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seven cents, on the plea that the increased cost of operation made it impossible to continue furnishing service at the franchise rate. At the end of December, 1918, the company went into the hands of a receiver appointed by the federal court. In preparation for their defense, the indicted Brooklyn Rapid Transit officials employed as associate counsel two of the judges in the county in which the trials were to take place. Public opinion in Brooklyn was further inflamed by this action and a measure was introduced into the legislature at Albany, and was passed by the senate, to prohibit these judges from serving as counsel in the cases. Meanwhile the trials of two of the defendants went on and resulted in acquittals. The proposed legislation not having become effective, the county judges played their part in selecting the jury and in summing up the evidence. A third trial recently resulted in a disagreement. An accident, probably the most terrible in the annals of local transportation in the United States, and resulting directly from a dispute between the company and its employes over the question of organization, bids fair to pass into history without any legal punishment being inflicted upon those who were responsible directly or indirectly for it. The hostility of the public and its sense of the futility of all efforts to secure adequate service from this company are accentuated by the fact that the Brooklyn Rapid Transit itself is a holding company, not subject to the jurisdiction of the public service commission, and carries on its public activities through a group of subsidiary companies whose financial and legal relations are so intricate as to baffle public understanding. The accident and the outcome of the trials only accentuated a feeling of bitterness against the company that poisoned the

political atmosphere of Brooklyn and has rendered next to impossible any solution of the local transit problem that is dependent upon a spirit of co-operation and mutual good-will between the public and the company.

This Brooklyn Rapid Transit accident and its complex and far-reaching consequences illustrate how the whole street railway situation is charged with dynamite. The mere suggestion that, through a financial breakdown necessitating the neglect of equipment, or through a disagreement between companies and their employes leading to the temporary use of inexperienced substitutes, the operation of local transit systems in the great cities of the country may become subject to such disasters as that which occurred in Brooklyn a year ago last November, is ominous of the dangers ahead unless a prompt solution of the street railway problem is found. The dynamic possibilities for evil of the present condition of the street railway business in the United States could be illustrated in other ways from the experience of almost every city in the country. Danger to life through the physical deterioration of equipment and the demoralization of the operating force is only one of the perils that confront us.

THE LACK OF A DEFINITE PUBLIC POLICY

It cannot be denied that the American people, through their governmental agencies, are failing miserably with respect to the public utility function. This is primarily due to the overload of individual as compared with community initiative that is characteristic of our country. The problem is made much more complex by the fact that so far as street railways are concerned, public policy is determined primarily by forty-eight different commonwealths, and secondarily by hundreds

of individual municipalities. In some instances, even local transportation systems are operated in two separate states. A notable illustration is the local street railway system of the two Kansas cities. Another is the street railway system of Omaha and Council Bluffs. Another is the Hudson tubes operating between New Jersey and New York. In such cases there is a chance of conflict between the policies of two states with respect to the same local transportation problem. When it comes to municipalities, the opportunities for diversity of aim and for conflict of policy are almost infinite. In New Jersey, a single street railway company serves no less than 141 municipalities. Similar conditions on a somewhat smaller scale are found in Massachusetts, Connecticut, Rhode Island, Pennsylvania, Ohio and other states, where cities are close together and interurban street railway communication has been developed.

Street railways were originated as local urban utilities. The development of local transit is a legitimate and necessary concern of municipal

policy, as it is vitally related to city planning, the distribution of population and other essential urban problems. In recent years, however, partly as a foil to the agitation for municipal ownership, the states generally have adopted the policy of regulation through state commissions. A blind conflict has arisen between state and municipal aspirations, with the result that instead of the co-operation between central and local authorities, which in the nature of the case is essential to the successful control and development of public utilities under modern conditions, we have almost everywhere a spirit of antagonism and political strife by means of which both the municipalities and the state agencies have been paralyzed and rendered ineffective in the development and application of public policies with respect to public utilities.

Under these conditions the need for a definite, constructive street railway program, formulated in the public interest and supported by a crystallized and intelligent public opinion, is imperative.

vested with power to perform and render all public services," subject to any express limitations that may be contained in the constitution and statutes of the state. It proposed that bonds issued for water supply, "or for other specific undertaking from which the city will derive a revenue," shall not be subject to the general debt limit unless the particular undertaking, after five years of operation, fails to be self-sustaining. In brief, the original municipal program was based upon the theory of rational municipal home rule with respect

to public utilities as with respect to other municipal problems, and recognized the principle that public utility debts should be treated in a different way from debts incurred for nonproductive improvements.

