District Commissioners should take over the street railways, issue 30-year bonds at 32 per cent to pay for the property and operate the roads. Under the bill the commissioners were authorized to make an agreement with the owners as to the price, and in the event of a disagreement, to proceed to condemnation. Out of the annual receipts a sinking fund for the amortization of the bonds was to be built up. The minority report (District Committee report on Crosser municipal ownership bill, July, 1914) vigorously opposed municipal ownership and operation. The Chamber of Commerce opposed municipal ownership and operation. The Washington Star, in its issue of July 2, 1914, termed the bill "a municipal paradox." Representative Crosser reintroduced his bill in 1916 in Congress. Senator Norris, of Nebraska, was represented in the Evening Star of March 6, 1916, as wanting the District of Columbia to own the street car lines. In 1917 a serious strike occurred among the employees of the Washington Railway & Electric Co., resulting in renewed agitation for public ownership, and on October 6, 1917, the Senate District Committee made a report urging public ownership. On June 28, 1921, a House special committee reported favorably on ownership of street-car lines by the District of Columbia, but on August 7, 1921, the House District Committee rejected municipal ownership. Mr. Clayton, of the Federation of Citizens' Associations, opposed government ownership (hearings on H. R. 2922, 66th Cong., 1st sess., p. 129). The companies consistently opposed government ownership. 4. ANOTHER PLAN An interesting bill was introduced October 8, 1919, in the House of Rperesentatives by Representative Romjue, of Missouri, written by former corporation counsel Conrad B. Syme, of the District of Columbia, and sponsored by the Allied Trades of the Bureau of Engraving and Printing. (Hearing on H. R. 9806 and 11753, 66th Cong., 2d sess., before House District Committee, p. 204, et seq.) Mr. Syme's proposal, in brief, was that a merger should be effected, either by the formation by act of Congress of a new company to take over the two existing companies upon an agreed basis of purchase, or the purchase by the Capital Traction Co. of the Washington Railway & Electric Co., and further that a fare of 5 cents or six tickets for a quarter be inaugurated with universal transfers, and further that the stockholders should be given a guaranteed return of 6 per cent or 7 per cent with a provision for making good any deficit out of unappropriated District funds in the United States Treasury. His proposal also provided that further extensions should be paid for and owned by the District and leased to the consolidated company; that the public should be given a representative on the board of directors and that the consolidated company should be relieved of District taxes. No action was ever taken on this measure. 5. SERVICE-AT-COST PLANS The proposal that following a consolidation the rates of fare on the street-car lines of the District of Columbia should be regulated on a so-called "service-atcost" basis has been mentioned previously in the discussion of other plans. Such a basis, which is now in existence in Boston, Mass.; Dallas, Tex.; Cincinnati and Cleveland, Ohio; and in numerous other cities, has met with very general support in the District of Columbia from individuals and organizations, generally opposing each other on other suggestions. As a result, such a plan has been approved by the Public Utilities Commission and the District courts in the case of the Potomac Electric Power Co., and the principle is definitely recognized in paragraph 18 of the public utilities act (37 U. S. Stats. 974) as follows: "That nothing in this section shall be taken to prohibit a public utility with the consent of the commission from providing a sliding scale of rates and dividends according to what is commonly known as the Boston sliding scale, or other financial device that may be practicable and advantageous to the parties interested. No such arrangement or device shall be lawful until it shall be found by the commission, after investigation, to be reasonable and just and not inconsistent with the purposes of this section. Such arrangements shall be under the supervision and regulation of the commission. The commission shall ascertain, determine, and order such rates, charges, and regulations, and the duration thereof, as may be necessary to give effect to such arrangement, but the right and power to make such other and further changes in rates, charges, and regula tions as the commission may ascertain and determine to be necessary and reasonable, and the right to alter or amend all others relative thereto, is reserved and vested in the commission notwithstanding any such arrangement and mutual agreement." A brief summary of "service-at-cost" plans in effect in many