Arizona republican., 1910-02-13

and the profits so uncertair that if the city did not build tn, ! plant no one else would. These W, must evidently leave out of account il | our discussion. What. then are the ob. ! jects sought by q city which estab- | fishes its own electric light plant i | private capital has embarked. or is willing to embark in the enterprise
 Evidently to save money for the tax 1 payers or to get better service.
 The Question of Profits.
 l The common argument, of course. for
 the establishment of a municipal plant | is that the city will gain the profits
 which ordinarily go to a private com. pany undertaking a street lighting ] contract But what are the profits | actually earned by electric light and
 power companies through the coun-
 try?
 Whether an electric light plant is built by the city or by company. in- i terest should be paid on the invest
 ment. IT we assume that a large part
 of the cost of construction is paid by ; issuing bonds, it is undoubtedly true as claimed by municipal ownership ad- vocates that a city can sell bonds bearing a lower rate of interest than could a private corporation doing the same business. It will be evident. however. that a difference of one or two perecent in bond interest on 8 plant may easily be counterbalanced by other factors, such as the rate of wages paid and the efficiency Of the management. It is of first importance to determine in this connection the actual profits being made by electric light and power companies over and above the commoR rates of interest paid on municipal bonds. If such profits or dividends are considerably above interest rates on municipal bonds. we have at once strong incentive for municipalities to enter into electric lighting business themselves. Otherwise one great argument for municipalization disap- pears.
 Unfortunately there are no figures available on the financial conditions of electric lighting companies the. coun- try over. and We must fall back upon our general knowledge of the business and the statistics of a few localitieR
 The state of Massachusetts for twen- ty years past has had an excellent SIS ten for regulating electric light com panies and municipal plants and safe guarding the interests of both, stock holders and pnblic. yearly reports are
 made to d board of gas and electHc light commissioners, both by private companies and municipal plants.
 We have therefore from Massaahu- sets more complete information as to the state Of the industry than from any other state or locality We can place more confidence in the reports of thiS commission than in most of the other statistics cited in connection with mu- nicipal ownership controversies. for the reason that the methods of classifying accounts and making reports as well as the issuance of stock and bonds ara controlled by the commission lceord- ing to certain uniform regulations. and have been for many years. Companies and municipalities not required to re- port according to such fixed rules. if they issue reports of the financial con ditinns at all. issue them in such vari- ons shapes that no one but aa expert can anaiyZe them in a way to afford q true comparison, and frequently even an expert can not make such compari- son without actual further eyamina
 ton of the hoOkT
 In Massachusetts, according to the 1905 report of the commissioners, of the fifty-six purely electric light and power companies in the state. twenty
 four. pai6 no dividends: one paid a dividend Of two per cent: one divi- dend of four per cent; one a dividend of 4.5 per cent; four dividend of five per cent: eleven a dividend of six per cent: eight dividend of eight per cent; three q dividend of seven per cent: one a dividend of nine per cent and two paid dividends of ten per cent In some states with some kinds of corporations these statistics on dividends would give little indica- tion of the per cent of earning on the actual investment. because of the common practice of issuing watered stool; for which but a. small per ,cent of the face value has been paid. In Massachusetts. however, where securi- ties for many years past have been issued only upon approval of the commission, to pay for actual improve ments In a plant. these figures can safely be accepted as indicating very nearly the true state of affairs. This statement as to dividends, of course. does not show what earnings may be put back into the property in the shape of new construction and extensions In this latter connection it is of interest to note that the combined balance sheets of the Massachusetts companies