PUBLIC UTILITY PROVISIONS OF NEW

MUNICIPAL PROGRAM

The new municipal program, adopted by the League in 1915, includes "Municipal Home Rule Constitutional Provisions" recommended for incorporation in the state constitutions. One of these provisions is to the effect that "each city shall have authority to exercise all powers relating to municipal affairs." This grant is made specific with respect to public utilities by the further provision that the following shall be deemed to be a part of the powers conferred upon cities, namely: "to furnish all local public services; to purchase, hire, construct, own, maintain, and operate or lease local public utilities; to acquire, by condemnation or otherwise, within or without the corporate limits, property necessary for any such purposes, subject to restrictions imposed by the general law for the protection of other communities; and to grant local public utility franchises and regulate the exercise thereof"; also "to issue and sell bonds on the security of any public utility owned by the city, or of the revenues thereof, or of both, including if deemed desirable by the city, a franchise stating the terms upon which, in case of foreclosure, the purchaser may operate such utility."

The new municipal program, in the subdivision relating to the model charter, contains specific provisions with relation to public utilities (Sections 63-72, inclusive). The general policy recommended by the League

is expressed in a footnote appended to the sections relating to public utilities, as follows:

Note 20. The public utility and franchise policy embodied in a model city charter should be so formulated as to conserve and further the following purposes:

I. To secure to the people of the city the best public utility service that is practicable.

II. To secure and preserve to the city as a municipal corporation the fullest possible control of the streets and their special uses.

III. To remove as far as practicable the obstacles in the way of the extension of municipal ownership and operation of public utilities, and to render practicable the success of such ownership and operation when undertaken.

IV. To secure for the people of the city public utility rates as low as practicable, consistent with the realization of the three purposes above set forth.

It should be no part of such policy to secure compensation for franchises, or special revenues for general city purposes, by an indirect tax upon the consumers of public utility services.

In formulating a policy to carry out the four purposes above stated the following principles should be recognized:

1. Each utility serving an urban community should be treated as far as practicable as a monopoly with the obligations of a monopoly; and its operation within the city should be based as far as practicable upon a single comprehensive ordinance or franchise grant uniform in its

application to all parts of the city and to all

extensions of plant and service.

2. Every franchise should be revocable by the city upon just compensation being paid to its owners, when the city is prepared to undertake public ownership.

3. The control of the location and character of

public utility fixtures, the character and amount of service rendered and the rates charged therefor should be reserved to the city, subject to reasonable review by the courts or a state utilities commission where one exists.

4. The granting and enforcement of franchises and the regulation of utilities operating thereunder should be subject to adequate public scrutiny and discussion and should receive full consideration by an expert bureau of the city government established and maintained for that purpose, or in case the maintenance of such

bureau is impracticable, by an officer or committee designated for the purpose.

5. Private investments in public utilities should be treated as investments in aid of public credit and subject to public control, and should be safeguarded in every possible way and the rate of return allowed thereon should be reduced to the minimum return necessary in the case of safe investments with a fixed and substantially assured fair earning power.

The policies above outlined have been adopted by the National Municipal League.

SUGGESTIONS FOR A MODEL STREET

RAILWAY FRANCHISE

At the conference held at Richmond, Virginia, in November, 1911, a subcommittee of the committee on franchises submitted a report outlining the elements of a model street railway franchise. In its conclusions this subcommittee said:

In our opinion the first consideration in the operation of a street railway should be the rendering of sufficient first class service. In order to secure this result practically, the franchise should not only reserve to the city specific and comprehensive regulatory powers, but in all cases where there is no existing state or local authority for the purpose should make provision in detail for a supervising commission or officer, with adequate means for enforcing the contract and compelling the grantee to give such service.

The second consideration, in our judgment, should be the protection of the capital legitimately invested in this public service. The aim should be to make street railway securities approximately as safe as municipal bonds. We esteem it a disgrace to a city either to lend the use of its streets for the exploitation of the credulity of unwary investors or to impose such severe restrictions upon capital honestly invested in a public utility as to drive the franchise-holder into bankruptcy. We also think it to be a lamentable error in public policy for a city by laxity in supervision to permit the grantee of its franchises so grossly to mismanage a public utility and overload its capitalization as to deprive the public of adequate service and at the

same time endanger the security of invested capital.

