The stock and bonds were all issued under the supervision and with the approval of the Board of Railroad Commissioners. Much of the floating indebtedness is of long standing, and what it represents is not clear. A substantial part of it apparently was incurred for property expenditures in the early days, which the Railroad Commissioners were unwilling to capitalize permanently. Some of it, without doubt, represents later additions and improvements which might properly be capitalized. Funds amounting to $13,657 have been invested in a projected extension to Belmont, which has been abandoned and ought to be written off the books. The total permanent investment shown by the returns amounts to about $29,000 per mile of single track. While this figure is not low for a road of this type, it can hardly be considered excessive.

The net results from the operation of the company year by year have been as follows:

These figures are for the fiscal years which ended on September 30, until 1910, and thereafter have ended on June 30. It will be noted that in the year ended June 30, 1916, no dividends were paid. In the following six months, however, a dividend of 4 per cent was declared. The table shows that under the origi

nal management the policy with respect to dividends was conservative. No dividends at all were paid, and. any net income remaining after the payment of operating expenses and fixed charges was allowed to accumulate in the surplus fund. Beginning with 1911, the year before the Massachusetts Consolidated Railways assumed control, dividends have been paid, although not in every year, which have at times made it necessary to draw upon surplus. Amounting to $43,425 in 1912, it had diminished to $27,623 on December 31, 1916. This decrease, however, is partially offset by the fact that in 1912 the company had set aside no depreciation or other reserves, whereas on the latter date the accumulations in such accounts amounted to $15,074. It is also true that the dividends have been small and have averaged, since June 30, 1910, but 2.46 per cent per year. The average throughout the life of the company has, of course, been much smaller even than this figure.

In recent years, gross income has increased slowly and operating expenses more rapidly. The year ended June 30, 1912, was the first full year after the consolidation with the Lowell, Acton, & Maynard. Earnings and expenses since that year have been as follows:

Gross income increased during the period 16.3 per cent and operating expenses 29.1 per cent.

The following table shows the amounts which have been expended for maintenance and depreciation and charged to operating expense in each fiscal year throughout the life of the company up to June 30, 1916, with the per cent of operating revenues in each case:

P.U.R.1917E.

It will be noted that the amounts expended for this purpose have, as might have been expected, grown in recent years as the property increased in age. Since 1910, additional amounts, charged to the profit and loss account and averaging $2,897 per year, have been written off the property account or credited to depreciation reserve. It further appears that actual maintenance expenditures in the year ended June 30, 1916, were understated in the operating account, and that $4,260.38 was incorrectly and improperly charged to "other current assets," instead of to operating expense. Notwithstanding these expenditures, it is clear that the existing depreciation reserve is wholly inadequate, and the inspection department of the Commission reports, after an examination of the property, that it has been maintained in only fair condition, and that repairs beyond the normal average are needed in the case of both track and equip

inent.

[2] The road is managed by general officers, located at Greenfield, who also manage the two other companies the Connecticut Valley and the Northern Massachusetts-which are under the control of the Massachusetts Consolidated Railways. The salaries of these general officers are shared in proportion to gross earnings, the Concord, Maynard, & Hudson's share being one seventh of the total and amounting to about $2,150 per year. In addition, the road has the undivided services of two officers, the president and assistant superintendent, whose combined salaries amount to $1,800 per year. Some small companies pay less for management, but the total charge cannot be held to be un

reasonably high. The operating expense per car mile—19.04 cents in the year ended June 30, 1916-is below the average, due, apparently, to a comparatively low labor cost. The cost of power is relatively high, but this would be expected of a small inland plant. A recent report by an outside expert indicates, however, that greater economy is possible in the operation of this plant. Rolling stock shows evidence of neglect, particularly in respect to trucks and motors; and it seems that a better system of inspection and maintenance, while perhaps more expensive in the first instance, would, in the end, produce better results. The faults of management are, however, faults induced by low earning capacity; and operating expense, on the whole, should be greater, rather than less, if the property is to be well operated and maintained.

[3] The payment of dividends in recent years without adequate provision for depreciation or, indeed, maintenance, is open to criticism; but the amounts paid have been so small, especially when averaged throughout the life of the company, that they do not seriously affect the situation. As the Commission said in the Middlesex & B. Rate Case, 2 Ann.. Rep. Mass. P. S. C. 137: "Resolving every reasonable doubt against the petitioner's management, we are driven irresistibly to the conclusion that at no time have the rates charged been adequate to meet the fair cost of the service. Up to the present time, as between investors in and patrons of this street railway company, the patrons have had much the better of the bargain." The fact that dividends have been paid at times practically at the expense of the property merely neutralizes any claim which might otherwise have been made to a return higher than normal. Under the circumstances, we think that the company is entitled to a return of 6 per cent upon the investment represented by its outstanding stock and bonds and by one half its floating debt. In view of the lack of satisfactory information in regard to this debt, this is a liberal estimate. On this basis, the company would be entitled to a return of 6 per cent upon $490,000, amounting to $29,400 per year. The net amount available for the payment of interest and dividends in the year ended December 31, 1916, after allowing for $2,253.24 improperly charged to "other current assets" which should have been included in operating ex

pense, was $20,780. In other words, without allowing for any more adequate provision for depreciation and maintenance than was actually made, the income fell $8,620 below the required figure.

[4, 5] The company, however, bases its claim for an increase in rates, not only upon the financial results from the operation of recent years, but upon the fact that the price of materials and supplies, and particularly the price of coal, has substantially increased in the past few months. It submitted evidence showing that coal for which it paid $3.50 per ton f. o. b. Boston, in 1914, gradually increased in price so that it cost $6.50 per ton in the latter part of 1916, while the last order, for 500 tons, executed on February 13, 1917, was at the rate of $10.30 per ton. The total bill for fuel in the year ended June 30, 1916, was $10,019, and the average cost was $5.27 per ton. It is therefore obvious that, if the price continues at the present rate, the operating expense of the company during the current year will be very materially increased. It seems that the company has paid a higher price than certain other companies have paid, due to its insistence upon New River coal, which it considers more economical than varieties which can be obtained more cheaply; but there is no doubt that the cost of all varieties has greatly increased.

In the three months ended March 31, 1917, operating revenue was $17,884, as compared with $18,157 for the previous year, while operating expenses increased from $13,373 to $16,620. The item of fuel alone advanced from $3,322 to $4,855. Gross carnings during the period were insufficient by $2,888 to pay operating expenses and fixed charges, while last year for the same three months they yielded a surplus of $590. The general phenomenon of rising prices during recent years has been aggravated by the conditions created by the European War. Transportation by rail and by water, the labor market, and the demand for coal, steel, copper, and other materials used by street railway companies, have all been seriously affected; and no one can now foretell how long the disturbance will continue. While it is probable that the prices of coal and certain other commodities which are now maintained at an artificial level may be somewhat reduced, either by change of conditions or by intervention of the