the rapid transit system to be built by the City, for its
equipment by the Company and for the building of certain new
facilities by the Company. There are in the grant specific pro-
visions describing such facilities.
Denver Service at Cost Ordinance
It is provided that "Additions, Betterments and Improve-
ments " shall be defined by the rulings and the Uniform System
of Accounts of the Interstate Commerc Commission. (Art. 4;
Sec. 2.)
344-
Service At Cost Agreements
1 1
Denver Elastic Six-cent Fare Ordinance
Ko provisions.
Minneapolis
The Uniform System of Accounts of the Interstate Commerce
Commission, except as they may he modified hy the Grant or by
subsequent City ordinances shall govern. The Company is obli-
gated to set up in its books of accounts, the Standard Property
Accounts of such I. C. C. System and with the advice and
approval of the City Council allocate all expenditures for
additions to property value among them. (Sec. 16.)
(b) Within MunicipaUtj
Chicago
The Grant and the Exhibit attached thereto (Exhibit B.)
specify a number of Extensions, Betterments and Permanent
Improvements which the Company is obligated to make to its
System. A portion of these are specified to be made within a
period of three years after the taking effect of the Grant, another
portion in a period of three years after the first period of three
years and others thereafter. They included additions to surface
and elevated lines, subways for surface lines and other rapid
transit facilities.
In addition the Company shall construct such additions to and
extensions, both of rapid transit and surface lines as may " be
required for furnishing adequate local transportation facilities and
service under the principles and provisions of the ordinance."
(Sec. 5.)
The Company need not, however, provide money either for the
Extensions, Betterments and Permanent Improvements specified
in Exhibit B, or others, if the Gross Receipts of the Company
during the previous fiscal year have been insufficient to pay the
Cost of the Service. (Sec. 10.)
Any work in connection witl^ Extensions, Betterments, and
Permanent Improvements involving an expenditure of more tha^i
t$5,000 shall be let by contract to the lowest responsible bidder,
upon plans and specifications furnished by the Trustees and after
30 days advertising, bids to be publicly opened. (Sec. 6.)
Service At Cost Agreements
245
The cost of Extensions, Betterments and Permanent Improve-
ments shall include payments on account of injuries to persons
or property occurring in connection therewith, as well as charges
for the use of Company equipment, engineering and supervision.
♦(Sec. 6.) When the Traction Fund is exhausted, all subway con-
struction, both of those provided for in Exhibit B and others, be
paid for by the Company and added to Capital Account or by the
City through special assessment against property owners benefited.
(Sec. 7.)
Plans, specifications and estimates for subways shall be pre-
pared by the Trustees and the work done under their supervision,
but contracts therefor shall be let by the City and payments there-
for made by the City. If subways in addition to those specified
in Exhibit B shall be deemed necessary by the Trustees they (the
Trustees) shall submit plans, specifications and estimates therefor
to the City Council, which may authorize such construction.
(Sec. 7.)
After the City shall have expended the sums in the Traction
Fund, the Company is required to furnish to it such sums as it
may require for subway construction. The money so furnished
shall be taken from Capital Account and shall be treated as a
Capital Expenditure. (Sec. 7.)
The City may authorize the provision in specifications for sub-
ways the inclusion of galleries, corridors or other facilities for the
use of City utilities, or utilities authorized to use such facilities
by the City, but the Company shall not be required to furnish
money for such construction, and no party shall have authority to
use them unless it be granted by City ordinance. (Sec. 7.)
Upon the completion of any subway, or of a portion of a sub-
way, which in the judgment of the Trustees may be advantage-
ously used for operation, the Company shall proceed to operate
trains in such subway and shall pay to the City an annual rental
of six per cent on the cost of construction. Included in such cost
shall be an allowance of three per cent upon all amounts paid by
the City for construction, until operation begins, but the amounts
furnished by special assessment of property owners, or by the
Company, or for the construction of, or on account of the con-
struction of galleries or facilities for other utilities shall not be
included in the cost. (Sec. 7.)
I
246
Service At Cost Agreements
The Company is required to renew, repair and maintain all
subways or portion of subways used by it, and shall acquire no
ownership therein, by reason of any payments made by it towards
the cost of construction. (Sec. 7.)
The City Traction Fund has been accumulated through the
division of receipts of the surface lines provided for in the Trac-
tion ordinances of 1907. It is defined by the Grant as consisting
of the money that has, on the effective date of the Grant been paid
into such Fund, any payments made into it thereafter under the
Traction Ordinances, and payments made thereinto on account of
subway rentals paid by the Company. It may be expended only
for subway construction, including the provision of galleries and
facilities of other utilities, and for the assessment against the
city of public benefits arising from the opening and extension of
two streets, which by the provisions of Exhibit B. are to be opened
or extended. (Sec. 13.)
Philadelphia
The principal object of the Grant is to secure a Unified Trans-
portation System for Philadelphia. To this the City is to con-
tribute certain subways and elevate<l lines and the Company its
existing subway and elevated line as well as surface lines, the
electrical equipment for the City system to be provided by the
Company. The method in which the City lines, the Company
lines and the equipment therefor shall be provided are set
forth in considerable detail in the Grant (Art. V-2.) The
building of City lines is at the pleasure of the City. If they
are built the Company must provide electrical equipment there-
for, and if the City is unable to provide capital for cars, yards,
shops, etc., the Company shall furnish such equipment, to the
limit of $3,000,000, provided it can secure money on terms
approved by city councils and provided that the City shall (if
legal) agree to purchase same from the Company out of the first
money available, the expenditure to be later repaid by the
Company.
The determination of what Extensions, Betterments and Per-
manent Improvements the Company shall build is left to the
Pennsylvania Public Service Commission, the Company waiving
Service At Cost Agreements
247
any objection to the jurisdiction of the Commission. In the event
that the Commission refuses to assume jurisdiction, the Company
shall obey the recommendations of the Supervising Board, sub-
ject only to its ability to finance them under the terms of the
Grant. (Art. 4.)
The Company shall reasonably anticipate the growth of traffic
and provide therefor. The facilities to be furnished shall be the
best known to the art and replacements and renewals shall at least
provide facilities equal to those replaced or renewed and shall in
addition include such improvements as the state of the art may
have developed. (Art. 6.)
Extensions, Betterments and Permanent Improvements shall be
made in accordance with plans and specifications approved by the
Supervising Board. (Art. 6.)
The cost of Extensions, Betterments and Permanent Improve-
ments shall include the following:
Net cost in money of purchase or construction ;
Net cost in money of administration, engineering, superin-
tendence, legal services, insurances and damages ;
Taxes, assessments and other governmental charges, paid or
accrued before the beginning of its operation and such assess-
ments for benefits during its operation as are in the opinion of
the Board not chargeable to Gross Revenue ;
Interest or dividend and sinking fund charges upon money
used or securities issued to pay for the Extension, Betterment or
Permanent Improvement, incurred prior to operation ;
Cost of securing capital, including engraving and printing of
securities, advertising, taxes, expenses of selling, and trustees'
expenses in connection with the original issue of securities ;
Expenditures for repairs, replacements or renewals made
during construction, or after operation, which in the judgment of
the Supervising Board, shall have been necessitated by faulty
construction or design. (Art. 9; Par. 1.)
It is the duty of the Supervising Board to report to the City
Councils as to the advisability, reasonableness and necessity of
new lines, extensions, or equipment, and to review or compile
estimates covering construction, operation and method of finan-
cing and to bring proceedings before the Pennsylvania Public
li
h
248
Service At Cost Agreements
III
Service Commission to require the undertaking of Extensions,
Betterments and Improvements by the Company. (Art. 31;
Par. 3.)
The Supervising Board shall give hearings on all petitions for
Extensions, Betterments and Improvements. (Art. 31 ; Par. 4.)
The Board is charged with the duty of inspecting all work and
materials in connection with both construction and operation and
must be afforded the facilities for such inspection by the Com-
pany. (Art 34.)
Denver Service at Cost Ordinance
Capital expenditures exceeding in any one calendar year one-
half of one per cent of the Stipulated Fair Value, may not be
added to Stipulated Fair Value as affecting the cost of service,
unless approved by a majority of the Board of Tramway Control.
(Art. 3; Sec. 7.)
Denver Elastic Six-cent Fare Ordinance
No provisions.
Minneapolis
The Company is required by the terms of the Grant to con-
struct and put into operation during the first year in which the
Grant is effective certain specified extensions. In addition it is
required within the time determined by the City Council to con-
struct and put into operation certain other specified extensions.
(Sec. 7.)
Either the City or the Company may propose Extensions, Bet-
terments or Permanent Improvements. If proposed by the Com-
pany they shall not be carried out unless approved by the City
Council. Before they shall be ordered by the City Council or
constructed by the Company, there shall be made under the direc-
tion of the Street Kailway Supervisor, a careful survey of all
material facts, including
The number of people to be served by such line or extension ;
The estimated expense of construction and equipment;
An estimate of earnings for the immediate year and years;
An estimate of the effect upon the gross, net and surplus earn-
ings of the entire railway system. (Sec. 7.)
I
Service At Cost Agreements
249
When estimates of the cost of plans and specifications for Exten-
sions, Betterments and Permanent Improvements have been
approved by the City Council and filed with the Company, the
Company may object on the ground that their carrying out would
impair the payments of the cost of service, and the Company shall
be entitled to a hearing before the City Council upon ten days'
notice before any Extensions, Betterments or Permanent Improve-
ments shall be ordered by the City Council. (Sec. 7.)
Within one year, or such other time as the City Council may
decide, from the date of approval by the Council, the Company
shall construct and operate the Extensions, Betterments or
Improvements as ordered. (Sec. 7.)
If the Company refuses or neglects to construct extensions as
ordered by the City Council, the City may itself make such
extensions, under the direction of the City Engineer, the stand-
ard of the construction to be equal to that adopted by the Com-
pany for lines in similiar territory and for similiar service. The
Company is required to equip and operate such extensions, the rate
of fare, service and maintenance to be in conformity with that
provided by the Grant for the rest of the System, compensation to
be made to the Company on terms equitable both to the City and
the Company. (Sec. 7.)
Upon Capital invested in such extensions the City shall receive
the same rate of return, and under the same conditions, as is pro-
vided by the Grant for capital invested by the Company.
(Sec. 7.)
The right of the City thus to construct and compel the Com-
pany to operate Extensions, does not release the Company from
its obligations to construct Extensions, Betterments and Per-
manent Improvements, when ordered so to do bv the City.
(Sec. 7.)
After the first year of operation under the Grant, the Company
may not be required to construct street railway tracks in a street
that is less than 40 feet in width. (Sec. 7.)
Disputes between the City and the Company arising in regard
to Extensions, Betterments and Permanent Improvements may
be arbitrated. (Sec. 7.)
't I
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II
250
Service At Cost Agreements
(c) Outside of Municipality
Chicago ,
No provisions.
Philadelphia
The Councils are empowered to stipulate the terms and condi-
tions under which the Company may lease or operate lines out-
side the City and the Supervising Board is charged with the duty
of recommending to the Councils terms and conditions in con-
nection with such leases and operation. (Art. 31, Par. 11.)
There are no other provisions in the contract affecting control
of Extensions, Betterments and Permanent Improvements out-
side the municipality, except that certain parts of the system
extend outside, and over these the City exercises such control as is
provided in the Orant for all lines.
Denver Service at Cost Ordinance
1^0 provisions.
Denver Elastic Six-cent Fare Olt^t nance
^o provisions.
Minneapolis
City exercises control over certain specified lines outside of
City and no others.
4.— CAPITALIZATION, FINANCES AND ACCOUNTS
(a) Ordinary Expenses
Chicago
No provisions in the Grant. The Trustees have control.
Philadelphia .
Contracts covering the leasing of car and station advertising,
news stands and other vending privileges, are subject to the
approval of the Supervising Board. (Art. 17.)
Contracts for power are subject to the approval of the Super-
vising Board. (Art 31, Par. 5.)
Service At Cost Agreements
251
Terms and conditions under which the Company may grant
permits for show windows, entrances or other easements, or privi-
leges in connection with the operation of the system are subject
to the approval of the Supervising Board. (Art, 31, Par. 5.)
Such control as is provided by the laws of the State is exer-
cised by the Pennsylvania Public Service Commission.
Denver Service at Cost Ordinance
The Company shall submit prior to the last day of each calen-
dar month, an estimate of the cost of service, total operations and
gross revenues for the ensuing year. (Art. 3, Sec. 8.)
No operating expenses for any year, exceeding three per cent
of the operating expenses for the preceding year, shall be added
to the cost of service, unless they be approved by the Board of
Tramway Control. (Art. 3, Sec. 7.)
Denver Elastic Six-cent Fare Ordinance
No provisions.
Minneapolis
The City Council has the right to require the submission of an
annual budget and supplements thereto, in wbich case no expendi-
tures other than those detailed in such budgets as approved by the
City Council shall be made. (Sec. 5.)
It is provided that the Company shall pay its general officers
no higher compensation than that paid by other street railway
companies " or other enterprises " of equal magnitude for work
of the same general character. Diiferences between the City and
the Company as to salaries may be arbitrated. (Sec. 30.)
The City Council may exercise such " reasonable control "
over contracts for and purchase of supplies and payments on
account of injuries and damages as will afford it protection
(Sec. 5.)
(b) Securities
Chicago
For the purpose of acquiring the surface and elevated line?
as provided in the ordinance, the Company is authorized to
assume liens against such property to the amount of not more
III
252
Service At Cost Agreements
than the Capital Account of the Company as fixed by the Ordi-
nance, (Note: The Capital Account fixes, in effect, the price at
which such property shall he acquired), and to issue (to pay the
difference between the amount of the liens assumed and Capital
Account, which difference shall not be more than 40 per cent of
Capital Account), debentures or other obligations, which shall not
have the right of foreclosure nor bear any date or time of redemp-
tion, but shall be subject to call for payment under the provi-
sions of the Grant, or, subject to the rights of lienors, at the time
of purchase by the City. The manner of acquiring each of the
properties is separately provided for. (Sec. 2.)
The Company is authorized to place upon its property a First
and Refunding Mortgage or Trust Deed to secure bonds or interest
bearing obligations to be issued for capital expenditures. In addi-
tion, such mortgage may secure (a) refunding bonds or interest
bearing obligations, issued after the date when the Grant becomes
effective; (b) refunding bonds or interest bearing obligations
which were a lien upon the property at the date when Grant
became effective, and (c) provide the Emergency Fund. In
addition, the Company may place upon its property a mortgage
or trust deed, subordinate to the First and Refunding Mortgage
or Trust Deed, to secure bonds or interest bearing obligations
which shall be used only for refunding or retiring (by payment
or exchange) bonds or interest bearing obligations which were a
lien upon its property at the time Grant became effective. No
other lien shall be placed upon the Company's property.
(Sec. 11.)
All New Capital obtained by the Company shall be through
the sale of bonds, debentures or other obligations of the
Company, to be sold after public advertisement and on the terms
most advantageous to the Company. (Sec. 2.)
The return upon debentures issued for the payment of
acquired property is fixed at eight per cent from the date when the
Grant becomes effective until eluly 1, 1932, and thereafter at
seven per cent. (Sec. 2.)
The interest to be paid on new bonds, debentures and other
obligations of the Company is on the basis of the most advan-
tageous returns obtainable after public advertisement and com-
petitive bidding. (Sec. 2.)
