Watertown weekly leader. [volume] (Watertown, Jefferson County, Wis.) 1906-1908, 1907-01-18


uated. The industrial and commercial pros
perity of every city and the comfort of
every urban home is vitality affected by
these agencies which are now independent
of public control
OverCap italiza ton of Local Service Cor
porations.
The custom has long prevailed in the
organization OF public service corporations,
to issue bonds to an amount sufficient TO
pay the cost of the entire plant. the stock
being issued without consideration, as a
stimulus to the sale of the bonds or to re-
ward the promoters. When the corpora
ton. through the earnings cxacted from the
public, is enabled to pay attractive. divi-
bends, the stock is listed on the exchange
and Ostensible value is given TO that which
has none. and the shares are bought at sub
stantial prices by innocent purchasers. EX,
ceSSiYe rates must thereafter be maintained
to pay dividends upon the fictitious capital
iZatiOn, thus imposing an unjust burden
upon the community.
In nearly all cities, profits dependent upon
gratultlOuS franchise grants have in very
short time become so large as to require
concealment. Further, the progress OF the
public service industry has necesSltated
revolutionary changes in plant and equip
ment. These, in turn, have invited financial
manipulation at every turnover and re
placement, and finally the rapid growth OF
cities has necessitated great extension OF
lines and mains, always at increased capt.
tai, and often leading to consolidation with
all their attendant opportunities for intia-
ton. Efficiency OF service has seldom been
factor in determining the amount of capt.
talization. In order to pay interest and
dividends on this large capital, rates have
been fixed at point entirely unreasonable
In comparison with the cost OF service.
Largely increased earnings are also dis
posed of by reSorting to the issue of stock
dividends, all of which become an increased
burden loaded upon the property from
which no benefit is received. Another IN
ducement for such additional issue is the
practice of giving to existing stockholders
the prior right to subscribe for proper
tionate share thereof at par, regardless of
market value. In such cases the corpora
lions will receive but q portion of the
amount they might have realized, and the
people of the cities are taxed to pay rates
on the excessive issues.
Remedial Legislation.
The remedy for conditions now so oppres-
siye in the municipalities of the state lies
in a complete revision of the statutes relat-
ing to the organiza ton of public utility cor
porations and the granting of municipal
franchises, and providing for the super
vision by public authority of the issue of
stocks and bonds and the control Of the
rates that shall be charged and the service
that shall be rendered. Such legislation
should strike at the root of the matter.
Franchises imprOVidCntly granted are gen
orally recognized in this and other states
as the source of the evil which is aggrl-
waited by ovcrcapitaliZation and oppressive
management. The remedy lies in placing
an absolute limit by the Legislature upon
the time for which franchise may be
granted, and prescribing Il period upon
which all franchises heretofore granted
shall terminate. Already twenty states and
two territories have adopted legislation fix
ing such limit, ranging In great majority
of cases from 20 to 50 years. and con-
tanning a provision permitting the city to
purchase the plant at the expiration Of
the term or at Il time prior thereto. The
constitution of this state has wisely re-
served to the Legislature the power to
alter, amend or repeal all general or spG-
cial laws granting corporate. powers and
privileges. The exercise of this power by
the Legislature for the control of public
service corporations has been upheld for
more than generation by the supreme
court of this state and of the United States,
and there can be no just cause for com
plant against the adoption of proper
amendments to charters and franchises
which have since been granted and accept
ed. Such grants have been made subject to
the exercise of this power for the proteC-
tion Of the public.
Since there are franchises in this state
which have been granted to public service
corporations in perpetuity, or claimed to be
such, and also many which have been
granted for very long period of years. the
terms of which will operate harshly and
OppresSively, l recommend the enactment
of law declaring that all franchises here
tofore granted to any individual, partner
ship. or corporation. to engage in public
service business in any city in this state
shall terminate on January /. 1890 unless
they shall sooner expire by their own terms
such nature hereafter granted shall be
for a longer term than twenty years.
State Commission.
The only adequate remedy for excessive
charges by public service corporations is
the regulation of the rates by public an.
thority. The Legislature may exercise this
power directly or it may delegate the
authority to any approprlat" public agency.
This doctrine, long. recognized by, the su
preme court of this state, has been re
affirmed in the recent case of the city of
Madison Madison Gas & Electric com
many [ recommend that the control and
regulation of local public service corpora-
tons be granted to a state commission.
massachusetts and New York have clothed
the state commission with ample power of
supervision and control of the organization
and operation of public utility corporations
and the statutes of those states will 1ndi-
cate the nature of the legislation needed N
TSSi-ao+,.;, ~ I'LL no E7n+oJ IL ~ u II
found eXpcdient by the Legislatures OF
those states to vest the supervision of gas
and electric lighting companies in a com
mission separate and distinct from the
railway commission to which the regu-
lation Of street railways is Cntrust-
ed. The difference in the character of
may suggest the prOpricty of placing the
control and regulation thereof in different
bodies The distribution of these powers
concerning the several classes Of public
service corporations however, is q matter
for legislative determination. Should it be
deemed advisable to place the control OF
these corporations. or any of them under
Il separate commission, the expense thereof
should be met by Il moderate license fee
to be imposed upon the corporations sub
jeCt 20 such supervision. The proprety or
such provision is apparent when it is CON
sidercd that the administrative control af-
fectS a part only of the whole people Of the
state, and the cost thereof should not be
paid out of the general fund.
Public service corporations are entitled
20 secure Il fair profit upon the actual cost
of their properties, and no more. The
valuation of the property, therefore, be,
comes an important factor in the problem
be granted to the state commission to as
certain and determine the true cost Of
such properties, and to use this determine
ton to aid in fixing a fair and just rate Of
compensation for services rendered.
A limit should be placed upon the CAPT
talization of local service corporations, and
the issue of stocks and bonds by them
should be under the supervision Of the
of such corporations. Massachusetts and
New York have provided that no stocks or
bonds shall be issued by this class of cor
portions without application having first
approval obtained after an examination as
to the necessity of such issue, and the
methods and purposes of the investment of
the proceeds. With capitalize ton measured
be ascertained and the accumulation of
large surplus funds through excessive
charges may thus be prevented.
Municipal Ownership.
There is a growing sentiment in favor
of municipal ownership and encouragement
should be extended in this direction, es
pecially with respect to water works and
gas and lighting plants. 1 recommend the
necessary legislation to enable any city
or village to establish public utilities, or
to acquire such may already exist I'M
der the power of eminent domain, and TO