cities was presented to the Public Utilities Commission in 1926 by Major Covell, Assistant Engineer Commissioner, District of Columbia, with the introductory statement that "well over a decade of experience has shown that commission regulation is immeasurably better than legislative control, but that even further improvements can be made. One of these, applicable especially to transportation companies, is the service-at-cost plan. Service at cost is the term applied to the method of conducting the business of a transportation company as a quasiprivate enterprise by which the fares paid are made to respond automatically to the cost of service, this cost including the cost of capital, preferred and common stock, as well as bonds. This method differs from ordinary commission regulation only in being automatic. It is merely another step in the same direction, a step which tends to simplify and expedite regulation by the commission." As previously stated, former Engineer District Commissioner Kutz indorsed the service-at-cost plan in 1921. * * "Service at cost has also been proposed several times by Mr. William McK. Clayton, representing the Federation of Citizens' Associations. In 1921 he said: "Under the service-at-cost plan we could have fair rates * We would then pay for whatever service we got. If we wanted two cars instead of one, we would pay for the two. Under the Cleveland scheme (service-at-cost plan) I think you would get a workable plan and a fair plan." Also, as previously stated, "service at cost" has been proposed by President Hanna of the Capital Traction Co. (hearing on H. R. 11753, 66th Cong., 2d sess., p. 331) and by President Ham of the Washington Railway & Electric Co. (hearing on H. R. 11753, 66th Cong., 2d sess., p. 47). A service-at-cost plan in the case of the Potomac Electric Power Co. has also been indorsed by the Public Utilities Commission and by the District courts, and is now in effect, and has resulted in a yearly reduction in electric light rates from a domestic household rate of 10 cents per kilowatt-hour to 5.9 cents per kilowatt-hour. In summarizing his suggestions in 1926, Major Covell stated that he believed "a modern transportation franchise for the District of Columbia shouldFirst. Safeguard the integrity of the capital invested by, (a) Making the franchise terminable only under certain agreed conditions, such as purchase, and (b) Providing for the necessary reserves. Second. Include all mass transportation within the metropolitan area of this community, and allow for necessary extensions. Third. Make the company carry its proper tax burden, and no more. Fourth. Provide for a variable scale of net return to insure efficiency and economy safeguarded against changes in the actual worth of the dollar and against public demands for exorbitant extensions of trackage or service. Fifth. Allow for possible collection of fare, kind of fare, etc., which will not materially affect net revenues. Sixth. Contemplate the possible use of public credit for the purposes of: (a) Reducing fare by cutting the cost of capital, or, (b) Providing rapid transit lines. d. Valuation, rate of return and authority to change trackage.-In addition to the considerations already emphasized, discussion of the consolidation plans have also involved the following points: 1. Valuation: During the early days of merger discussion, there were many loose assertions regarding watered stock, etc., and many merger movements failed because no official valuation of the properties involved had been made, and the owners of the companies were unable to agree upon the comparative values. This difficulty has now apparently been overcome because, pursuant to power vested by the law creating the Public Utilities Commission, the commission placed valuations upon the Potomac Electric Power Co., upon the Capital Traction Co., and upon the Washington Railway & Electric Co. properties within the District of Columbia, and the valuations of the power company and of the Capital Traction Co. have been finally reviewed by the courts, and the District Court of Appeals in valuing the Capital Traction Co. property laid down principles which make it simple for accountants to value the property of the Washington Railway & Electric Co. In discussions between the two companies as to the relative valuations of the properties, the subject has been considered entirely upon the basis of relative earnings, and while completely reserving all their rights under the court decisions, some of the more recent plans, and particularly the plan of Mr. Harley P. Wilson, have arrived at a rate base for consolidation purposes (exclusive of additional money to bring about the consolidation for working capital, etc.), by capitalizing estimated earnings, this rate base being $50,000,000, or a reduction of more than $12,000,000 below the legal valuation. 