Service At Cost Agreements
253
Philadelphia
*
When the Company desires to make capital expenditures, it shall
submit to the City Councils a plan for raising such capital, and
shall issue no bonds, stocks, or incur any guarantee or liability for
carrying out such plan, until the plan shall be approved by the
City. (Sec. 2, 1907 Contract.)
Funds for New Capital requirements shall be raised when
I>ossible from the sale of bonds, and stock shall not be issued
except when bonds cannot be disposed of and then, only with the
approval of the City. Such stock shall be fully paid for in ca-^h
at par. (Sec. 3, 1907 Contract.)
In case that preferred stock is issued, payments for the amor-
tization thereof (amount of such payments not specified, but pre-
sumbly to be controlled by City Council) to be made to the Sink-
ing Fund Commission (See D-3.) to be held for the purpose of
retiring said stock, and to be invested in such stock. (Art. 12.)
In case that bonds, debentures or notes are issued, payments for
the amortization thereof (amount of such payments not specified
but presumably to be controlled by City Councils) to be made to
trustees for the issue, to be invested by them in the issue, pro-
vided that the same can be purchased in the market at a cost of
not more than 105 per cent of the par value with accrued inter-
est (Art. 12.)
If securities cannot be purchased in accordance with the above
provisions, the sinking funds shall be invested in such securities
as may be legal investments for Trustees under the laws of Penn-
sylvania. (Art. 12.)
The Company shall not be held to be in default if it cannot
secure capital under the terms approved by City Councils.
(Art. 12.)
Subject to the approval of the Supervising Board, the Com-
pany may use Initial Surplus (See F-2,) for Extensions, Better-
ments and Permanent Improvements, for refunding or other capi-
tal requirements. (Art. 16.)
Denver Service at Cost Ordinance
No provisions.
Denver Elastic Six-cent Fare Ordinance
No provisions.
17
III
'
I
It
^54
Service At Cost Agreements
Minneapolis
The City's control over the issuance of securities by the Com-
pany is practically absolute as to securities protected by mortgage.
It is provided that the Company may place upon its property
and rights a blanket mortgage or deed of trust, to secure bonds to
be used.
First, For refunding bonds or other interest bearing obliga-
tions which constituted a lien upon the property as of the date
that the Grant became effective, and for providing for the
Stablizing Fund ;
Secmd, In such par value and amount as may be approved by
the City Council, for the purpose of providing new capital (Sec
15.) ^ *
The indenture of mortgage or deed or trust shall not be lim-
ited as to the amount of bonds or other evidences of indebted-
ness that may be issued thereunder and shall provide that each
series of bonds issued thereunder shall be co-ordinately secured.
It shall further provide that bonds issued shall bear such rate of
interest as the City Council may fix, and be sold at not less than
the minimum price fixed by the City Council. (Sec. 15.)
Bonds issued under the blanket mortgage shall be issued in
alphabetical series and each series numbered consecutively. A
stipulated number of Series A. is set aside for the purpose of pay-
ing off the prior liens upon the property. If not so used they
shall he cancelled and destroyed by the Trustee of the mortgage.
(Sec. 15.)
If the bonds provided to be set aside for the retirement of prior
liens cannot be sold at a rate of interest and a cost to finance, or
exchanged for such prior lien bonds on a basis satisfactorv to 'the
City and the Company, then the Company mav refund such prior
bonds either before or at maturity, if it be advantageous so to do
and the refunding shall not disturb the. lien by which such prior
bonds or other evidences of inedebtedness are secured. (Sec. 15.)
In case the prior bonds or other evidences of indebtedness are
refunded,Tetired or refinanced through the bonds (Series A), pro-
vided by the Grant, then no securities shall be issued by the Com-
pany which shall be prior to the lien of the mortgage or trust deed
securing such bonds. (Sec. 15.)
Service At Cost Agreements
255
Stocks, bonds, notes, or other evidence of indebtedness, running
for a longer period than one year, issued by the Company after
the Grant takes effect, shall provide that they shall be callable on
any annuity or interest payment date, upon terms and price to be
recommended by the Company and approved by the City Council.
(Sec. 15.)
Any mortgage or trust deed and securities issued thereunder,
shall be subject to the provisions of the Grant, including the right
of municipal purchase. (Sec. 15.)
The City Council may require the Company to sell its securi-
ties at public sale, and in any event they shall be sold in the man-
ner and upon the notice prescribed by the City Council. (Sec. 15.)
In addition to the securities specifically authorized by the
Grant, the Company may, with the approval of the City Council,
issue equipment trust certificates in such amounts and on such
terms as may be necessary to finance the operations of the Com-
pany. (Sec. 15.)
If the City and the Company cannot agree as to the rate of
interest and cost of refinancing or refunding the prior bonds, or
upon the terms upon which Series A bond shall be exchanged
therefor, the matter shall be arbitrated. (Sec. 15.)
(c) Bookkeeping:
Chicago
The Company is required to submit to the City Comptroller
on or before the 10th day of March of each year, an annual report
covering the preceding year ending December 31. Such report
shall be in writing, shall be sworn to by the Auditor of the Com-
pany and shall set forth in reasonable detail, the amount of
business done by the Company, the receipts from and the expenses
of conducting the Company's business. The City Comptroller
or accountants authorized by him, acting under the direction of
the Mayor or City Council shall have at all reasonable times access
to the books, vouchers and records of receipts and expenditures
of the Company for the purposes of verifying such reports and
the rights of the City under the Grant. (Sec. 16.)
In addition there shall be an annual audit of the accounts of the
Company by certified public accountants selected bv the Citv
\i
256
Seevicb At Cost Agreements
Service At Cost Agreements
257
Comptroller and the Company and such accountants shall make
a formal written report thereon, the expense of such audit to
be paid as an operating expense. (Sec. 16.)
Philadelphia
The method of keeping accounts is prescribed by the Pennsyl-
vania Public Service Commission.
The Supervising Board shall prescribe the form of statements
to be submitted at three-month periods in which shall be set
forth —
Gross Revenues and deductions therefrom exclusive of expenses
or fixed charges incurred prior to the date that the Grant shall
become effective;
The amount of New Capital upon which the Company is
entitled to a return, together with Sinking Fund payments for
the period covered by the reports ;
The Cost of Transit Facilities owned by the City upon which
the Company shall pay rental, and the amount of such rental, as
well as Sinking Fund charges, less any portion of such Transit
Facilities withdrawn from rental and the amount of rental and
Sinking Fund charges thereon ;
The amount of Capital Stock of the Company authorized and
issued, less any installments remaining unpaid on any shares.
Such statements must be certified by the Supervising Board
and delivered to the City Comptroller. (Art. 23; Sec. 1.)
A complete audit of all of the accounts of the Company in the
form prescribed by the Director of City Transit, shall be made by
auditors appointed and paid by the City, as of the date when the
Grant becomes effective, and thereafter the books and accounts
of the Company shall be audited annually by accountants mutu-
aUy agreed upon by the City and the Company, and such audit
ihall be published and submitted both to the City and the Com-
pany, the cost thereof to be paid out of Gross Revenues. For
the purpose of the audit the City shall have access to the books,
records apd memoranda of the Company and may examine offi-
cers and employees of the Company under oath. (Art. 23, Sec. 2.)
If the public accountants or the City object to any charges
appearing in the books of the Company, or the public account-
ants or the Company object to any charges appearing in the
accounts of the City as to the cost of the City's Transit Facili-
ties, the Supervising Board shall have the power for the pur-
pose of the contract, to determine the propriety of such charges.
(Art. 23, Sec. 2.)
Denver Service at Cost Ordinance
All general accounts shall be kept in the manner prescribed by
the Uniform System of Accounts of the Interstate Commerce
Commission. (x\rt. 3; Sec. 9.)
The Board of Tramway Control may inspect and audit all
receipts, disbursements, prices, payrolls, salaries of all officers,
time cards, papers, books, documents and property of the Com-
pany "used and useful in the public service." (Art. 3; Sec. 5.)
Denver Elastic Six-cent Fare Ordinance
No provisions.
Minneapolis
The Company shall keep its accounts in the manner prescribed
by the Uniform System of Accounts of the Interstate Commerce
Commission, as modified to meet the requirements of the Grant or
subsequent ordinances. (Sec. 20.)
The Company shall furnish to the City Council sworn monthly
report of earnings and expenses, and such other statements as the
City Council may direct, and such statements shall be received as
prima facie evidence before any court or other tribunal in any
controversy between the City and the Company. The Company
shall also furnish annual reports of operation and additions to
Capital Value. (Sec. 20.)
The receipts and expenditures of the Company shall be audited
annually by a certified public accountant selected by the City who
shall submit a written report thereon, the expense of such audit
to be borne by the Company and paid from the Gross Receipts.
(Sec. 20.)
The books, records and accounts, of the Company shall at all
times be open to the Street Railway Supervisor for the purpose
of verifying statements and reports made by the Company to the
City under the terms of the Grant. (Sec. 20.)
ti
ii
258
Sekvice At Cost Agreements
If either the Street Eailway Supervisor or the certified Public
Accountant disapproves of any voucher or expenditure, the man-
ner of keeping accounts or other matters effecting the keeping of
the books or records of the Company or the manner in which the
. Company complies with the provisions of the Grant, and the mat-
ter 18 not adjusted by the Company to their satisfaction, the mat-
ters m dispute shall be submitted to arbitration. (Sees. 5 and 20.)
S.— METHODS AND PRACTICES
Chicago
Expenditures for Extensions, Betterments and Permanent Im-
provements of more than $5,000 shall be let by contract. (Sec.
6.)
The Company is required to keep such of its property fully
insured in responsible insurance companies as is usually kept
insured by similar companies. (Sec. 21.)
It is provided that the Company shall develop the " zone system
of car operation " by means of which service on long through
lines may be tapered off according to the traffic demands, by estab-
lishing short line terminal routes. (Exhibit B.)
The Company shall establish the skip-stop wherever possible.
(Exhibit B.)
It is recommended that distance between the center lines of
surface tracks be nine feet eight and one-half inches and that when
transit tracks are laid on the surface the distance should be
twelve fetft. (Exhibit B.)
Grooved rails weighing 129 pounds to the yard shall be used
on all new construction, except in streets not occupied by track
at the time that Grant takes effect, where if the Commissioner
of Public Works approves, high Tee rails may be used, but may
not extend beyond the level of the pavement. (Exhibit B.)
Cast welded or electrically welded joints or a type which will
give an equally smooth joint shall be used. Joints must have a
current carrying capacity equaLto that of the rail. (Exhibit B.)
A method of providing against electrolysis is provided. (Ex-
hibit B.)
Service At Cost Agreements
!5D
Detailed specifications as to paving are provided. (Exhibit B.)
General plans for the construction and equipment of power
houses and auxiliary buildings are provided. (Exhibit B.)
All cars shall be of the double-tnick type with a carrying
capacity of at least 40 passengers, (Exhibit B.)
Kules and regulations for car heating and for car equipment
are provided. (Exhibit B.)
Philadelphia
The Supervising Board has the right to limit and revoke the
right of the Company to permit the use of the City's cars and sta-
tions for advertising and vending purposes, and shall approve
all contracts for such privileges. (Art. 17.)
The Company is obliged to keep insured against fire and other
usually insurable accident or contingency, all property of the
City's system to an extent to be determined by the Supervising
Board and this may be effected, with the approval of the Board
by establishing an Insurance Fund out of Gross Revenues.
(Art. 25.)
The Supervising Board is given complete authority to inspect
work and materials in connection with the operation and main-
tenance of both the City's and the Company's system. (Art. M.)
Denver Service at Cost Ordinance
" The Board shall hear, determine and act upon all complaints
criticism and suggestions as to Tramway service on the City
lines which may not have been disposed of by the the Company."
(Art. 3, Sec. 6.) .
Denver Elastic Six-cent Fare Ordinance
Ko provisions.
Minneapolis
The Grant covers the operation of surface cars on tracks only.
(Sec. 2.)
The system shall be operated by overhead trolley or such other
system as the City Council may approve. (Sec. 2.) "
All construction work in streets, alleys and public places shall
be done under the supervision of the City Engineer under regula-
tions adopted by the City Council. (Sec. 2.)
»
260
Sebvice At Cost Agreements
Service At Cost Agreements
261
The City Council may require the elimination of trolley poles
and the siis|>ension of trolley wires from wires attached to build-
ings, when perniii-sion can be secured from the owners thereof.
(Sec. 2.)
The Company is required to construct and reconstruct its pay-
as-you-eiiter cars, so that there shall be exits and entrances at
both ends and through the sides. (Sec. 2.)
Tracks shall be laid substantially in the center of the streets
and when but one track is laid it shall be placed in proper position
for dou])le track construction. (Sec. 27.)
Tracks in unpaved streets shall be laid with modern low tee
rails weighing not less than 80 pounds to the yard and in paved
streets with modern high tee rails weighing not less than 90
pounds to the yard. On curves and in special work, approved
standard girder rail may be used. (Sec. 27.)
The Company shall at all times keep buildings, cars and other
insurable property insured against fire in responsible insurance
companies, or may with the approval of the City Council main-
tain an insurance fund for the purpose. (Sec. 29.)
The location of ear barns, shops, waiting rooms and terminals
shall be subject to the approval of the City Council. (Sec. 4.)
«.— USE OF TRACKS AND FACILITIES BY OTHER COMPANIES
Chicago
The Company may enter into contract with connecting sub-
urban and intenirban companies for the operation of freight and
express cars of such companies over the Company's tracks, such
contracts to be subject to the approval, by ordinance of the City
Council (Sec. 20.)
Philadelphia
The City shall have the power to fix and the Supervising
Board shall recommend, the terms and conditions upon which
lines outside the City constructed by private capital may be leased
or operated 4)y the Company, and upon which such companies
may use the Transit Facilities operated by the Company. (Art.
31, Sec. 11.)
Denver Service at Cost Ordinance
The ordinance contains no provisions as to the use of tracks
and facilities by other companies, except that in the event of the
purchase of the Company's property by the City, agreements
for such use made by the Company and then effective shall be
continued. (Art. 12, Sec. 8.)
Denver Elastic Six-cent Fare Ordinance
No provisions.
Minneapolis
The City reserves the right to authorize tlie use of the Com-
pany's track and overhead by any suburban railway and to compel
the Company to furnish power for its operation. Routes and
schedules shall be fixed by agreement between the Company and
such surburban railways. If they cannot agree, the City Council
shall fix such routes and schedules. (Sec. 21.)
Compensation " representing not less than the reasonable value
of the power furnished by the Company and a fair share of the
cost of maintenance of the tracks and equipment, taking into ac-
count the advantages and disadvantages of the entry of said line
into the city,'' shall be fixed by agreement between the Company
and the suburban railway. If they cannot agree, the City Coun-
cil shall ^x it, and if either the Company or the suburban rail-
way dissents from the amount fixed by the City Council, the mat-
ter shall be determined by arbitration, as shall other disputed
questions arising over the use of such tracks and facilities. (Sec.
21.)
The City Council may at any time reroute cars of suburban
railways so admitted and control and regulate the carrying of
freight and express by such suburban companies. (Sec. 21.)
The Company is given the right to sell power to any of the
properties included in the Twin City Rapid Transit Co., or to
other suburban and interurban railways, at a price which shall
at least equal the cost, including all overhead charges as specified
by the Grant. (Sec. 25.)
