The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1907-07-21
HAVE THE TIMES MAILED 10 YoJ
SUNDAY, JULY q. 1907.
Gas Capitalization Hearing.


of the District Supreme Court viii
begin the hearing on the petition Of
the Georgetown Gas Company for
authority to increase its capitaliza-
ton. The company is one of the
two selling gas in the city, and asks
to be allowed to increase its out
standing stock from S150,000 to
100000, or if not to that sum then
TO such figure as will represent the
present total value of the property.
This hearing is held under the
law of 1896, which provides that no
capitalization shall be issued beyond
the actual cash value and the needs
of the company for expenses or bet
terments. The Georgetown com
pany now desires Interpretation of
this law, and it is assumed that If it
is authorized TO bring it's capitaliza-
tion up TO the total physical values,
the Washington Gas Company will
apply for like authorization, and
proceed TO increase its capital.
The people of the District have a
profound concern with this inquiry.
1t involves an Interpretation of law
which may be followed by the vest
ing of rights that thereafter would
be beyond assault, and which direct
" involves the prices that must be
paid for one of the most important
necessaries of life; a commodity
whose price cannot be regulated by
competition, but is bound TO be de-
termined largely by the amount of
capitalization issued against the
privilege of selling it. Therefore, it
is the interest of every citizen that
the most thorough exposition of the
facts surrounding the corporation
be secured; its present capital,
financial history, earnings and divi-
dends from year to year, needs for
funds to make extensions, the ques-
ton of how much has been set aside
for depreciation charges, general
physical and financial conditions-in
short, everything calculated to en-
tighten as to the merits of the pres
ent petition.
The community is no less con-
cerned than the gas company in
having the public service corpora
ton equipped to give the best posi-
bic service. If the gas corporations
need more capital, if they cannot
get it except by increasing their
outstanding issues, and if their
prospects for increasing business
are suchIas to justify the expendi-
ture, then permission should be
given for a proper increase.
But the inquiry that has been
suggested would also deal with the
question of whether profits have
been reasonable in the past, and
what disposition has been made of
them. If, for example, a public
service corporation has been earn
ing and paying per cent dividends
regularly, and at the same time has
been investing. out of surplus earn
ings, large sums in the betterment
and extension of its physical plant.
it is neither sound economies nor
good public policy to allow it now
to capitalize these investments Of
surplus. The surplus is a contribu-
ton from the public, additional to a
compensatory dividend, and to capt.
taize it would manifestly be to inn
pose upon the public the burden of
paying dividends perpetually on an
amount which it had originally con-
tributed.
This is exactly what f. II. Harri-
mar did in his reorganization of the
Alton. For many years the Black
stone management of that road had
been paying good dividends, and
still earning millions of surplus,
which it invested in betterments of
the road. When Harriman got the
property he pored over the books
till he had figured how many mil
lions had thus been invested from
the surplus, and proceeded to capt.
talize the amount on a liberal basis.
just how the public views that sort
of finance, how the Interstate Com
merce Commission viewed it, how
the President and his advisers have
viewed it, is well known as a result
of the recent Investigations. "Inde-
fensible financing" was what the In
terstate Commission called this
group of operations in the case of
the Alton. Perpetrated on the city
of Washington, any parallel to it
would be equally indefensibIe.
But this is not all. If a public
service corporation has been taking
excessive dividends out Of its prop
erty, or issuing watered capitaliza-
ton in order to absorb the profits,