2. Rate of return: In the Potomac Electric Power case the court allowed a rate of return on the legal valuation of 72 per cent. As reviewed in the previously mentioned memorandum by Major Covell in 1926, Cleveland, upon an agreed basis allows actual cost on bonded indebtedness and 7 per cent on stock, Youngstown 7 per cent, Memphis 62 per cent to 72 per cent, and Dallas 7 per cent to 9 per cent, depending on fares. Various reviews of court decisions fixing rates of return for public utilities have been inserted in the hearings before congressional committees. Apparently it has been generally agreed that the rate of return if fixed by the courts would not be less than 7 per cent. VI. SUMMARY The history of merger or consolidation agitation in the District of Columbia, therefore, makes clear the following proposition: 1. The demand for a merger or consolidation of street railway and bus facilities in the metropolitan area of Washington, is unanimous. 2. The consolidation should be upon a voluntary basis between the stockholders of the private companies, since plans for forcing a consolidation are either unconstitutional or would lead to years of litigation, and thus postpone actual consolidation. 3. Values of the transportation facilities are constantly increasing, thus adding to the basis upon which a fair return must be paid to the private owners, and making an immediate solution of the problem imperative in the public interest. All of the elements, such as valuations, etc., which have prevented a consolidation in the past, have now been eliminated, and the actual inauguration of an enlarged public building program by the National Government, increasingly difficult traffic conditions, and the completion of various city planning studies, including that of the National Capital Park and Planning Commission, make the immediate solution of the problem both possible and necessary. RELATION OF THE POTOMAC ELECTRIC POWER CO. TO PROPOSED TRACTION CONSOLIDATION For many years the Washington Railway & Electric Co., as a corporation, has owned all of the stock of the Potomac Electric Power Co. These companies have continued as two separate entities, but have identical boards of directors and officers. All of the power for the Washington Railway & Electric Co. has been furnished by the Potomac Electric Power Co. At various times bills have been introduced in Congress both to prevent and to permit a merger of these companies. The stock of the power company was acquired by the railway company under authority of the law of 1900, which, however, forbids the railway company from taking over the franchise and property of the power company. This direct inhibition is still in effect. In 1914 the Public Utilities Commission prepared and caused to be introduced H. R. 14896, Sixty-third Congress, second session, the same being a bill for the separation of electric power and street railway companies. This bill required the railway company to sell and dispose of its power company securities within six months, and failing so to do, such sale would be made by the Supreme Court of the District of Columbia. During the ensuing hearing upon this bill the commission was most insistent in its support of the bill, urging that the close relationship between these companies was not for the benefit of the public. It was further contended that a separately owned and controlled corporation engaged in the business of manufacturing clectricity for the purpose of supplying power to all street railway lines in the District of Columbia would be able to earn reasonable returns on its investment at materially reduced rates for its services. The commission contended that there should be a complete separation so that there could be no possible confusion as to costs of the production of power. In 1916 a bill was introduced authorizing a merger of the Washington Railway & Electric Co. and the Potomac Electric Power Co., H. R. 11058, Sixty-fourth Congress, first session. The Public Utilities Commission contended as in the previous hearing on the separation bill in the preceding Congress that the close relationship of the two companies was not in the public interest and further that the commission's difficulties of regulation would be increased by the proposed consolidation of the railway company and the power company. The House District Committee at the conclusion of the hearing rejected the bill. In connection with several propositions in the past for a traction merger it has been suggested that the Potomac Electric Power Co. be included. As a matter of fact, the manufacture and distribution of power is a separate and distinct business in itself entirely different in every way from the operation of a transportation system. Engineers are agreed that these two industries should be required to each stand on its own bottom and in no way should the costs of light