The Company has the right to have its cars repaired in the car
shops of the St. Paul City Railway Company, and shall pay for
If
262
Sehvice At Cost Agreements
such work the actual cost thereof, including a fair allowance for
overhead. (Sec. 25.)
7.-- MACHINERY OF CONTROL
(a) Power, Where Lodged
Chicago
The control and management of the Company is lodged in the
Board of Trustees subject to the provisions of the Grant and
certain powers and authority remaining with the City Council,
with the City Engineer and the Commissioner of Public Works
of the City. *
Philadelphia
Control, under the Grant, is variously distributed. The Penn-
sylvania Public Service Commission has control over fares and
over Extensions, Betterments and Permanent Improvements to
Transit Facilities owned by the Company; The City Council
has control over Extensions, Betterments and Permanent Im-
provements connected with the Transit Facilities owned by the
City; the Supervising Board has control over service, mainte-
nance and the details of operation. (Art. 31.)
Denver Service at Cost Ordinance
Control is lodged in the City, to be exercised by the Board of
Tramway Control. (Art. 3, Sec. 1.)
Denver Elastic Six-cent Fare Ordinance
Power to increase or decrease fares in relation to increases or
decreases in wages, is lodged in the City and exercised by the
Board of Control.
Minneapolis
The power of control and regulation is lodged in the City, to
be exercised as to matters connected with work in the streets by
the City Engineer, with the operation of the system through
parks by the Board of Park Commissioners, and as to all other
matters by the City Council. The City iStreet Eailway Super-
visor acts in an advisory and administrative capacitv only (Sec**
2, 4, 5, 27, etc.)
Service At Cost Agreements
263
if
(b) Administration
Chicago
The affairs of the Company, which company shall not be for
" pecuniary profit," are administered by a ' Board of nine
Trustees. These shall be residents of Chicago or the suburban
territory in which the Company is permitted to operate, shall be
men of business ability, public spirit and qualified to direct the
affairs of the Company, shall not own any of the bonds or other
obligations of the Company or be financially interested in it except
in a fiduciary capacity and shall receive no other salary than that
provided and permitted by the Grant. The first Board shall be
named in a resolution of the City Council and shall hold office
without classification until December 31, 1927. Prior to that
date, however, they shall be divided, by lot or otherwise into
three classes of three each. The first class shall hold office until
December 31, 1928; the second class until December 31, 1929,
and the third class until December 31, .1930. Their successors
shall be elected for terms of three years. The election shall be
by the Company from a list persented by the City Council.
Vacancies by death, resignation, removal, or otherwise than by
expiration of the term of office shall be filled by the Board.
(Sec. 1.)
The Company agrees not to change its charter or method of
selecting Trustees, without the consent of the City. (Sec. 1.)
The salaries of the Trustees shall be $5,000 each, annually,
but in addition to their salaries as trustees they may receive other
compensation for acting as officers of the Company, or members
of the Executive Committee of the Board, which Board shall have
direct charge of the operation and management of the System.
(Sec. 1.)
Philadelphia
The Supervising Board shall consist of three members, the
Director of City Transit, who shall represent the City, a member
to be appointed by the Company, and a Chairman to be appointed
by the Mayor of Philadelphia and the President of the Com-
pany, for a term of four years. If the Mayor and the President
fail to agree upon Chairman, the Board shall function with two
members, and in case of disagreement, a temporary arbitrator
264
Sebvicb At Cost Agreements
iii
I
shall be appointed by the two members of the Board. If these
fail to agree upon the appointment, either the City or the Com-
pany may upon five days notice apply to the Pennsylvania Public
Service Commission, which shall then make the appointment.
The arbitrator shall be skilled in the matter concerning which
there is disagreement. The Board shall maintain an office in the
City of Philadelphia, shall employ necessary assistants and incur
necessary expenses, and ^x the salaries of such assistants and
employees. The salaries of Board members shall be fixed at the
time of their appointment, that of the City Member to be fixed
by the City Council, that of the Company Member to be fixed
by the Company and that of the Chairman to be fixed by the
Mayor and the President of the Company. The salary of the
City Member shall be paid by the City; all other salaries and
expenses shall be paid, either out of Gross Revenues as an operat-
ing expense or out of Capital Account, in a proportion to be deter-
mined by the Supervising Board. (Art. 31, Sees. 1 and 2.)
Denver Service at Cost Ordinance
The Board of Tramway Control consists of three members, one
appointed by the Mayor, for a term coincident with that of the
Mayor, one appointed by the City Council for a term of five
years, and one appointed by the Company to serve at the Com-
pany's pleasure. The members appointed by the Mayor and the
City Council shall be taxpayers in and residents of Denver for at
least ^we years, shall own none of the securities of the Company
or its affiliated or subsidiary companies, shall not have any busi-
ness connection with the Company and shall be qualified by edu-
cation, training and experience to discharge their duties. Vacan-
cies shall be fiUed in the manner of the original appointment
within fifteen days of the date of such vacancy and if not so filled
by the party having the appointment, shall be filled by the other
two members of the Board. The Mayor, City Council and the
Company shall detei-mine the amount of compensation of the
members, of the Board to be pdd together with the expenses of
City supervision, as a cost of service, but such compensation shall
not exceed $500 a month. The decision of any two members shall
be the decision of the Board. (Art. 3.)
Service At Cost Agreements
265
Denver Elastic Six-cent Fare Ordinance
A Board of Control consisting of three members, each with a
term of four years, subject to removal by the appointing power
shall be appointed as follows : One by the Mayor, one by the City
Council and one by the Company. Vacancies to be filled in the
manner of the original appointment. If compensation is to be
paid, each of the appointing powers shall determine and pay the
compensation of the member appointed by it. The appointees of
the Mayor and the City Council may be City officers, if the
appointing power so desires. The Board may at all times act by
a majority of its members. (Sec. 4.)
Minneapolis
All orders or requirements of the City Council as to matters
affecting the service of the Company, shall be made in writing,
and shall become effective twenty days after notice has been served
upon the Company, unless within ten days after the serving of
such notice, the Company shall file with the Street Railway Super-
visor, or other City officer designated by the City Council, objec-
tion thereto. In case such objection is filed, the City Council
shall at the end of ten days or as soon thereafter as convenient,
hold a public hearing at which the Company shall be heard.
Orders made after such hearing and all orders to which the com-
pany files no objection shall be binding upon the Company
and enforceable. Objection may be made to orders of the City
Council by the Company, on the grounds that they impair the
cost of service. (Sec. 4.)
Pending action of the City Council, the Street Railway Super-
visor may temporarily approve changes in schedules and routes,
but such changes shall remain in force until changed by the City
Council. (Sec. 4.)
The City Council may require the Company to submit 45 days
prior to the first day of any year, a budget of operating expenses,
and the Company may thereafter any time file supplementary
budgets thereto. The City Council is required within 20 days
after the receipt of such budget or supplements to approve or
disapprove them and in case of disagreement the matter shall be
arbitrated. (Sec. 5.)
Ml
<("l"1[Pf»BfH"
266
Service At Cost Agreements
Service At Cost Agreemexts
In relation to Extensions, Betterments and Permanent Improve-
ments see C.-3.-(b).
The City Council shall appoint a City Street Railway Super-
visor who shall act as the technical advisor to the Council, and
who shall either be experienced in the operation of street rail-
ways, or have a " broad general knowledge of the business " and
other special qualifications for the work. The salary and
expenses of the Supervisor shall be paid by the City, and the
Company shall reimburse the City therefor. lie is authorized
to appoint such assistants as he may deem necessary-, subject to
the approval of the City Council. His salary and \hose of his
assistants shall be fixed by the City Council, which shall also pro-
vide him with suitable quarters. Vacancies in the office are filled
by the Council, which may designate any officer or employee of the
City to act in his stead, pending the filling of the vacancy.
(Sec. 5.)
The City may enforce its orders as to service by a^y suitable
proceedings and is specifically empowered to impose penalties by
fine and imprisonment and to enforce its orders by mandamus and
injunction. (Sec. 4.)
In the case that the Company fails, neglects or refuses to com-
ply with any order of the City Council, requiring it to continue to
operate any existing line, or to construct, equip or operate any
mew line, the return to the Company on Initial Value shall be
reduced to six per cent and the return over and above the actual
interest on Added Value shall be withheld from the date of com-
pletion fixed in the order until such time as the order shall be
complied with, not including, however, such time as may have
been consumed in arbitration. If the Company shall have acted
tmllfuUy or in had faith in such refusal, failure or neglect, then
the time consumed in arbitration shall not be deducted from the
time during which the reduction in return shall prevail. Sums
so deducted from return shall be paid into such of the funds pro-
vided by the ordinance, as the City Council may direct. Deduc-
tions so niade shall be considered by both the City and the Com-
pany, as liquidated damages for such refusal, failure and neglect
(Sec. 10.)
267
For provisions as to forfeiture of the Grant, upon neglect of the
orders of the City Council see A.-3.
It is provided that the provisions of the Grant providing for
enforcement shall be additional remedies only and shall not pre-
evnt the City or the Company from resorting to the Courts and
enforcing rights, duties and obligations by mandamus, injunction
or other appropriate legal measures. (Sec. 33.) '
(c) Powers and Duties of Administrative Body or Officers
Chicago
The entire control and management of the Company and its
affairs .s vested in the Board of Trustees, which Board is gov-
erned and restricted by the provisions of the Grant and general
police powers of the city. (Sec. 1.) 6 " «"
Philadelphia
The Supervising Board
ShaJl reiH>rt to Councils on the advisability, reasonableness and
nece sity of Extensions, Betterments and Permanent Improve-
ments, including the review of cost estimates presented by the
Company, or the compilation of such cost estimates, and the
review or preparation of plans covering the financing of the cost
of Transit Facilities provided by the Company ■
reatir!Il'TJ° p'"*^ '"'''^^ ^ tri-monthly financial statements
required of the Company. (Sec. C.-4.-(c));
Shall take proceedings before the Public Service Commission
to conipel the construction of Extensions, Betterments .uIfZZ
nent Improvements in connection with the Company's system-
Tra!; f'^T^ '" .•^•^^PP'-^^^ Pl«»« for the construction of
Transit Facilities either by the City or the Company, and shall
inspect work and materials provided by the Company therefor
except that the Board may not alter the location or curtail or p^^
pone the construction of any line which has been authorized bv
the Uty, by a vote of the people, or ordinance of the City Coun-
268
Service At Cost Agreements
Shall pass upon, adopt or alter, rules and standards for
maintenance, routing, and adequacy and suitibility of equipment ;
Shall approve the terms of contracts for power;
Shall approve the term under which the Company may grant
permits for show windows, entrances and other easements, or
privileges in connection with the operation of Transit facilities;
May establish, omit or change stations and stopping places ;
Shall file with the Pennsylvania Public Service Commission
schedules of fares and charges in compliance with the terms of
the Grant;
Shall decide upon the amount and the investment of Deprecia-
tion Funds;
Shall check and approve the amount to be set aside from gross
revenues annually for damages incurred by the Company, which
amount shall represent the damages paid and for which the Com-
pany is liable ;
Shall require the Company to have legally determined its lia-
bility for any item concerning which the Board is in doubt, in-
cluded* in operating expenses, taxes and other public charges, or
fixed charges, which are to be paid from Gross Revenue. In such
determination the City is empowered to intervene, or to make the
original application, in which application the Company agrees
to join;
Shall act as a Board of Arbitrators in case of disagreement be-
tween the City and the Company, under the provisions of the
Grant ;
Shall recommend to City Councils, the terms and conditions
upon which the Company shall lease or operate lines constructed
by private capital outside the City, and the terms and conditions
which outside companies may use the facilities of the Company.
(Art. 31; Sec. 3.)
Shall hold public hearings on all petitions for new lines and
extensions, additions to Transit Facilities, proposals to change
fares, petitions for routing, re-routing or through routing, and
such other matters as the Councils may direct. (Art. 31 ; Sec
4.)
Shall select the depositories for the Trust funds over which
the Board has control, which funds shall be annually audited by
Service At Cost Agreements
269
public accountants selected by the City and the Company. (Art,
31; Sec. 5.)
The Board shall act through the decision of two of its mem-
bers, except that if there be no Chairman and an Arbitrator be
appointed, the decision of the Board in the matter to consider
which the Arbitrator was appointed may be by one member and
the Arbitrator. (Art. 31; Sec. 4.)
The decision of the Board in matters assigned to it by the
Grant, shall be final except that in the event that either the City
or the Company may claim that the questions is one for the
determination of the Pennsylvania Public Service Commission,
either may appeal to such Commission, but until the Commission
decides the issue, Company is required to obey the orders of the
Board. (Art. 31; Sec. 6.)
Denver Service at Cost Ordinance
The Board of Tramway Control — Shall control, regulate and
supervise the City service of the Company, including the fixing of
schedules, the regulation of transfers, and the fixing, changing and
extension of routes. (Art. 3; Sec. 1.)
Keep informed as to the cost, quantity and quality of service
furnished, receipts and disbursements, vouchers of expenditures,
leases and rentals. For this purpose the Board of Tramway Con-
trol is given access to the books and records of the company for
the purpose of auditing and inspecting receipts, disbursements,
leases, contracts, property, and other relevant matters. (Art.
3; Sec. 5.)
The Board shall hear, determine and act upon, complaints,
criticism and suggestions not disposed of by the Company. (Ai*t.
3; Sec. 6.)
Must approve upon all expenditures for Extensions, Better-
ments and Improvements, if they exceed, in any one year, one-
half of one per cent of Stipulated Fair Value, before such ex-
penditures can be added to Stipulated Fair Value. (Art. 3 ; Sec.
7.)
Must approve expenditures for Operating Expenses which
exceed for the year, by 3 per cent, the cost of the service, for the
18
t
I t
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Service At Cost Agreements
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2X1
l>
preceding six months, if such excess is to be added to the cost of
the service. (Art. 3 ; Sec. 7.)
Shall determine^the amount and the disposition of Renewals
and Depreciation Keserve Fund, and if the Company desires to
mvest any unexpended balances in such fund, must approve the
negotiable securities in which such balance is invested fArt
•>; See. 1.) ^ *
Shall increase or decrease the fares in effect in accordance with
the condition of the Fare Control Fund and in the manner
provided in the Ordinance. (Art. 7; Sees. 3 and 4 )
Shall decide as to the carriage of materials and supplies bv
the Company for the City and the public, approving the time
at which such transportation can be carried on, and the routes
which n.ay be used for the purpose, and the charges to be made
therefor. (Art. 9; Sec. 1.)
Sh.ll at all times have access to the books and records of the
Company, relating to Interurban lines. (Art. 12; Sec. 7.)
Denver Elastic Six-cent Fare Ordinance
The Board of Control shall have the power to increase or
decrease the fares charges by the Companv in accordance with
wages paid as provided b:^' the Ordinance. (Sec. 4. )
The records and accounts of the Company relative to wages paid
and fare receipts shall be open to the Board of Control, .nd the
Company shall furnish to such Board all information concerning
wages paid and fare receipts. (Sec. 4.)
The Board is empowered to investigate and shall keep itself
mformed as to wages paid to street railway employees in the cities
of ht Louis, Omaha, Kansas City, Minneapolis and St Paul
(hee. 4.) * '
Minneapolis
The City Council —
May designate additional streets in which Companv may
operate. (Sec. 2.) ' ^
May authorize changes in motive power or methods of electrical
transmission. (Sec. 2.)
