The daily morning journal and courier., 1907-05-24
G0V, W0ODRUFF'S
 FIRST VETO SENT Rejects Windsorville Street Railway Incorporation
 Bill. HOUSE TABLES MESSAGE Document Remarkable in Its Provisions Says
 MT. Barnes.
HOUSE TABLES MESSAGE

Hartford, May 29.-The first veto of a measure by Governor Rollin $. Woodruff during the present session of the general assembly came to-day, when the governor sent to the house of a message formally mo- tifying the house that he will withhold his approval on house joint resolution No. 179, incorporating the Windsorville and East Hartford Street Railway company. The message contains some interesting statements concerning over capitalization of corporations.
 The house voted to table the matter for printing and in making the motion to table, House Chairman Burnes, of the railroads committee, referred to the message as "a document remarkable in some of it's provisions.
 The Message.
 I herewith return without my ap- proval to the house, in which it origi- mated, house joint resolution No. 17S, incorporating the Windsorville and East Hartford Street Railway compa- ny, and as reasons for withholding my approval would say:
 The tendency for some years past has been toward capitalization in the formation of public service corpora tions, and, unfortunately, the general assembly has not checked that prac- tice, although it is against the public interest and creates an unwholesonne financial condition. The state of Con necticut has been liberal in granting charters to street railway corporations, but I am of opinion that we have ar- rived at point where we ought to take a conservative stand. And because a very large proportion of such corpora tions has come into the control of one great corporation the state is now in better position to act conservatively than ever before.
 I can see no reason, nor have I been shown any valid reason, why 1t is nee- essary for a railway corporation to have a capital greater than is needed to construct its roadbed and to equip it for service plus reasonable working capital. All capitalization beyond such sums as may be required for those pur- poses is excess, and is commonly term ed, in the language of the day, water" Therefore, if corporation be water ed" it is obliged to earn percentage on an unnecessarily inflated eapitaliza- ton to satisfy its stockholders, and that means that the general public pays sum unfair in proportion to the service rendered. It is probably need less to cite instances, for recent case is still in the public mind where street railways were over-capitalized and were later absorbed by another corpor- ation-a case in which the watered stock is now to pay dividends sufficient to make that stock salable in the mar ket. It is my conviction that all pub lie service corporations should begin on a cash basis. If that be true of them, then their stock can be marketed more readily when it becomes known than in the case of over-capitalized corpora tions whose promoters plan to issue bonds to pay the cost of building the road, and that the capital stock shall be given away for promoting purposes. This kind of financing Is clearly against public policy, and If we have erred in the past, it is high time to call halt now, rather than to persist in a wrong policy. Manifestly, it Is better for the stockholder to have in his possession stock that Is worth its face value, or more. than to have a larger block of stock worth less than par because 1t Is 'watered.' Manifestly also, it is more prudent for one. to leave to his heirs stocks that are readily marketable be- cause they are what they purport to be than to leave to heirs a legacy of more or less fictitious value.
 This broad proposition I believe to hold good, that all stock should be paid for in money, in such manner and at such times as the board of directors may prescribe, and that the price of each share for an increase of capital stock shall not be less than par, and as much more as Its market value may be shown to be. Inspection of sections 5 and of house joint resolution No. IFS will show that this charter Is de- fective in this respect, if my reasoning is correct. One other point in refer ence to special privileges granted by this charter of which I do not approve; is the grant of authority to secure right of way over private property by ex- ercise of eminent domain. I find that during the last two sessions of the general assembly, if not longer, it has been the apparent policy of the gen. eral assembly to grant to street rail-
 ways the rights of eminent domain as a special privilege. If the state is to continue that practice it would seem 1 advisable that such provision with re- gard to street railways be incorporated into the statute law by definite enact ment, just as now the steam railroad corporations enjoy that legal provision, | so that all street railway corporations may be placed on an equality. But in my opinion, such statute provision
 would be unwise and I do not recom- mend it. On the contrary, the street railways of our state are in their na- | ture and operation very different from | the steam railroads that are state-
 wide in their length. The street rail-
 ways receive very valuable privileges
 in their several communities in that
 they put down their tracks in the
 highways and streets and make free
 use of them, crossing over private
 rights of way only when they cannot traverse their territory through the
 highways The rights of the individual l land owner cannot therefore he too
 well safeguarded, and I do not believe
 it wise to grant the free use of the ex-
 traordinary legal privilege of eminent
 domain to street railway corporations
 to enable them to condemn for pur-
 poses of their own use, land of the l ln11Snhnldnr nr tha far1aaar snrn atir,nes