We consider that while the question of street railway fares is of great importance it is after all secondary to the furnishing of adequate service, to the honest protection of necessary investment, and to the gradual amortization of the capital for the benefit of the city. We think that the franchise should prescribe an initial rate of fare, but should provide for an occasional readjustment either through regulation or by means of an automatic schedule of rates specified in the grant itself. An interesting experiment with the latter policy is now being made in Cleveland, and the final results there will throw important light upon this method of adjusting rates. Whatever rate may be in force at any particular time we think that as far as practicable it should be uniform within the city limits, and that a general system of transfers without extra charge should be provided.

We have considered with care the question of compensation for franchises. In our judgment the car riders should not be taxed for the relief of the general tax rate. While there are strong arguments for the policy of requiring a franchise holder to pay taxes at the regular rate on the value of its property outside of the streets, we think that at least all compensation in excess of this requirement, whether in the form of general city taxes, car license fees, a percentage of gross receipts or a division of net profits, should be applied either to the construction of extensions on the city's account, or to the amortization fund, or should be remitted for the benefit of service or for the reduction of rates.

The public necessity of maintaining continuous service on a street railway system is so great that in our judgment the franchise should provide some method for the arbitration of labor disputes so as effectively to prevent strikes.

We have been impressed by observation and experience with the tremendous cost in human vitality represented by the time and energy wasted in transit. It is often true that a half hour or an hour spent on a crowded, poorly lighted, badly ventilated street car at the end of a hard day's work is a greater tax upon a person's strength than an extension of the day's labor for the same time would be. The cost of transportation is not to be measured merely by the fares paid. The representatives of the city in framing a street railway franchise contract and in the regulation of street railway service

should constantly keep in mind the conservation of human energy as well as financial considerations.

STATE AND LOCAL CO-OPERATION IN THE CONTROL OF PUBLIC UTILITIES

Two years later, in November, 1913, the full committee on franchises submitted a carefully prepared report at the Toronto conference in which it discussed at considerable length the matter of municipal home rule in its relation to the control of public utilities, and took the position that co-operation between state and local authorities, rather than exclusive control by either of them, is essential to the protection of the public welfare in the matter of the regulation of public utilities. Its general outline of a proper co-ordination of state and local functions in this

respect is contained in the following paragraphs of the report:

The extent to which state control of utilities is necessary and the extent to which local control is possible vary greatly in different parts of the country. In states where cities are widely separated, each urban community naturally forms a more or less independent utility center, and municipal control may be developed to a great extent without interfering with the rights of other communities. Moreover, in the case of a great city where the bulk of the service of any particular utility is rendered within the corporate limits, the city's overwhelming "majority interest" in the utility requires the city, for its own protection, to maintain a large measure of local control. Under other circumstances, where cities are bunched together, as they are in eastern Massachusetts and northern New Jersey, it is obvious that unless some new form of co-operation among neighboring municipalities is developed, state control of the utilities will necessarily go much further than is necessary where cities are physically remote from one another.

In view of these various considerations, we suggest that where a city has assumed actively to exercise the functions of regulation, it shall have substantially final authority with relation to the occupation of the streets, the quality of service rendered and the nature of the franchise contract

which it may desire to make for the purpose of facilitating the transfer of the property from private to public ownership. In all matters where an appeal lies from the decision of the local authorities, as in the matter of rates or extensions, and in all matters where the state commission has primary jurisdiction, especially in questions relating to competition, accounts and publicity, we suggest that the local department or commission, representing the city's interest and its intelligence on public utilities, have the right to appear officially before the state commission to present the city's case. In other words, in certain important lines of regulation the city should have final authority; in certain other matters the city should have primary jurisdiction, and, in case of appeal, should have the right to be represented officially before the state commission by its local utility experts; while in still other matters the jurisdiction of the state commission should be regarded as normal and complete, but even in these matters the city should have the right to appear in its corporate

capacity to make suggestions or to protest against any proposed action affecting utilities that operate within the city limits.

A POLICY WITH RESPECT TO
EXTENSIONS

The committee also in its Toronto report outlined certain fundamental principles to be adopted in all municipal franchise contracts with respect to the control and financing of extensions. The committee said in part:

We believe that a public utility within a given urban community is a natural monopoly, and that one of the first and absolutely essential obligations of such a monopoly is to extend its services to meet all the legitimate needs of the community.

The problem of extensions is a delicate and difficult one. Obviously some power of initiative as well as of veto on the part of the public authorities is necessary. At the same time it is clear that any company could be driven into bankruptcy by the arbitrary exercise on the part of the local authorities of unlimited control over extensions. The construction of an extension means an additional capital investment, and the power of the city to order a private company to