May regulate carriage of mail and packages. (Sec. 2.)
May require elimination of poles and attachment of suspension
wires to buildings. (Sec. 2.)
Shall determine the terms under which the Company shall
continue to operate after the grant has expired. (Sec. 2.)
Controls and regulates the service. (Sec. 2.)
Appoints, removes and controls the Street Railway Supervisor.
(Sec. 5.)
Must approve or disapprove the Operating Budget and sup-
plements thereto. (Sec. 5.)
Exercises jurisdiction over purchases and contracts therefor
and payments of account of damages. (Sec. 5.)
Orders at its own volition, or approves proposals by the Com-
pany, for Extensions, Betterments and Permanent Improvements.
(Sec. 7.)
Must authorize all additions to Capital Value, and securities
issued on account thereof, both as to interest paid and as to terms.
(Sees. 9, 13, 14, 15 and 16.)
Administers Amortization Fund, decides upon the amount to
be paid into Fund from Gross Revenues, and from surplus in the
Stablizing Fund, payments out of Amortization Fund and fixes
intangible values. (Sees. 9, 12, 13 and 17.)
Decides on the payments from Gross Receipts to the Mainte-
nance Reserve Fund. (Sec. 11.)
May, when authorized by State Legislature, loan City funds
to the Company for Extensions, Betterments and Permanent Im-
provements, or guarantee the Company's security issues made on
account thereof. (Sec. 14.)
Supervises the refunding of securities, secured by liens on the
Company's property made prior to the taking effect of the Grant.
(Sec. 16.)
Acts for the City in the event of the purchase of the property
of the Company by the City or a licensee of the City. (Sees. 18
and 19.)
Controls the use of tracks and facilities by other companies.
(Sec. 21.)
May construct for the City, or authorize to be constructed a
central passenger station and require and regulate its use.
(Sec. 22.)
•WHW" l»i"l
272
Service At Cost Agreements
May require the Company to sweep, clean and oil the pavement
between its tracks. (Sec. 26.)
May, for the purpose of reducing fares, waive requirements as
to street cleaning, oiling, sprinkling and paving. (Sec. 26.)
Shall require the Company to keep its property insured against
fire. (Sec. 29.)
Shall appoint the City member of the Arbitration Boards pro-
vided for by the Grant. ( Sec. 31.)
Shall act for the City in the enforcement of the provisions of
the ordinance and in case of its forfeiture. (Sees. 4, 10, 32
and 33.)
The Supervisor of Street Railways —
Is the technical advisor of the City Council. (Sec. 5.)
He shall keep informed as to the character of the service ren-
dered, the condition of the property, the need of new lines and
extensions, improvements in the service and all matters coming
within the jurisdiction of the City Council and shall report to
the City Council thereon. (Sec. 5.)
He shall perform such additional duties as may be imposed
upon him by the City Council or by subsequent ordinances, not
inconsistent with the terms of the Grant. (Sec 5.)
He shall keep informed as to all matters affecting the cost,
quantity and quality of service, the receipts and disbursements'
property and equipment, rate of fare, vouchering of expenditures
and the manner of keeping accounts under the Uniform System
of Accounts of the Interstate Commerce Commission. (Sec. 5.)
He shall have access at all reasonable times to the books and
records of the Company, necessary for use in connection with the
performance of his duties. (Sec. 5.)
He shall, with the approval of the City Council, appoint such
assistants as he may deem necessary. (Sec. 5.)
He shall make, in connection with any Extension, Betterment
and Permanent Improvement, the surveys preliminary thereto
as provided by the Grant. (Sec. 7.)
He ghall receive and certify to the City Council if he finds it
to be correct the monthly statement of Capital Expenditures
required to be made by the Company under the terms of the Grant,
and may within 90 days after such certification make necessarv
i
Service At Cost Agreements
273
corrections therein, and may annually after the audit of the Com-
pany's books and records may make such further corrections as
are shown to be necessary by such audit. (Sec. 16.)
He shall have the right to examine the books and records of
the Company for the purpose of verifying the reports required to
be made by the Company to the City under the terms of the
Grant. (Sec. 20.)
If he disapprove of any voucher, the manner of keeping ac-
counts, or the bookkeeping methods of the Company and the mat-
ter is not adjusted by the Company, the dispute shall be arbitrated.
(Sec. 20.)
7.— ARBITRATION
(a) Machinery For
Chicago
No provisions.
Philadelphia
If either the Company or the City shall desire to arbitrate any
matter arising under the Contract, such matter shall be submitted
to the Supervising Board, sitting as a Board of Arbitration.
(Art. 35.)
Denver Service at Cost Ordinance
Any matter of difference arising under the provisions of the
ordinance may be submitted to arbitration, by either the City or
the Company. The party desiring arbitration, shall notify the
other party, stating the matter upon which arbitration is desired,
and naming its member of the Arbitration Board, which when
completed shall consist of three members. Within five days of
such notice the party so notified shall select its arbitrator, and in
case it fails to do so, the party demanding arbitration may do so.
The two thus selected shall name the third arbitrator, or if
within five days they fail to do so, then either the City or the Com-
pany may apply to the Judge of the District Court of the United
States for the district in which the City and County of Denver
is located, for the appointment of such third arbitrator. In case
such judge is disqualified or refuses to act, then any Judge for
the Circuit Court of Appeals of the United States for the circuit
2T4
Service x\t Cost x\greements
1 1
Lt:
If f
J i;
in which the City and County of Denver is located may upon
application of either the City or the Company make such appoint-
ment. (Art. 13; Sees. 1 and 2.)
Denver Elastic Six-cent Fare Ordinance
1*^0 provisions.
Minneapolis
All disputes arising between the City and the Company over
the interpretation or the application of the provisions of the Grant,
except matters falling within the police power of the City, and
those especially exempted by the Grant shall be arbitrated, on the
demand of either the City or the Company, and no other action
for the enforcement of the rights of either party, shall be taken
until the question has been arbitrated. Submission to arbitra-
tion must be made in the case of any order or demand of the City
Council, within 30 days of the date of such order or demand, and
in the case of any other dispute within 30 days of the date when
such dispute arises. (Sec. 31.)
The party demanding arbitration shall submit the name of one
arbitrator selected by it, together with a statement of the matter
to be arbitrited, to the other party, who shall within ten days of
the receipt of such notice select its Arbitrator and so notifv the
first party. The two shall within ten days select the third Arb>
trator and if within twenty days they are unable to agree upon
such third Arbitrator, he shall be named by a majority of the
members of the District Court of Hennepin County or any court
which may succeed it and exercise like jurisdiction. The Board
by a majority shall determine the question submitted to it within
thirty days, unless its members unanimously agree upon an exten-
sion oi time. If the Board fails to determine the matter within
a reasonable time, either party may apply to the District Court
for the removal of the third Arbitrator and the appointment of
a new third Arbitrator, who shall be selected in the manner of the
original appointment. In the event of the death or disqualifica-
tion of any of the arbitrators his successor shall be appointed in
the manner of the original appointment within thirty days from
the date of such event. (Sec. 31.)
The decision of the Board shall be made in writing and copies
forwarded to both the City Council and the Company. Either
^p*
Service At Cost Agreements
275
party may then appeal to the Courts, which shall try and deter-
mine the case de novo, (Sec. 31.)
The Arbitrators selected by the City and the Company shall be
disinterested and reasonably qualified to pass upon the question
in dispute. The third Arbitrator shall be disinterested and
qualified by study and experience. Each Arbitrator shall before
assuming his duties to take oath that he will fairly and impar-
tially decide the question according to the evidence and the law
and equity applicable, and in accordance with the terms and con-
ditions of the Grant. (Sec. 31.)
Control of service involved in the fixing of headway, speed, type
of cars, their lighting, heating and sanitary conditions as well as all
other matters falling within the police power of the City are
exempt from arbitration. (Sec. 31.)
Arbitrated is specifically provided for in connection with certain
matters as follows :
In disputes between the Street Railway Supervisor and the
Company involving the vouchering of expenditures and the
method of keeping accounts under the Uniform System of Accounts
of the Interstate Commerce Commission. (Sec. 5.)
In the event of the disapproval by the City Council of the
Budget of Operating Expenses or supplements thereto. (Sec. 5.)
At the request of the employes in case of a dispute over wages or
working conditions. (See H.-l.)
In disputes respecting the making of Extensions, Betterments
and Permanent Improvements. (Sec. 7.)
In disputes as to the rate of interest and cost of refinancing or
refunding bonds issued to retire bonds issued under mortgages
placed upon property prior to the taking effect of the Grant or the
terms of exchanging for such prior securities new securities issued
under the provisions of the Grant. (Sec. 16.)
Refusal of the Company to make changes suggested either by
the Street Railway Supervisor or the Certified Public Accountant
who shall each year audit the books and accounts of the Companv,
in its manner of keeping accounts, other matters relating to book-
keeping, or the manner of its compliance with orders of the City
Council. (Sec. 20.)
276
Service At Cost Agreements
Disputes as to the approval or disapproval of any voucher or
expenditure by the Street Railway Supervisor or the Certified
Public Accountant (Sec. 20.)
Disputes as to the use of the Company's tracks and facilities by
suburban railways and the compensation to be paid therefor.
(See. 21.)
Disputes as to the salaries paid to general officers of the Com-
pany. (Sec. 30.)
«
(b) Powers of Arbitration Board
Chicago
1^0 provisions.
Philadelphia
See powers of Supervising Board (C.-6.-(6)).
Denver Service at Cost Ordinance
The decision of an Arbitration Board is final and binding upon
both parties, subject to the right of either the City or the Com-
pany to appeal to the Courts. (Art. 13; Sec. 1.)
Denver Elastic Six-cent Fare Ordinance
No provisions.
Minneapolis
It may adopt such procedure governing hearings as it may
deem proper. (Sec. 31.)
It shall give duo notice to each party of all hearings and each
party shall be entitled to be represented by counsel. (Sec. 31.)
Both parties are required to furnish such information to the
Board as it may require and as is in the possessim if such partv
(Sec. 31.) ^ •' ■
It may extend the time within which it is required to determine
any case submitted but for not more than 30 days. (Sec. 31.)
(c) Penalties
Ko provisions.
Chicago
Service At Cost Agreements
277
Philadelphia
See powers of Supervising Board (C.-6.-(c)).
Denver Service at Cost Ordinance
No provisions.
Denver Elastic Six-cent Fare Ordinance
No provisions.
Minneapolis
If the Company fails to comply with an order of the City
Council as sustained by a Board of Arbitration the return to the
Company shall be reduced to six per cent on Initial Value and it
shall receive no further return on Added Value than the interest
fixed on securities by the City Council at the time of their
issuance. (Sec. 10.)
(d) Expenses of Arbitration
Chicago
No provisions.
Philadelphia
See Supervising Board (C.-6.-(b)).
Denver Service at Cost Ordinance
The City and the Company shall each bear the expenses of their
own Arbitrators. The expenses of the third Arbitrator shall be
borne equally by the City and Company. (Art. 13; Sec. 3.)
Denver Elastic Six-cent Fare Ordinance
No provisions.
Minneapolis
Paid as an operating expense. (Sec. 31.)
D. RETURN
1.— INITIAL VALUE
i Chicago
The Original Capital Account (Initial Value), as set up by
the Grant as of the date when the Grant becomes effective is mado
up as follows:
278
Service At Cost Agreements
I
First, the sum of $220,114,428.46 (being the Capital Vahie of
the Chicago Surface Lines as of June 30, 1916, plus the appraised
value of the Elevated Companies as of the same date as appraised
by the Chicago Traction and Subway Commission), plus addi-
tions to the property between that date and the time the Grant
becomes effective, minus deductions from the property during the
same period, both as determined by the Board of Supervising
Engineers ;
Second, such sum as the Trustees shall determine shall be the
value of the property acquired by the Elevated Companies
between June 30, 1916, and the date when the Grant becomes
effective, minus such sum as the trustees shall determine to have
been the value of property lost, destroyed, abandoned, sold or dis-
posed of and the amount of impairment to the property (ordinary
wear and depreciation expected) during the same period;
Third, the amount of any moneys or securities on deposit with
the trustee of any mortgage assumed by the Company, represent-
ing the proceeds from the sale of property mortgaged, which
amount is required to be paid to the reduction of the debt under
such mortgage. (Sec. 24.)
Philadelphia
The Capital Value of the Company's property is not formally
fixed. Payment of fixed charges on mortgages, as well as rentals,
is provided for and a special audit of the Company's accounts is
provided in order to ascertain the amount of such charges. One
of the objects of the 1907 Contract, as set forth in the preamble,
was to provide that the securities, of the Company and its under-
lying properties, should be " unquestioned." The investment of
the Philadelphia Rapid Transit Company itself, irrespective of
the underlying properties, is fixed at $30,000,000, less any
installments on underlying shares remaining unpaid. (Art. 20.)
Denver Service at Cost Ordinance *
The basic value of the property coming under the provisions
of the ordinance, both for the purpose of regulating fares and for
the fixing of a purchase price, is placed at $20,867,750, as of
January 1, 1918. This is the value placed upon the property by
^r
Service At Cost Agreements
279
the Public Utilities Commission of the State of Colorado, and
accepted, after investigation, by a committee of 55 representative
citizens of the city of Denver appointed by the Mayor to investi-
gate and report upon the street railway problem. (Art. 4 ; Sec. 1.)
Denver Elastic SiX-cent Fare Ordinance
No provisions.
Minneapolis
For the purpose of fixing the return to the Company and for
purchase by the City, the Original Capital Value (Initial Value)
as of January 1, 1919, is fixed by the Grant at $24,000,000,
which is the value as of January 1, 1916, fixed by F. W. Cap-
pelen. City Engineer, plus the value of property acquired between
January 1, 1916, and December 31, 1918, as determined by
Bion J. Arnold. (Sec. 17.)
The Original Property Value, as of January 1, 1919, is also
fixed at $24,000,000. (Sec. 16.)
2.— ADDED VALUE
Chicago
The par value of bonds, debentures, or other obligations issued
for new capital funds or other capital expenditures authorized
by the Grant, shall be added to Initial Value at the time sold and
when added to the Capital Account. (Sec. 24.)
Philadelphia
There is no formal definition of Added Value in the Grant, the
Company is permitted to earn a return upon new capital fur-
nished by it, and provision is made for the certification at three-
month periods of such new capital furnished. (Arts. 20 and 23.)
Denver Service at Cost Ordinance
There shall be added to basic value the total cost of Additions,
Betterments and Improvements (as defined by the rulings and the
Uniform System of Accounts of the Interstate Commerce Com-
mission and • determined from the records of the Company,
authenticated by the Board of Tramway Control) made subse-
quently to January 1, 1918. (Art. 4; Sec. 2.)
280
Service At Cost Aoeeements-
Dbjiveb Elastic Six-cent Fare Ordinanc
E
i
I
No provisions.
Minneapolis
There shall be added to Capital Value the par value of all
securities sold or debt created by the Company either for the pur-
pose of creating the Stabilizing Fund, or for Capital Expendi-
tures made after January 1, 1919, as approved by the Citv
Council (Sec. 17.)