and power to consumers be confused with the fares required of riders on the street railways. For these reasons the power company is not included in the proposed merger. It is provided, however, that the Washington Railway & Electric Co. be required to cause a long-term contract to be executed for the supplying of power to the merger company at the same cost as the aggregate present cost of power to the two railway companies. It is significant that all of the suggestions now before the public are based upon a separation of the power company. Mr. Bachman of the Public Utilities Commission urged that it be left out of a merger. The Hansel report said that "under present-day methods of regulation it is decidedly in the public interest that there be a complete divorcement of power and railway companies." BIBLIOGRAPHY TOPICAL INDEX TO NEWS ARTICLES, 1912 TO 1927 This index to news articles appearing in the Evening Star is published for a twofold reason: 1. To give a bird's-eye view of the local transportation problem over a long period, showing graphically its perennial character. 2. To aid students of the subject who may wish to consult newspaper files on the various phases. The files of the Evening Star may be consulted at the Library of Congress. 1912 Hearing transfer bill before Senate committee. Representative George advocates municipal ownership. Gallinger and Works public utilities bills in parallel columns.. Bill in House for new subway and surface system.. Senate committee reports Gallinger-Commissioners' bill. Corporation formed to control all utilities of District of Columbia. Utilities Commission plan would benefit public more than a merger. Plans and scope of local merger outlined.. Directors of companies ready to meet merger plan.. Big merger may handle utilities under new name.. Commissioner Judson submits series of questions to promoters of merger. Washington-Virginia directors to act on merger. Question of merger may be decided Saturady; objections in Virginia. Rev. John Van Schaick discusses merger in sermon. Merger plans wait on Virginia Utilities Commission. Rev. Dr. McKim preaches against merger District of Columbia may fight proposed merger.. Proposal to ask Congress to halt merger. Commissioners instruct corporation counsel to begin legal proceedings to prevent merger Department of Justice and District of Columbia officials confer regarding merger. Merger started under name of Washington Utilities Co... 1913 Washington Utilities Co. acquires Chevy Chase to Great Falls line. Projects in Congress for new lines. Public Utilities Commission created as a rider on District of Columbia appropriation bill passed March 4, 1913.. More details of merger. Commissioner Judson opposes absorption by corporation. 1914 Representative Crosser before Economics Study Club advocates city ownership.. Project for merger of all District of Columbia utilities before Senate committee. Feb. 25 Senator Norris favors bill to separate Washington Railway & Electric and Potomac C. P. King says divorce of Washington Railway & Electric and Potomac Electric Power Representative Crosser introduces bill for condemnation proceedings and public ownership.. Wilson denies knowledge of Crosser public ownership bill. Mar. 30 12 Park View citizens hear talk by commissioners on public ownership.. Apr. 4 3627 5 Commissioners favor bill to separate Potomac Electric Power Co. and Washington District of Columbia Committee approves Crosser bill by vote of 9 to 8.. June 6 Consideration of Crosser bill probably delayed in the House. June 7 Piney Branch citizens and Central Labor Union indorse municipal ownership.. June 9 President King of Washington Railway & Electric predicts loss under municipal ownership.... Union labor advocates get reports on municipal ownership in the West.. July 17 Aug. 3 91155 — 1 Maryland-District of Columbia Federation of Labor indorses municipal ownership, but not the Crosser bill. Corporation Counsel Syme insists on divorcing Potomac Electric Power Co. and Washington Railway & Electric.. Dec. 10 3 1915 Crosser bill may go over. Commissioners favor one management next to municipal ownership.. George E. Hamilton before Federation of Citizens' Association. W. McK. Clayton asks consolidation of traction companies.. Capital Traction and Washington Railway & Electric merger hanging fire. 1916 Representative Crosser reintroduces ownership bill. Jan. 17 Bill in House for merger of Washington Railway & Electric and Potomac Electric Power Feb. 9 President King, of Washington Railway & Electric addressed Federation of Citizens' Plan of Federation of Citizens' Associations for utilities development by cooperation favored.... House committee to discuss Washington Railway & Electric and Potomac Electric Power Commission Kutz tells Federation of Citizens' Association commissioners may authorize but not order a merger... |