Evening star. [volume] (Washington, D.C.) 1854-1972, 1901-01-22
Comments by a Chicago Authority
on the Pending Gas Bill.
WASHINGTON HERETOFORE A MODEL
Danger of Too Much Latitude to
Franchise Holders.
WINDY CITY FIG U RES

Washington affairs are being watched
closely by municipal authorities throughout
the country, as the conviction grows year
by year that this is a model municipality
in many respects. This fact was adduced
anew by statements made yesterday to a
Star reporter by Mr.. George c. Skies, the
secretary of the street railway commission
to the Chicago city council Mr.. Skies, who
is in Washington for a short visit, is gen.
orally Interested as a matter of municipal
financering, in the pending bill proposing
to grant the right to the Washington Gas
Light Company to increase its capital stock
on a computat ton of the net earnings of the
corporation. He thinks this principle which
underl;es the bill discussed yesterday in the
House and finally recommtted to the Dis
trict Commissioners for amendment to be
vicious and dangerous. He said:
'In many respects Washington is the
model city of the country. For instance,
the franchise policy of Congress in the past
with regard to public utilities in the DIS
trict of Columbia has been in many ways
most exemplary and deserving of imitation.
1t is to be regretted, however, that a change
seems to be coming over Congress in this
respect and that the pressure of special
interests appears, in some cases at least, to
threaten an abandonment of old-time poll
cies that called forth commentator from
the student of city problems.
stock Watering Threatened.
Stock watering by public service corpO-
rations operating in the city of Washington
is an evil which Congress until quite re-
Gently has uniformly sought TO prevent,
and with a fair degree of success in most
instances. Most franchise grants have stp-
uated that the amount of stock and bonds
outstanding should be limited to the actual
cost of construction and equipment of the
plant, whatever it might be, and in many
cases it was made the duty of some public
body-usually the Supreme Court for the
District Of Columbia-to supervise the issue
of bonds and stock, to see that the intent
of the law with regard to ovcr-capitaliZa-
ton was respected. Now, the District COM
mtteeS of Congress, whose recommended
lions of Legislation for the District of Co
lumbia usually followed by Congress,
are committed to an entirely different pol
icy. The gas companies of the District de-
sire to conSOlidate-a course to which there
can be valid objection from the view
point Of sound municipal policy-but the
House committee on District affairs, i'll rec
ommending a bill permitting consolidation,
has also given approval to what Is, for the
city of Washington, a novel principle of
capitalization, that capitalization shall be
based upon earning power rather than cost,
the very thing that Congress hitherto has
sought so hard to avoid. The bill in qucs-
ton provides that securities may be issued
by the gas company to an amount that
will represent the yearly earnings of the
OF course, this is a stock-watering device,
pure and simple, and of the very worst
kind. It's sole object is to obscure the
amount of the actual investment upon
which alone the company has a tight to
I'cXpect dividends. If capitalization is to be
based upon earning capacity rather than
cost, of course the company will be able to
claim with much pIausibility when demands
may be made i'll the future for further re-
auctions in the price of gas, that its earn
ings are not excessive us shown by the
dividend rates upon its stock
Attitude of the Commissioners.
In conversation the other day with one
of the Commissioners of the District of
Columbia, I took the commission mildly TO
task for this proposed piece of legislation.
I told the Commissioner that we of outside
cities were accustomed to look to Washing
ton as model upon many matters of
| municipal policy, but that we could not con-
tinue to do SO If such measures the one
In question We're to be enacted into law.
His reply was that the commission did not
favor the stock-watering provision to which
took exception, and that the bill, as
favorably reported by the House commit
tee on District affairs, was in conflict with
the recommendations of the commission.
This bill, If enacted into law by Congress,
will mark radical departure in policy with
| respect to public utilities in the city OF
Washington. The departure, moreover, is
one to be seriously regretted, not only by
| residents Of Washington, but also by resi-
dents of other cities who hitherto have been
| able to point to Washington as in many
respects Il model of what ought to be in all
! cities in matters of this kind"
Chicago Report.
| In this connection" Nh. Skies called at
tention to the latest annual report of the
| street railway commission. of which he is
secretary, filed in December last, in the
course of which the whole subject of capt.
| talzation of the public utilities was dis
| cussed. The report says:
"OVer-capitalization is a favorite device
! for concealing large profits The putting
| on the market of large quantities of wa
| tered securities is Objectionable, too, as in
| Producing complications which it Is better
| to avoid The commission is strongly of the
| opinion, therefore, that provision should be
made by law to prevent, if possible, excess
! slve apitalizaiOn by street railway
| companies.
| '"ro accomplish this object, something
more is necessary than a mere declaration
Of law against over-capitalization. The
| constitution of Illinois contains a provision
| (Article XI, Section % designed to prevent
| stock watering, but it has proven of COM
| paratively little value. In order to prevent
| oVer-cap talization there must not only be
| law against it, but there must be admin
| istrative machinery Of some sort to pass
| upon all bond and stock issues to see that
| the law is compiled with before the securi-
| ties are put out. Massachusetts has such
| special administrative machinery, and the
| results OF Its operations appear to be fairly
| satisfactory, as is attested by the following
| excerpt from the report page 80 made to
the Massachusetts legislature in February
| 1898, by the special committee on street
| railways:
| In Massachusetts.
"'The laws of Massachusetts as to capi-
| talZation have been strictly drawn and
| rigidly administered, nor has any evidence
| been adduced showing that they have been
peculiarly ineffective. On the contrary,
using round numbers only, the capitalize
| ton per mile in stock and bonds $4,000
| is less in Massachusetts than the average
l. $4,000 in the New England states, not a
| third of what it is in New York (S177, 500
| or half what it is in Pennsylvania (s12S,-
300, less than half what it Is ($94 100 in the
| United States as a whole; and it is less
| than Great Britain ($47,OOO.