The Company agrees to obtain new capital for the purpose of
creating the Stabilizing Fund and for Extensions, Betterments
and Permanent Improvements required by the ordinance, the City
Council to approve the amount and character of the securities to
be issued or debt created, as to rate of interest, sinking fund,
method of retiring same, if any, and the price at which thev shall
be sold; providing that the Company acting <liligcntly and in good
faith can sell such securities or incur such debt. The par value
of securities and the amount of indebtetlness shall constitute a
capital expenditure and shall he added to Capital Value as of the
date they begin to draw interest. If securities arc issued for a
debt included in Capital Value tk-y shall bo included at par value
in Capital Value in lieu of such debt. Funds secured by the sale
of such securities or from such debt, if not used within a month,
shall be placed at interest which shall be added to Groes Receipts.
Premiums received from the sale of securities shall be used for
Extensions, Betterments and Permanent Improvements, but not
added to Capital Value. Usual and necessary costs of financing
the sale of securities, approved by the City Council, shall h]
included in the amount of capital funds for which such securities
are issued. (Sec. 14.)
Fpon the failure, neglect or refusal of the Company to pro-
vide the necessary new capital for Extensions, Betterments and
Permanent Improvements, the City may, if authorized by the
State Legislature, provide such funds, either by direct loan to
the Company, or by guaranteeing the payment of the Company's
securities or obligations, and such amount shall be added to
Capital Value. (Sec. 14.)
There shall be added to Property Value, the cost of new prop-
erty or betterments added from January 1, 1919 to the date when
Service At Cost Agreements
281
the Grant became effective and there shall be added thereafter the
cost, including the cost of construction of the property in place
engineering, supervision and legal expenses incident to construe-'
tion and the cost of obtaining the money, such as bond discount, of
all Extensions, Betterments and Permanent Improvements, author-
ized or required by the Grant or built by the Company with the
approval of the City Council. (Sec. 16.)
In the replacement of any principal part of the Company's
property there shall he charged to Property Value the excess cost
of the new property over the property displaced, as it appears in
the allocation of value set up as provided by the Grant. If the
Company is required to construct, or reconstruct any of its track
equipment or roadbed in any street, before sewer and water pipes
are laid therein, and shall thereafter be required to reconstruct
on account of the laying of such pipes, the Expense shall be
deemed a capital, expenditure and allocated as an intangible value.
(Sec. 16.)
3.— DEDUCTIONS FROM VALUE
Chicago
Payments to the holders of the Company's bonds, debentures,
or other obligations or on account of the liens or claims, or obliga-
tions secured thereby upon or against the Company's property
shall be deducted from Initial Value. (Sec. 24.)
Philadelphia
A Sinking Fund, under the control and in the custody of a
Commission consisting of the Mayor, the President of the Com-
pany and the President of the Board of Directors of City Trusts
was established by the 1907 Contract. Into this Sinking Fund
the Company is required to make the following payments:
Beginning with July, 1912, and annually for ten years after
at the rate of $10,000 a month;
For the next ten years at a rate of $15,000 a month ;
For the next ten years at the rate of $20,000 a month ;
For the next ten years at the rate of $25,000 a month;
<t*
282
Service At Cost Agreements
Service At Cost Agreements
283
1
n
For the remaining period of the Contract (until 19'57) at the
rate of $30,000 a month. (Sec. 9, 1907 Contract.)
Such payments are treated as fixed charges and deducted from
income before any payments of dividends are made to stockholders
and before any payments on account of dividends are made to the
City. No such dividends shall be paid as long as Sinking Fund
payments are in arrears. The money in the Sinking Fund may be
invested in such securities as are legal for Trustees, or in the stock
of the Company, which may be purchased at a price not above par,
or in the bonds and underlying securities of the Company pur-
chased on a four per cent income basis. Stock or bonds so acquired
shall not be resold or re-issued. At anv time after the fund shall
have accumulated $5,000,000, the City may require that it be
paid into the City Treasury and that the City acquire absolute
title thereto and that future payments be made directly into the
City Treasury. (Sec. 9, 1907 Contract.)
In the ease of New Capital secured by issues of preferred stock,
provision for the amortization thereof shall be made as approved
by the City Councils, and payments on account of such amortiza-
tion shall be made to the Sinking Fund Commission, which shall
hold monies so received for the retirement of, and shall invest it
in such preferred stock. (Art. 12.)
In the case of New Capital secured by debentures, or notes,
similar provision shall be made for amortization and payments on
account thereof shall be made to the trustees for such issue and
shall be invested by them in such issue, if it can be obtained at
a price not to exceed 105 of par value with accrued interest.
(Art. 12.)
Denver Service at Cost Ordinance
There shall be deducted from Value, the value of property
retired as defined by the rulings and the Uniform ^System of
Accounts of the Interstate Commerce Commission. (Art. 4;
Sec. 2.) •
The Stipulated Fair Value o£ the Property, both for the pur-
pose of computing return and for computing the purchase price
shall consist of Basic Value, plus the cost of Additions, Better-
ments and Improvements, and minus the value of property-
retired. (Art. 4; Sec. 2.)
Denver Elastic Six-cent Fare Ordinance
No provisions.
Minneapolis
There shall be deducted from Capital Value, all payments to
Company, or to the holders of securities or evidences of indebted-
ness that have been created on account of Capital Expenditures,
made out of the Amortization Fund, and the right is reserved to
the City Council to amortize such part of Capital Value as it
may see fit. (Sec. 17.)
The Grant provides for the accumulation of an Amortization
Fund, to be used for the purpose of amortizing any intangible
values, either in the original $24,000,000 value or arising from
refinancing or from other causes. The Amortization Fund shall
be accumulated, first, by payment thereinto annually from
Operating Revenue, of an amount equal to one-half of one per
cent cumulative, of Capital Value at the beginning of the year ;
second, by any payments provided for sinking or retirement funds
in securities issued with the approval of the City Council, and,
third, by transferals from the Stablizing Fund, when there shall
be an excess therein, as provided by the Grant. The whole
or any part of the Amortization Fund may be paid to the
Company or the holders of bonds or interest bearing obligations
of the Company that have been created for Capital Expenditures
for the purpose of extinguishing such obligations and Capital
Value shall be reduced to the extent of such payments; or the
City may direct the Company to use the amounts so paid for
Extensions, Betterments or Permanent Improvements, in which
case the amount so used shall not be added to Capital Value, but
shall be added to Property Value. When the intangibles for the
elimination of which the Amortization Fund was created have
been so eliminated, the City Council may order discontinuance of
payments into the Fund from Operating Receipts, or may order
the Company to set aside and pay into the Fund any other amount
that the amount so provided in the Grant to be used to reduced
Capital Value. (Sec. 13.)
" Intangible values in Capital Value shall be taken and deemed
to be such elements in Capital Value as are not reflected in or
ft
284
Service At Cost Agreements
repreWMtei by values of the existing physical property in agreed
valuation as of January 1, 1919, together with additions thereto.
The Intangible Yahies shall be allocated by direction of the City
Council." (Sec. 9.)
There shall be deducted from Property Value first the cost
assigned in the inventory of January 1, 1916 or in the Arnold
analysis of additions between January 1, 1916 and December
31, 1918 of withdrawals of property from January 1, 1919 to
the date when the Grant becomes effective; and second the value
of any property withdrawn from Property Value, as it appears
in the valuation of January 1, 1916, in the Arnold analysis, or
in the case of property added after January 1, 1919, at actual
cost. (Sec. 16.)
At the time the Grant takes effect, the Company shall set up
in its books Standard Property Accounts as prescribed by the
Uniform System of Accounts of the Interstate Commerce Com-
mission modified to meet the provisions of the Grant or subse-
quent ordinances, and shall allocate, with the advice and approval
of the City Council, the full value of the property as agreed upon
in the Grant, and shall thereafter allocate to these accounts all
additions to property value. On or before the 20th of each month
the Company shall report to the Street Railway Supervisor, all
Capital Expenditures for the previous month. If correct, the
report shall be certified to the City Council by the Supervisor, and
the Council shall approve or disapprove of the same. If approved
it shall be final and binding upon the City, except that within
ninety days of the date of the report, or after the annual audit of
the Company's books, he may correct any error. Such corrections,
however, shall not affect or impair any report theretofore certified
but shall be adjusted in the first certificate issued after the end
of the year. (Sec. 16.)
Upon the removal of any property which is not replaced from
the Maintenance Reserve Fund, an amount which represents the
unreplaced value thereof, as it appears in the valuation of January
1, 1916, the Arnold analysis, or in the case of property added
subsequent to January 1, 1919, actual cost, shall be transfered
to a suspense account and amortized from the Amortization fund.
(Sec. 16.)
Service At Cost Agreements
285
4.— RATE OF RETURN
Chicago
Upon bonds and other obligations secured by liens against the
property, rights and franchises of the Company — the interest
stipulated in such bonds and other obligations; (Sec. 16)
Upon debentures issued in part payment of the property of the
Chicago Surface lines and Elevated Railways required under the
terms of the Grant to be acquired by the Company — eight per
cent per annum until July 31, 1932 and seven per cent per
annum thereafter. (Sec. 2.)
Upon debentures issued by the Company to obtain l^ew
Capital-return as fixed by the Trustees, at the time such debentures
shall be sold.
Philadelphia
Fixed charges on obligations of the Company — either mort-
gages, leases or operating contracts — assumed before the Grant
took effect or mortgages refunded, at the rate contracted for;
Interest and sinking fund charges on New Capital, as approved
by City Councils at the time of their issuance ;
Sinking Fund Charges as provided in the 1907 contract;
Five per cent, on the Company's investment ($30,000,000, less
any unpaid installments on outstanding stock). (Arts. 20 and
24).
Denver (Service at Cost Ordinance
The Rate of Return upon the Stipulated Fair Value of the
property shall be as follows:
From the date the ordinance becomes effective, until April 30,
1920, at the rate of five and one-half per cent per annum;
From May 1, 1920, to October 31, 1920, at the rate of six per
cent per annum ;
From November 1, 1920, to April 30, 1921, at the rate of six
and one-half per cent per annum;
After April 30, 1921, at the rate of seven per cent per annum.
(Art. 8; Sec. 2.)
Denver Elastic Six-cent Fare Ordinance
No provisions.
19
I
I
\ III
28C
Service At Cost Agreements
Minneapolis
Seven per cent per annum cumulative upon Original Capital
Value (Initial Value) as of January 1, 1919. Upon securities
issued and debt incurred with the approval of the City Council and
added to Capital Value thereafter, the interest as approved by the
City Council plus one per cent per annum cumulative, except that
upon money loaned or securities issued by the Company and
guaranteed by the City, there shall be paid no return over and
above the actual interest. (Sees. 9 and 14.)
5.— ADDITIONAL ALLOWANCES
Chicago
'No provisions.
Philadelphia
No additional allowances.
Denver Service at Cost Ordinance
Allowances in addition to the regular rate of return are pro-
vided by the ordinance as follows :
In any calendar month in which the adult fare shall be six
cents, one-twelfth of one-fourth of one per cent ;
In any calendar month in which the adult ticket fare shall be
five and one-half cents, one-twelfth of one-half of one per cent ;
In any calendar month in which' the adult fare shall be five
cents, one-twelfth of three-fourths of one per cent ;
In any calendar month in which the adult fare shall be less
than five cents, one-twelfth of one per cent. (Art. 8 ; Sec. 2.)
Denver Elastic Six-cent Fare Ordinance
No provisions.
Minneapolis
None.
^'T
6.— ASSURANCE OF RETURN
Chicago
There is no other assurance of return than that provided by the
regulation of fares to cover the cost of service.
Service At Cost Agreements
287
Philadelphia
No other assurance of return is given than that provided by a
system of fares, which, subject to the Pennsylvania Public Service
Commission, is intended to respond to the cost of the service.
Denver Service at Cost Ordinance
No other assurance of return is afforded than that given by the
automatic regulation of fares to cover the cost of the service.
Denver Elastic Six-cent Fare Ordinance
No assurance of return provided. There is partial assurance
that fares will be sufficient to pay wage increases.
Minneapolis
;No assurance of return is provided other than by the automatic
regulation of fares and by the right given to the Company to
object to requirements of the City as to service and extensions
which would impair the ability of the Company to earn the cost
of the service.
On the other hand it is provided that " nothing in this ordi-
nance contained shall constitute an obligation or iniarantv on the
part of the City to pay to the Company the seven per cent per
annum on the Capital Value or the amount of interest plus one
per cent per annum on new capital as above providtxl, and further,
that in no event shall any taxes be levied or other appropriations
be made by the City Council to provide for the payment of said
seven per cent cumulative or the one per cent cumulative on new
capital or for any deficiency in the said payment which may here-
after accumulate or hereafter be accumulated under the terms of
this ordinance." (Sec. 9.)
E. COST OF SERVICE
1.— DEFINITION
Chicago
There is no definition of the Cost of Service. The Grant pro-
vides for the payment of the following items out of Gross
Receipts :
i
»
288
Service At Cost Agreements
Item First: (a) All expenses of operation, including mainte-
nance, repairs and renewals (except such payments as are made
from the Maintenance and Repair Fund, the Eenewal and Depre-
ciation Fund and the Damage Claim Fund), including all pay-
ments required to be made by the Company under any lease or
operating agreement;
(b) PajTnents into the Maintenance and Repairs, Renewals and
Depreciation and Damage Claims Funds. (Sec. 16.)
The Trustees shall set aside from Gross Receipts a sufficient
fund to meet all claims from damages arising out of the operation
of the Surface lines subsequent to February 1, 1907 (date of the
so-called Settlement Ordinances) ; damages arising from the
operation of the Elevated Lines previous to the taking effect of the
Grant and damages arising from the operation of the System sub-
sequent to the taking effect of the Grant. The amount that shall
be annually deducted is left to the judgment of the Trustees, except
that the Fund shall at the time of purchase by the City be suffi-
cient to meet all claims against the Company at that time out-
standing. The monies so set aside shall constitute the Damage
Claims Funds and may be invested by the Trustees in interest-
bearing securities, other than those of the City or the Company,
which securities may be sold from time to time as occasion re-
quires for the benefit of the Fund. Interest and earnings thereon
shall be added to the Fund. At the time of the sale of the prop-
erty of the Company, the Fund shall pass into possession of the
City, which shall hold the Company harmless on account of all
claims for damages. (Sec. 15.)
For information as to Maintenance and Repairs and Renewals
and Depreciation Funds see E.-(b)- (b2) and E.-2.-(c).
(c) Payments on account of taxes, assessments and other gov-
ernmental charges, including franchise, excise and income taxes
and city license fees, if any. (Sec. 16.)
Item Second, payments on account of interest on bonds and
other outstanding obligations, secured by a lien on the Company's
property in accordance with the terms of the Grant. (Sec 16.)
Item Third, payments to the City on account of the use of sub-
ways or portions thereof. (Sec. 16.)
Item Fourth, payments into the Amortization Fund. ( Sec. 16. )
Service At Cost Agreements
289
The Amortization Fund is established for the purpose of pro-
viding a substitute for new capital for Extensions, Betterments
and Improvements and to provide for the amortization and retire-
ment of the Capital Account. There shall be paid into it :
(a) The amount required to be set aside under the sinking fund
provisions of mortgages or deeds of trust assumed by the Company
as part of the purchase price of the Surface and Elevated Lines ;
(b) After five years from the effective date of the Grant, each
year, one-quarter of one per cent of the then outstanding Capital
Account of the Company, to be increased at the end of five years
to one-half of one per cent, to be increased at the end of the next
^ve years to three-quarters of one per cent, to be increased at the
end of the next five more years to one per cent, at which rate it
shall thereafter stand. The amount to be paid into the Fimd in
any year under this provision, shall never be less than the amount
paid in the previous year, despite any decrease in Capital Account
caused by payments from the Amortization Fund (Sec. 14) ;
(c) The Surplus Receipts of the Company. (Sec. 14.)
Whenever money is needed for Extensions, Betterments and
Permanent Improvements not including subways and the con-
dition of the Amortization Fund permits, such money shall be
taken from the Amortization Fund, and there shall be no addition
to Capital Account on account thereof . (Sec. 14.)
Whenever, in the opinion of the Trustees, the condition of the
Amortization Fund \\ ill permit, money therein may be used for
the retirement of the outstanding bonds, debentures or other obli-
gations of the Company, or for sinking fund payments under the
terms of mortgages and trust deeds assumed by the Company in
part payment of the Surface and Elevated lines, but no payment
shall be made on account of debentures issued in payment for such
property, until all other bonds, debentures and obligations of the
Company constituting a lien upon the Company's property have
been paid. The amount so paid for the purpose set forth herein
shall be deducted from Capital Account. (Sec. 14.)
In case the First and Refunding Mortgage provided for by the
Grant shall contain sinking fund provisions, approved by the City
Council by ordinance, sinking fund payments thereunder may be
I
290
Sekvice At Cost Agreements
made from the Amortization Fund and the Capital Account cor-
respondingly reduced. (Sec 14.)
Item Fifth, payments on account of annuity or interest on out-
standing debentures and other obligations or agreements of the
Company, not secured by liens on the property, franchises and
rights of the Company. (Sec. 16.)
All payments under any of the items are culmulative, and if
not paid during the fiscal year, shall be paid out of the Gross
Keceipts of the next, or the following fiscal years in the order
named. Any surplus Gross Receipts remaining after the payment
of the items specified shall be paid into the Amortization Fund.
(Sec. 16.)
Philadelphia
The cost of service is not defined, but provision is made for
the payment of the following items out of Gross Revenue :
First, Operating expenses, including maintenance and damage
claims ;
Second. Taxes, both those assessed directly against the Com-
pany and those assessed against the Company on account of its
ownership of Transit Facilities, as well as taxes, licenses and
imposts assessed against underlying companies, except taxes due
from such companies to the city on dividends;
Third. Fixed charges, including interest on mortgages, rentals,
payments on account of operating agreements or other contracts,
which were in effect at the time of the taking effect of the Grant,
and any renewals or refunding thereof;
Fourth. Interest and sinking fund payments on new securities,
and dividends and sinking fund payments on capital stock, issued
for New Capital ;
Fifth. Payments into the Depreciation Funds provided by
the Grant ;
Sixth. Sinking Fund payments required by the 1907 Contract ;
payments due City on account of taxes on dividends to holders of
the securities of underlying companies as imposed by the charters
of such companies. The payment to the City of the sum provided
in lieu of paving, repaving and repair of paving, snow removal
and license fees (See E.-3) ;
Service At Cost Agreements
291
Sevenlh. Payments to both City and Company of a return
equal to 5 per cent of their respective investments.^ Such invest-
ment is for the Company fixed at $30,000,000, less any unpaid
installment on outstanding stock, and for the City is certified in
the three-month statements provided by the Grant ;
Eighth, Payment to the City of the difference between its
gross interest and Sinking Fund charges upon its investment and
the 5 per cent return upon investment provided in the previous
Item. (Art. 20.)
All of the payments provided for are cumulative. Items First
to Fifth, inclusive, shall be cumulative in order and shall be made
up before Gross Revenue of subsequent years is applied to current
payments. The other items shall, however, not be made up in
subsequent years until after current payments shall have been
made and the Company's Initial Surplus shall have been restored
to the extent that it has been depleted to make up deficiencies
Thereafter deficits in return to the City and the Company shall bo
made up before Items Sixth and Eighth shall be made up. (Art
.iO ; oec. 2. )
Denver Service at Cost Ordinance
The following items are defined to be the cost of the ser^ ice, to
be paid from Gross Earnings in the order named :
(a) Cost of wages and compensation to employees;
(b) Cost of materials used in the operation of the City system ;
(c) Cost of renewals and depreciation of the property ;
(d) Cost of taxes and other governmental charges, including
the expenses of City supervision ;
(e) Cost of such other operating expenses as are authorized
under the rulings and Uniform System of Accounts of the In-
terstate Commerce Commission ;
(f ) Cost of money invested in the property, being the reason-
able return upon the Stipulated Fair Value of the Citv Svstem
(Art. 2; Sees. 1 and 2.)
Denver Elastic Six-cent Fare Ordinance
No provisions.
Piiiladelpttia
Xo provisions.
1
I
292
Service At Cost Agreements
Minneapolis
It is provided that the following payments shall be made from
Gross Keceipts, in the order named:
First, expenses of management and operation, including sal-
aries, wages and reasonable pensions and benefits to employees
in amount to be approved by the City Council. (See. 9.)
Second, an amount monthly equal to one-twelfth of 2.75 per
cent of Capital Value as of January 1, of the current year, plus
9 per cent of the gross earnings of the month, to create a Repair,
Maintenance, Renewal and Depreciation Fund, from which shall
be paid all expenses, necessary "to put, maintain, repair and
keep said railway system in first class condition." The amount
taken from Gross Earnings can be increased or decreased as the
City Council may determine is the need. (Sees. 9 and 11.)
Third, payments on account of liabilities for damages to per-
sons and property. (Sec. 9.)
Fourth, payments on account of taxes and public charges, in-
cluding all earnings and income taxes. (Sec. 9.)
Fifth, return to the Company. (Sec. 9.)
Sixth, an amount equal to one-half of 1 per cent, of Capital
Value as of January 1 of the current year, per annum cumulative,
plus such additional sums to provide sinking or retirement funds
as may be authorized by the City Council in connection with the
issuance of new securities to be paid into the Amortization Fund.
Payments of one-half of 1 per cent of Capital Value into this fund
shall continue until the amount thereof equals the amount of all
elements of intangible value contained in Capital Value. There-
after only such payments shall be made into the Amortization
Fund from Gross Receipts, as the City Council shall determine.
(Sec. 9.)
Seventh, payment into the Stabilizing Fund, of the amount
remaining after payment of these items, which amount shall be
known as " Surplus Earnings." (Sec. 9.)
Accounting for the purpose of determining fares shall be on
the basis of monthly credits and charges and liabilities shall be so
allocated, that a suflScient amount shall be set aside each month to
meet deferred liabilities when they fall due. (Sec. 9.)
Service At Cost Agreements
293
2 — ALLOWANCES
(a) Operating
Chicago
No provisions, the. matter being left to the judgment of the
Trustees.
Philadelphia
N^o operating allowance provided for.
Denver Service at Cost Ordinance
jSTo actual Operating Allowance is provided for. The Com-
pany is, however, required to present to the Board of Tramway
Control prior to the last day of each calendar year, a budget esti-
mating the cost of service for the ensuing year, and any increase
in operating expenditure over the previous calendar year, amount-
ing to more than three per cent, cannot be added to cost of service,
unless it be approved by the Board of Tramway Control (Art'
3; Sees. 8 and 9.)
Denver Elastic Six-cent Fare Ordinance
^0 provisions.
Minneapolis
While no operating allowance is provided, the City retains con-
trol over the operating expenditures by a provision which Permits
the City Council to require the Company to submit at least 45
days before the beginning of each calendar year a Budget of
operating expenditures and receipts and further to submit supple-
mentary budgets for expenditures other than those provided in
the original Budget. :N'o expenditure not provided for in the
Budget or a supplement approved by the City Council thereto
may be met from Gross Receipts. (Sec. 5.)
(b) Maintenance
(bl) DEFINITION
Chicago
The Grant establishes a distinction between Maintenance and
Repairs, and Renewals. "* * * Renewals are hereby defined
ill
*.1
^t/TT
Service At Cost Agreements
to be the replacement of any principal part of the local trans-
portation system or its equipment or appurtenances (including
pavement) or subways; and the Trustees shall determine by
classifications made from time to time what particular items of
expenditure shall be considered as Maintenance and Repairs and
what particular items of expenditure shall be considered as
Kenewals under the provisions of this ordinance." (Sec. 8.)
Philadelphia
The Grant contains no definition.
• Denver Service at Cost Ordinance
The rulings and the Uniform System of Accounts of the Inter-
Btate Commerce Commission govern.
Denver Elastic Six-cent Fare Ordinance
The Grant contains no definition.
Minneapolis
The Grant contains no definition of Maintenance, Repairs,
Renewals, or Depreciation.
(b2) HOW FIXED
Chicago
The Company is obligated by the terms of the Grant to keep
its property in such condition as to give to the public the best pos-
sible transportation service, and agrees, irrespective of any of the
provisions of the Grant as to amounts to be spent for maintenance
and repairs, to spend such sums as will so maintain the property.
(Sec. 8.)
The Company shall spend for maintenance and repairs an
annual amount at least equal to six per cent of its Gross Receipts
for the year. If in any one year such amount is not spent, it shall
be set aside in a special fund (The Maintenance and Repairs
Fund) to be used when and as necessary for such maintenance
and repairs. (Sec. 8.) "
Philadelphia
The Supervising Board shall pass upon, adopt and alter rules
and standards as to Maintenance. (Art. 31; Sec. 3.) No actual
allowance is provided.
Service At Cost Agreements
205
Denver Service at Cost Ordinance
By the Company subject to the approval of the Board of Con-
trol m case the total operating expenses for anv one year exceed
those of the previous year by more than three per cent. (Art 3 •
Sec. 7.) , A V >
Denver Elastic Six-cent Fare Ordinance
No provisions.
Minneapolis
Repairs, maintenance, renewals and depreciation are to be met
out of the same fund — the Maintenance Reserve Fund This
IS provided by payments from Gross Receipts as set forth in E -1
and by receipts from the sale of material or property that may
become unnecessary or is unadapled to the use of the Company
and from interest received on such part of the fund as may be
invested or put on deposit. (Sec. 11.) If, however, such unneces-
sary or unadaptable property be rented, the rentals shall be added
to Gross Receipts. (Sec. 28.)
When property is replaced, the excess of cost of the new prop-
erty over the property displaced shall be charged to Capital, while
the value of the property displaced shall be charged to the Main-
tenance Reserve Fund. (Sec. 11.)
The creation and use of the Maintenance Reserve Fund does
not relieve the Company from the obligation to keep its property
in first-class condition by expenditures from Gross Earnings.
(c) Depreciation
Chicago
There shall be set aside each month from Gross Eeceipts, an
anmount equal to eight per cent of the Gross Eeceipts of the
previous month and the sums so accumulated shall constitute the
Renewal and Depreciation Fund. Moneys in such fund shall be
used to take care of the renewal and depreciation of the Com-
pany's property, including subways. There shall be paid from
the Fund such amounts as are necessary to provide for renewals
and the balance shall constitute a fund to provide against the
depreciation of the property. The Trustees are empowered to
a96
Service At Cost Agreements
increase the amount set aside for this fund, as in their judgment
seems desirable and necessary. (Sec. 8.)
When replacements are made there shall be charged to Capital
Account, the excess cost of new property over the original cost of
the property displaced, except that in the case of property
acquired from the Surface and Elevated lines in accordance with
the provisions of the Grant, the inventory value instead of the
original cost shall be used in reckoning excess. The balance of
the cost of such replacements shall be taken from the Renewals
and Depreciation Fund. (Sec. 8.)
As long as the Company purchases its power, there shall be
charged to the Renewals and Depreciation Fund, such part of the
cost of such power as represents the allowance made for Renewals
and Depreciation by the seller, if such allowance is made.
(Sec. 8.)
The Trustees may invest any moneys in the Fund in bonds or
other interest bearing securities, except those of the City and the
Company, and may from time to time sell the securities so pur-
chased and deposit the market price thereof to the Credit of the
Fund. (Sec. 8.)
In the event of purchase by the City any balance in the fund
becomes the property of the City. (Sec. 8.)
Philadelphia
The Grant provides for the setting up of three distinct Depre-
ciation Reserve Funds —
A. To provide for Transit Facilities owned by the City;
B. To provide for Transit Facilities furnished by the Com-
pany in Connection with the City System ;
C. To provide for Transit Facilities owned by the Company.
(Art. 22; Sec. 1.)
The Supervising Board may classify Transit Facilities and
apportion depreciation among the several Funds in accordance
with such classification. Fund C. shall be started on the date
when the Grant becomes effective. Funds A. and B. at the same
time as the time that the first section of the City System begins
operation or as soon thereafter as the Supervising Board may
determine. Nothing shall, however, be set aside for depreciation
Service At Cost Agreements
297
of permanent structures of the City's Transit Facilities, until ten
years after the date when they shall be first operated, and then the
appropriation for such purpose shall not exceed one-half of one
per cent, annually. (Art. 22; Sec. 1.)
The amount to be set aside for depreciation shall be determined
by the Supervising Board and Funds A. and B. shall be in the
control and custody of the Board. Fund C. shall be in the custody
and control of the Company, and shall be held for and applied to
repairs, replacements and renewals, other than those paid for out
of Gross Revenue, but such use of the fund, must be approved by
the Supervising Board. (Art. 22 ; Sees, 1 and 3.)
At the time that the Contract takes effect, such amount as equals
the excess of the amount in the company's Renewal Reserve over
its Reserve Fund for Renewals, as determined by the special audit
provided by the Grant, shall constitute the Company Depreciation
Fund. (Art. 16.)
Salvage from Transit Facilities retired from service shall be
credited to the appropriate Depreciation Fund. (Art 22-
Sec. 2.)
Whenever a Transit Facility or a principal part thereof shall
be retired from service, an amount equal to its cost shall be taken
from the appropriate Depreciation Fund, upon the requisition
of the Company approved by the Board and be expended for a
new Transit Facility or a principal part thereof for which the
Fund shall have been set aside. (Art. 22; Sec. 3.)
Amounts in Depreciation Funds not currently needed shall be
invested by the custodians of the Funds (in the case of Fund C,
the Company shall, however, secure the approval of the Super-
vising Board to such investment) in the bonds, notes or other
securities of the Company, providing they can be purchased at not
more than par value, or in such other securities as may be legal
investment for Trustees. (Art. 22; Sec. 3.)
At the termination of the lease. Funds A. and B. shall become
the property of the City, while Fund C. becomes the property of
the Company. In case the City exercises its right of recapture
(See B-l.-(a) and (b) ) all three Funds shall become the property
of the City. (Art. 22; Sec. 4.)
298
Service At Cost Agreements
Denver Service At Cost Ordinance
" The physical property of the City system shall always be well
and thoroughly kept up in first-class serviceable operating condi-
tion. Therefore, as distinguished from and in addition to the
ordinary day to day repairs, constituting current maintenance,
and in order to adequately provide for the replacement and
renewal of track, cars, equipment, buildings and plant, which
hereafter shall become worn out, obsolete or useless and for the
general depreciation of the property when and as necessary and
needed for the proper upkeep in the interest of the best service to
the car riders, there shall be set aside out of earnings and as a
part of the cost of service as hereinbefore defined, a sum monthly
consecutively and cunmlatively to be known as the " Renewals and
Depreciation Reserve Fund." This fund as to its amount shall
be reasonable and adequate in relation to the Stipulated Fair
Value and its determination and disposition shall be by and
under the supervision of the Board of Tramway Control, pro-
vided always that permanent expenditures out of this fund shall
be made only for the purpose in this section set forth, and that
this Fund or any part thereof shall not in any way afi'ect or
change the Stipulated Fair Value. Temporary' unexpended bal-
ances may be invested by the Company in negotiable securities
approved by the Board of Tramway Control and interest thus
earned shall be credited to the Funds." (Art. 5 ; Sec. 1.)
As a measure for the adequacy of the Renewals and Deprecia-
tion Reserve Fund, the ordinance states that for the Basic Value
of $20,807,750, set up therein, an addition of $37,500 monthly
to the cost of service shall be considered sufficient. (Art. 5;
Sec. 3.)
Denver Elastic Six-cent Fare Ordinance
No provisions.
Minneapolis
Depreciation is taken care of through the operation of the
Maintenance Reserve Fund.. (Sec. 11.)
S.— SPEOAL TAX AND IMPOST FEATURES
Chicago
The Company shall pave, repave and keep in repair pavement
on the portion of streets, viaducts and bridges occupied by its
Service At Cost Agreements 299
The Company shall fiU, grade, pave, clean, sprinHe and keep
in repair eight feet of such streets as it occupies with single track
and 16 feet of such streets as it occupies with double trad. The
made or other work done by the City in connection with its sewer
and water pipes. (Exhibit B.) w m us sewer
JV^' '"'"' *'''* '^' ^""'P'^y ^«y^ it« t'-^l^ i» streets before
water or sewer p.pes are laid therein, or before the street shaH
be g.-aded or paved, and is later comj^elled to reconstruct such
track, he expense thereof shall be borne by the Com^^y and
Cul )T *? *«' P«f °™«"«« »f the work by the Company, the
21' Z I ''•^\^^%^^-^ ^^- th« «r-t becomes 'effiire
shall clean the r.ght of way of the Company, including snnw
zzzf'u^T ^'^TY/r '-' ^^ ''^ cit;thtir,T
sum of $51.50 per mile of double track surface line per m;nth
(SibUB )" ""'"*'' "' '"'' "' *'' ''°^'' '' '^""^'^ *^-'''
If at any time there shall be a deficit in the cost of service to
meet which an increase in fares would otherwise be necil'rl
the Company shall be relieved from its obligation to ckan a7d
sprinkle streets, and such exemption shall continue, untU t^e
d^cit shall have been made up from Gross Receipt and sueh
Receipts shall warrant, in the opinion of the Trustees the IZp-
tion of such obligation. (Sec. 22.) resump-
lloalth Inspectors, Firemen and Police employed by the City
shall when m full uniform, be permitted to ride free. (Sec. lof)'
The City may by ordinance provide for the use without pay for
he private right of way of the Company underthe IvaS
structure for public comfort stations. (Sec. 20.)
The Company shall pay the cost of* altering any bridge or via
duct owned by the City, in order to permit its'use by r pfd 3"
li.es and in the case of new bridges and viaducti, which ZJ
300
Seevice At Cost Agreements
\ s
he so constructed as to provide for their use in connection with
the rapid transit system shall pay one-third of the cost. The Com-
pany shall pay to the City one-third of the cost of maintaining,
repairing or renewing bridges or viaducts used by the rapid tran-
sit lines, but full cost in connection with maintenance of pave-
ment on right of way over viaducts or bridges used by surface
lines. (Sec. 23.)
Philadelphia
In lieu of charges for paving, repaving and repair of streets
for the removal of snow and in lieu of license fees for operation
of cars through streets or over bridges, the Company shall pay
to the City:
For the first ten years after the date of the 1907 Contract —
$500,000 annually;
For the next ten years, $560,000 annually;
For the next ten years, $600,000 annually ;
For the next ten years, $650,000 annually;
For the next ten years, $700,000 annually.
In addition there shall be added for each additional street in
which tracks of the Company are laid, seven cents for each square
yard if paved with macadam; eight cents if paved with asphalt
and six cents if paved with any other kind of material.
Similarly, there shall be deducted from payments made by the
Company on this account, like sums for streets in which tracks
are abandoned.
If taxes other than those on real estate or dividends are imposed
upon the Company after the date of the 1907 Contract, the
amount paid in accordance with the provisions here set forth
shall be credited upon such assessmenta (Sec. 10, 1907
Contract.)
Denver Service at Cost Ordinance
By the provisions of the ordinance, the Company is relieved
from the payment of a franchise tax of $5,000 per month, for
which it is liable and from any obligation to " pave or surface or
maintain any paving or surfacing on any street, road, alley or
highway, or to construct or reconstruct, maintain or improve any
public bridge^ viaduct or subway within the City and County of
Service At Cost Agreements
301
Denver." It is, however, required to replace any pavement or
structure removed or damaged by it. (Art. 11; Sec. 1.)
The Company is required to carry firemen and policemen of the
City and County of Denver, when in uniform, free. (Art. 10;
Sec. 1.)
Denver Elastic Six-cent Fare Ordinance
No provisions.
Minneapolis
The Company is, at the time that any street shall be paved,
required to pave with granite block or other material agreed upon
the space between its tracks and keep such pavement in repair.
In addition, it is required to defray one-half of the cost of the
paving foundation for a space two feet on the outside of its tracks
and keep the pavement in such space in repair. There is no pro-
vision relative to repaving. (Sec. 27.)
The Company is required to keep free from snow and ice that
portion of the street occupied by its tracks. It shall oil, or
sprinkle with water such portion of streets occupied by its tracks
as the City Council may require. (Sec. 26.)
In order to reduce the rate of fare, the City may, if it so elects,
relieve the Company from obligations to pave and maintain pave-
ment, or to clean, oil or sprinkle streets. (Sec. 26.)
If the State laws require, reduced rates shall be provided for
Firemen and Policemen. (Sec. 8.)
F. FARES
l.__ SCHEDULES OP
Chicago
The Grant prescribes an initial rate of fare for rides within
present or future city limits of five cents for adults, three cents
for children under twelve years of age, and free rides for chil-
dren less than seven years of age when accompanied by a fare
paying passenger. Transfers between cars on the surface lines,
and between trains on rapid transit lines to be free, but, if in the
judgment of the trustees such a charge is necessary, a charge
not exceeding two cents to be made for transfers between surface
and rapid transit lines. (Sec. 17.)
^ 20
302
Service At Cost Agkeements
For rides between points outside of City limits, or between
points inside City limits and those outside, present fares shall
maintain, until changed by the Trustees, with the consent of
authorities having jurisdiction. (Sec. 17.)
If required, fares shall thereafter be increased or decreased
by such stages as the Trustees may decide. In this connection
such charge for transfers as may seem expedient to the Trustees
may be imposed. The action of the Trustees in increasing or
decreasing fares is subject to such control or regulation as may
be pi-escribedby law. (Sec. 17.)
General regulations for the issuing of transfers are contained in
the Grant. (Sec. 17.)
Health Inspectors, Firemen and Policemen of the City, when
in full uniform are carried free. (Sec. 19.)
ISTo passes shall be issued, but employees of the Company may
be carried free, either upon tickets issueil by the Company, a
record of which shall be kept, or when wearing an official badge
to be furnished by the Company. (Sec. 19.)
The Company may make with the approval of the City Coun-
cil an arrangemait with the United States Post Office Department
for lump compensation, so that "Mail carriers shall be carried with-
out payment of fares. (Sec. 19.)
Philadelphia
The initial fare was fixed by the Grant at five cents, with free
transfers between all parts of the system, including both rapid
transit and surface line and the Company's and the City's lines
except in the Delivery District (that portion of the City lying
between Arch street on the north and Locust street on the South,
l>oth inclusive, and between the Delaware and Schuylkill rivers).
Exchange tickets, for which a three-cent charge is made were
abolished, except as to the Deliveiy District, in which the charge
was to be abolished upon the opening of the first section of the
Frankford line, the Board however, being authorized to desig-
nate eertain points within such District as non-transfer points,
if necessarv' to relieve congestion. (Art. 21.)
No further schedule of fares is provided, it being the duty of
the Supervising Board to prepare such schedule for presentation
Service At Cost Agreements
303
to the Pennsylvania Public Service Commission, if a revision of
fares either upward or downward is contemplated. (Art. 21.)
Denver Service at Cost Ordinance
The ordinance contains no schedule of fares. It is provided
that fares for adults shall l>e decreased or increased in the method
provided in the ordinance, by steps of one-half cent each, and that
fares for children more than six and less than 12 years of age
shall be one-half the adult cash fare, and that upon the taking
effect of the ordinance, the Board of Control shall arrange and
promulgate schedules of fares to conform to the provisions of
the ordinance. In cases where an increase or a decrease of fare,
results in a fractional fare, tickets shall be sold on cars, and the
cash fare shall be the next highest exact number of cents. There
?hall be no charge for transfers. (Art. 6; Sees. 2, 3 and 4.)
Children under six years of age, trainmen of the Company and
firemen and policemen of the City of Denver, when in uniform,
shall be can-ied free. (Art. 10; Sec. 1.)
The ordinance provides that the rate of fare to be put in effect
when the ordinance becomes effective, shall be six cents for adults
and three cents for children. (Art. 6; Sec. 5.)
Denver Elastic Six-cent Fare Ordinance
It is provided that upon the taking effect of the ordinance, the
Company may charge an adult fare of six cents, childreri more
than six years of age and less than 12 years of age half price,
tickets to be sold by conductors on all cars, until the fare is
changed in accordance with the provisions of the ordinance.
(Sec. 1.)
At all times free transfers shall be given, under no greater
restrictions than prevailed at the time the ordinance takes effect.
(Sec. 2.)
Minneapolis
The initial fare for passengers more than six years of age.
shall be five cents. (Sec. 8.)
Fares shall thereafter be increased, or decreased, in accordance
with the method prescribed in the Grant, by stages of one cent,
except that when the fare is more than five cents, tickets shall be
304
Service At Cost Agreements
sold in lots of five at a discount of ten per cent from the fare then
in effect; provided, however, that if at any time when such
reduced rate tickets are sold, the earnings are insufficient to pay
the cost of the service, the sale of such tickets may be suspended
until the earnings are sufficient to pay the cost of service.
(Sec. 8.)
Tickets shall be on sale at convenient places in the City. If
fares shall be increased or decreased outstanding tickets shall be
void, but shall be redeemed by the Company at the price paid
therefor. (Sec. 8.)
Under reasonable rules and regulations made by the Company,
it shall issue free transfers, unless it is mutually agreed upon by
the City and the Company that a charge shall be made for trans-
fers. (Sec. 8.)
Children (not more than two for each paying passenger, babes
in arms one year and under not included) under six years of
age shall be carried free. No passes shall be issued to any except
Company employees. Reduced rates for Firemen and Policemen
may be made subject to State statute. The Company may con-
tract with the United States Government for the transportation of
letter carriers. ('Sec. 8.)
The Company may operate chartered and special cars at rates
uniform, compensatory and reasonable, to be approved by the
City Council. (Sec. 8.)
Despite the provisions of the Orant, the City and Company
may enter upon an agreement providing a different schedule or
arrangement of fares. (Sec. 8.)
t.— HOW FIXED
Chicago
The Company shall provide an Emergency Fund of $2,000,000,
from the sale of its bonds, the par value of which shall be added
to Capital Account. In case the receipts of the Company are
insufficient to meet the Cost of Service, such deficit shall be paid
out of the Fund, and monev so withdrawn shall be restored from
Gross Receipts, as soon as it is practicable to do so. Moneys in
the Fund may be invested in bonds and other interest-bearing
securities other than those securities of the City or Company, as
Service At Cost Agreements
305
the Trustees may see fit, and the Trustees may sell such securities
and add the market value thereof to the Fund. Interest received
from moneys in the Fund shall be added to Gross Receipts.
(Sec. 18.)
Whenever, by reason of withdrawals from the Fund, on
account of deficits paid to make good the cost of service, it shall
be reduced below $1,000,000, the Trustees shall immediately
make such increases in fares or transfer charges or both as will
not later than the end of the following fiscal year restore the
amounts withdrawn from the fund and prevent the recurrence of
such deficits during the following fiscal year. When such deficits
have been made up, if in the opinion of the Trustees, a new deficit
will not be created thereby, fares and transfer charges shall be
reduced, or transfer charges abolished, as the Trustees may deem
proper. (Sec. 17.)
If at the time of any annual report, the Surplus Receipts war-
rant, in the opinion of the Trustees, such action, fares shall be
reduced, or transfer charges reduced or abolished. (Sec. 17.)
Any increase or reduction in fares or transfer charges outside
of the City or to and from outside points shall be subject to such
control and regulation as shall be prescribed by law. (This
means that the Public Utilities Commission of Illinois might have
jurisdiction.) (Sec. 17.)
Philadelphia
Initial Surplus is defined to be the surplus on hand at the date
the Grant takes efi^ect, as determined by the special audit provided
by the Grant (See C.-4.-(c)) (Art. 1 ;*^Sec. 26). IN'ew Surplus is
the amount remaining and accumulated after the payments of the
items of cost of service provided by the Grant. (See E.-l.) (Art.
20; Sec. 3.)
If in any year Gross Revenue shall be insufficient to provide
for the payment of the items of cost of service as provided for
in the Grant, such deficits shall be made up from ISTew Surplus
until that be exhausted, and then from Initial surplus to the
extent of $2,000,000. Should there still be a deficit, it shall be
accumulated and paid from later Gross Revenue. (Art. 20;
Sec. 3.)
30G
Service At Cost Agreements
In case of the destruction of or serious damage to the system,
or a continued interniption of noimal operation, which results in
the suspension or curtailment of payments on account of Depre-
ciation Funds, sinking fund payments provided by the 1907 con-
tract, payments on account of the taxation of dividends of under-
lying companies, payments in lieu of paving' and license assess-
ments, return on the Company's or City's investment, or the fur-
ther payment provided on account of the City's investment, the
Company is not required to make up such deticits out of Initial
Surplus, if such surplus has been depleted to the extent of
$500,000 or more and not restored, nor shall the Company he
required to at any time make good deficits from such causes to an
extent of more than $500,000, if the total depletion of the Initial
Surplus is caused thereby. (Art. 20 ; Sec. 8.) Fares shall not be
increased to make up such deficits, nor shall they be made up
unless the Supervising Board shall sanction payment out of after-
acquired New Surplus resulting from "normal and reasonable
fares." (Art. 20 ; Sec. 3.)
If all the payments provided under cost of service cannot be
currently met, New Surplus shall be eliminated and Initial
Surplus depleted to the extent of $500,000, fares shall be revised
upwards, so as to provide Gross Revenue sufficient to provide such
cost of service, restore within a reasonable time, Initial Surplus,
and any deficit in the items of cost of service. (Art. 21.)
Within thirty days after the Initial Surplus shall have been
depleted to the extent of $500,000, the Board shall prepare and
file with the Pennsylvania Public Service Commission a schedule
of fares, which in its opinion, will produce the needed amount of
Gross Revenue. If for two quarterly periods under such new
schedule the Gross Revenue shall be insufficient to pay the
cost of service, and provide a surplus sufficient within a reason-
able time to make up money taken from Initial Surplus and pay
any deficits accumulated in cost of service, or if Initial Surplus
having been restored shall. be again depleted to the extent of
$500,000 by reason of pa^Tuents of account of current deficits
in cost of service, the Board shall file a new schedule of fares
which, in its opinion, will provide sufficient Gross Revenue.
(Art. 21.)
Service At Cost Aqueements
307
If during the first year of operation of any section of the
City's Transit Facilities, (during which first year no return is
paid to the City on account of its investment), it shall develop
to the satisfaction of the Board, that fares then in efl^ect will not
be sufficient during the ensuing year to provide Gross Revenues
sufficient to meet the cost of the service, the Supervising Board
may prepare and file with the Public Service Commission a new
schedule of fares to take effect, on the date from which the City
begins to receive a return upon its investment. (Art. 21.)
The power to permit increases of rates rests with the Pennsyl-
vania Public Service Commission, which may suspend schedules
filed by the Board. In case of such suspension, and if rates are
not effective within thirty days from the time that tariffs are
filed, the Company, may suspend payments to the City on account
of the remission of paving assessments and licenpes, to such an
extent as will make possible the payment of the return to the City
and the Company and the additional payment on account of the
City's investment, and such suspension shall continue until rates
sufficient to provide the cost of service shall be made effective.
(Art. 21.)
If for two consecutive years, the surplus shall increase a sub-
stantial amount annually, and New Surplus shall equal or exceed
$2,000,000, fares shall be revised downwards. The Supervising
Board shall within thirty days after reports showing this state of
affairs, file a schedule of rates and charges which, in its opinion,
will reduce Gross Revenue, but which will at the same provide
revenue enough to meet the cost of service, after applying thereto
each year, one-third of the New Surplus, accumulated at the time
the schedule is filed, such schedule to take effect within thirty
days. Fares shall be further reduced whenever New Surplus shall
have again accumulated to the extent above described. (Art. 21.)
If any part of the City's Transit Facilities are withdrawn
from the system operated by the Company and the operations of
the previous year indicate that the existing schedule fares will
produce more revenue than is sufficient to meet the cost of the
service, the Supervising Board shall prepare and file with the
Public Service Commission forthwith, a schedule of fares and
charges which in the opinion of the Board will reduce Gross
308
Service At Cost Agreements
Revenues to the extent of the interest and sinking fund charges
upon that portion of the Transit Facilities so withdrawn, except
that Oross Revenues shall not he reduced below the point neces-
sary to provide the cost of service on the remaining system.
(Art. 21.)
Denver Service at Cost Ordinance
The Company is obliged to provide a fund of $300,000 to be
known as the Fare Control Fund. The " normal '' amount of
such Fund shall be $300,000. (Art. 7; Sec. 1.)
Into the Fare Control Fund shall be paid monthly any surplus
remaining from Gross Earnings after the cost of service has been
paid; from it shall be taken monthly any deficit in the cost of
service. (Art. 7; Sec. 2.)
If by reason of payments into it from Gross Earnings, the
Fare Control Fund shall at any time amount to $500,000, which
amount shall be known as the " upper limit '' of the Fund, fares
shall be reduced to the next lower rate in the schedule. If in
spite of the reduction in fares, the Fare Control Fund again
reaches the " upper limit," fares shall again be reduced, and this
process shall continue until Fund remains at the " Upper Limit "
or below. (Art. 7 ; Sec. 3.)
When by reason of withdrawals from the Fare Control Fund.,
it shall be reduced to $100,000, which sum shall be known as
the " Lower Limit " of the Fund, the fare shall be increased to
the next higher rate in the schedule. If after such increase fur-
ther withdrawals are made from the Fund to meet the cost of serv-
ice, fares shall be increased again, and such increases shall con-
tinue to be made until payments into the Fund out of surplus are
made. The ordinance states that the Fare Control Fund " shall
be maintained as nearly the " normal " amount as possible consist-
ent with the purpose to render service to the public at actual
cost." (Art. 7; Sec. 4.)
Denver Elastic Six-cent Fare Ordinance
The initial fare permitted by the ordinance is conditioned on
the payment by the Company of the wages fixed in the award of
the ]?^atictnal War Labor Board, dated November 20, 191S.
Service At Cost Agreements
zm
If at any time wages paid employes are increased or decreased,
the Company shall so notify the Board of Control, and the Board
may increase or decrease fares to take care of such increase or
decrease in wages. If increased they shall not be increased more
than will produce revenue sufficient to provide the increase in
wages, and if decreased they shall not be decreased more than the
difference in the sum total of wages paid before such decrease
and the sum total paid after such decrease. In no event shall fares
be increased to meet any increase in wages, which will provide a
scale higher than the average hourly scale paid in the cities of St.
Louis, Omaha, Kansas City, Minneapolis and St. Paul. If at any
time the Board of Control should ascertain that the wage schedule
of the Company is in excess of the average schedule paid in the
above named cities and higher than the scale fixed bv the National
War Labor Board as of November 20, 1918, the Board of Con-
trol shall determine the fare to be charged to meet such schedule
The Board of Control shall act upon any notification of wage
mcreases or decreases within ten days of the receipt of such notifi-
cation and the Company shall put into effect fares determined by
the Board of Control, within ten days of the receipt of notification
of change. (Sees. 3 and 4.)
Minneapolis
A fund for Stabilizing Fares is established by the provisions of
the Grant, to consist of the sum of $250,000 furnished bv the
Company and added to Capital Value. From this Fimd all
deficiencies in the Cost of Service are met, except that when the
sum therein is insufficient to make up such deficits, they shall be
paid from subsequent Gross Receipts, or from the proceeds of
loaiis made by the Company to be repaid from subsequent Gross
Receipts at the rate of one-twelfth and interest thereof each
month. To the Fund shall be added all Surplus Earnings.
(Sec. 12.)
If at the end of any fiscal year the Fund shall amount to
$450,000 or more, the excess in the Fund to the amount of not
less than $100,000 or more than $200,000 as directed bv the City
Council shall be paid into the Amortization Fund. (Sec 19 )
If the Fund be increased to $500,000 and the Company esti-
mates that the next. lower fare will produce sufficient revenue to
310
Sekvice At Cost Agreements
Service At Cost Agreements
311
provide for payment from Gross Receipts into the Fund, the next
lower fare shall be put in effect. If at the end of three months
after the time when the lower faro goes into effect, the Fund shall
have accumulated an additional sum, the fare shall be reduced to
the next steps and such reductions shall continue at three month
intervals, until accumulations in the Fund shall have ceased.
(Sec. 12.)
If at any time the amount in the Fund shall be reduced to
$150,000 by reason of payments on account of deficits in the Cost
of Service, the fare shall be increased one step, and if at the end
of three months, the Fund shall be further reduced for the same
cause, the fare shall be increased another step and if at the end
of three months, payments are still required from the Fund,
increases by successive steps shall be continued at three month
intervals, until payments from the Fund on account of deficits in
Cost of Service are no longer required. (Sec. 12.)
Notice of increase or decrease of fare shall be given by the
Company through publication in one paper of general circulation
in the City and by the posting of notices in the Company's car*
on or before the 15th of the month, prior to the month upon the
first day of which such increase or decrease shall be effective.
(Sec. 8.)
The Stabilizing Fund shall be deposited at interest and such
interest shall be added to Gross Receipts. (Sec. 12.)
O. TRANSPORTATION OF FREIGHT, EXPRESS, ETC.
Chicago
" No part of the local transportation system shall be used for
any purpose but the transportation of passengers except as herein
expressly provided." (Sec. 1.)
The Company may carry and handle express matter, baggage,
mail, milk, parcels and such other package freight as may be des-
ignated by the Trustees, and at rates to be fixed and regulated by
the Trustees. It may enter into contract, with the approval of the
City Council, with suburban and interurban companies, for the
operation of freight or express cars of such companies over its
tracks, such cars to be approved as to design and equipment by the
Trustees. (Sec. 20.)
Philadelphia
Subject to such restrictions as the City may impose, the Com-
pany may use the Unified System for the transportation of freight,
mail, express and other unobjectionable matter, except that the
use of the system for the transportation of passengers to its fullest
capacity shall not be interfered with. Within these limits the
City may require the Company to carry freight, mail and other
unobjectionable matter. (Art. 17.)
Denver Service at Cost Ordinance
*' The Company is authorized to carry United States mail and
light parcels, besides those in possession of the passengers, if not
interfering with the convenience and safety of passengers. The
Company shall also, by and with the consent of the Board of
Tramway Control, have the right to haul or transjwrt in suitable
cars, such materials and supplies for and on l^ehalf of the City
and the public, at such times and over such routes as the Board
of Tramway Control may approve. All charges for such service
shall be compensatory, uniform and reasonable and shall be
subject to the approval of the Board of Tramway Control." (Art
0;Scc. 1.)
Denver Elastic Six-cent Fare Ordinance
No provisions.
Minneapolis
The Company may carry on its cars mail and light parcels
besides those in the possession of passengers, under rules and
regulations approved by the City Council and at charges which
shall be uniform, reasonable and compensatory. (Sec. 2.)
The Company is required when ordered by the City Council to
transport over its lines materials for municipal construction and
other purposes at a reasonable compensation, and the City may
construct or require the Company to construct at the City's
expenses., tracks connections between the City's warehouses and
the Company's tracks, but the transportation of material for City
or for Company use shall not be allowed to interfere with the use
of the tracks and facilities of the Company for passenger trans-
portation. (Sec. 2.)
1
312
Service At Cost Agreements
H. SPECIAL PROVISIONS
Chicago
Labor:
Hours of labor and working conditions shall conform to just
and reasonable standards of safety, health, comfort and efficiency.
Wages shall be just and reasonable and not less than customarily
paid for services of like character under substantially similar
conditions. (Sec. 27.)
Intervention and Enforcement:
The City may intervene in any suit brought to enjoin, restrain
or interfere with the Company in the doing of any work called
for by the Orant, in the observance of the terms of the Grant,
or in an action to foreclose under any lien, mortgage or trust deed.
The City may by mandamus, injunction or other appropriate
legal proceedings, compel the performance of their respective
duties and obligations by the Company or the Trustees and the
Company may likewise proceed against the City. (Sec. 29.)
Lease or Assignment:
The Company may make no lease or assignment, or operating
agreement without the consent of the City. (Sec. 31.)
Philadelphia ,
Right to Dissolve Unified System:
It is provided by the Grant that the Transit Facilities owned
by the City shall be combined with those owned by the Company
and operated as a unified system. At the termination of the
Grant, the City may dissolve the Fnified System and reacquire
its property. In this event the Company shall :
Surrender to the City the City's Transit Facilities in good
condition and repair, except for natural deterioration, but it shall
not be required to make good damage or destruction caused by
war, riot, earthquake or other extraordinary occurrence not
insurable, " and generally comprehended under the term of God
or vis major "j (Art. 26; Art. 28; Sec. 1.)
Service At Cost Agreements
313
Surrender to the City all Transit Facilities furnished by it for
the City, provided that the City shall pay to the Company an
amount equal to the cost of such facilities, less —
Any repayment of such cost which the Company shall already
have received through the operation of any Amortization Fund,
or otherwise,
The amount of securities issued for such cost, if the same have
been fully amortized, or if the City shall assume the same.
The amount of amortization of securities issued in payment for
such Transit Facilities which shall not be assumed by the City;
Nora: If securities have been issued which cover expenditures on accoJnt
of both City and Company Transit Facilities, the Supervising Board shall
determine the proportion to be assigned to each. (Art. 28; Sec 1.)
Pay to the City the City's share in the then existing IN^ew Sur-
plus, which share shall be apportioned upon the same basis as
that provided for calculating the return to the City and Company.
(See E.-l.) (Art. 28; Sees. 1 and 2.)
Initial Surplus shall remain the property of the Company
(Art. 28; See. 2.) ^'
If the Unified System be dissolved by reason of any default
upon the part of the Company, then the Initial Surplus and the
Company's share of ISTew Surplus shall be available for any
damages awarded to the City by the Court. (Art. 28 ; Sec. 2.)
Assignment:
The contract shall not be assigned, sublet, or mortgaged without
the consent of the City expressed by ordinance. The appointment
of a Receiver for the Company shall not be considered an assign-
ment or cause for termination of the Contract. (Art. 32.)
Public Svhsidy:
" The City reserves the right from time to time to determine
what portion of the interest and sinking fund charges upon its
investment in Transit Facilities shall be borne by the car-riders
and what portion shall be borne by the taxpay^ir * * ♦."
Accordingly the City may withdraw any or "all of its in-
vestment from the rental requirements of the Contract, in which
314
Service At Cost Agreements
case no return shall be paid on the portion so withdrawn and this
fact shall he taken into consideration in computing schedules of
fares. (Art. 18.)
Extraordinary Repairs:
In case of damage to or desti-uction of any of the City's Transit
Facilities by war, riot, earthquake or other extraordinary occur-
rence not ordinarily insurable, and generally comprehended under
the term act of God, or vis major, the same shall be repaired or
replaced by the City and charged to the cost of the City's Transit
Facilities. (Art. 26.)
Denver Service at Cost Ordinance
No special provisions.
Denver Elastic Six-cent Fare Ordinance
No special provisions.
Minneapolis
Wages and Worlcing Conditions:
The hours of work and working conditions shall conform to
just and reasonable standards of safety, health, comfort and
efficiency. Employes shall not be required to work more than 54
hours in any one week. Wages " shall be just and reasonable and
not less than shall be customarily paid for services of like char-
acter under substantially similar conditions." (Sec. 6.)
Any properly accredited committee representing fifty per cent
of the employes of any department, with or without counsel, shall
be entitled to a hearing from the Company and the Company
shall take up for adjustment any matter of wages, hours of lal)or
or working conditions presented by such committee. If the Com-
pany and the Committee are unable to agree, and the employes
ask for arbitration of the matter in dispute, then the Company
shall consent to such arbitration, which shall be conducted in the
same manner as is provided in the Grant for the arbitration of
other questions, except that the employes shall select one of the
arbitrators in place of the City. (Sec. 6.)
Service At Cost Agreements
315
Central Passenger Station:
The City may construct, or may authorize any other person,
corporation or association, including the Company, to construct,
a central passenger station for the handling of suburban and
interurban passengers. United States mail and express, and for
the storage of Company cars to be used in rush hour periods, and
compel the use of such station by suburban companies. The
station shall be located in the retail business district of the City,
and its location may be decided upon by agreement between the
Company and the interurban and suburban companies, approved
by the City Council, or, failing agreement, by the Council itself.
The City may require the Company to use such station for the
storage of cars to be used for rush hour purposes and shall approve
plans and specifications for its construction. (Sec. 22.) The
compensation to be paid by the Companies using the station shall
be fixed by the City Council in the manner provided for fixing
the compensation for the use of Company tracks by suburban
companies. The Company shall construct such tracks as will
permit of the tracks of the station to be connected with those of
the Company, but the owner or owners of the Station shall con-
struct all tracks in the station and connections with the Company's
tracks. (Sec. 22.)
Division of Revenues of Inter-City Lines:
The Company operates in connection with the St. Paul City
Railway Company inter-city lines between St. Paul and Minne-
aix)lis. The Grant provides that fares collected on such lines,
within the City limits on trips to St. Paul, shall be credited to
the St. Paul Company, and that fares collected within the City
limits of St. Paul on trips to Minneapolis shall be credited to the
Minneapolis Company. Expenses of the inter-city lines, including
interest and maintenance, incurred east of a point midway
between the two cities, shall be borne by the St. Paul Company ;
those incurred west of such a point shall be borne by the
Minneapolis Company. (Sec. 24.)
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0044267703
FEB 2 7 1930
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