Honolulu star-bulletin. [volume] (Honolulu [Oahu, Hawaii]) 1912-2010, 1913-03-13
- Per cent aPaI.ryr.


lie cannot safely tie itself up for tie
next forty years TO any paltry ~ per
cent. No ore can foresee the future.
By the end Of the present franchise
and still more during the latter poT-
ton OF the proposed extension, the
company may be able 10 pay the city
quarter of a million a year and yet
make a good profit for itself. The
city should not tie i;self down to per-
haps tenth or even a fifth of that
amount. The only safe provision that
can be made for a long period of time
is one that will operate automatically
SO that, if the traffic is large. the city
will share fairly either in the earn
ings, or in increased service, and, If
they are small. the company will not
fail to get a fair return on is invest
ment
But that is not all. As already
stated, the company will undoubtedly
contend, when the appropriate time
comes, that il is entitled TO construct
the read on bonds, issue watered
stock to the amount of 125 per cent
of the cost. pay off bonds and stock
bends on what the public and not the
stockholders have paid for the stock,
and that then if the public wants 10
take over the read, it viii haze to pay
the whole cost over again. thus pay
ing for the road from three and a
quarter to five times according to the
way it is figured The company thus
Tar has been on its good behavior.
There has been no occasion for issu-
ing more than few hundred thou
sand dollars of watered stock. and
during the period when the city was
small and the road was being deyel-
oped it, of course, would not assert
its claims in these respects If it could
avoid it until after it should get fur
ther concessions from the public in
the way of an extension Of the fran
chise. 1t has already shown dispo-
sition, as stated above, to claim all
in sight, when the occasion has arisen
for 1t to do so. The street railway is
purely a public affair. 1t operates en-
tirely on the public streets and for
public purposes. The reason why the
public allows the service to be per.
formed by private concern instead
of performing it itself is that it deems
it in the public interest to do so. But
this reason requires merely that the
company be given sufficient to induce
it to make the investment and give
good service. II does not require that
the public should pay for the property
three or four times over when it could
construct it itself by paying for 1t
onee. 1t should not extend the fran
chise without settling this matter of
Iwatered stock and disposition of earn
ings in a fair way. Much less should
il continue an unfair arrangement and
allow lot of watered stock to be is
sued as soon as the extension of the
! franchise. is granted and so place
, those who are to follow US in an en-
barrassing position. When watered
stock has once been issued and per
haps got into the hands of innocent
purchasers, it cannot easily be re
called. The company should not be
allowed to get into aSmore advanta-
geous position from which it can de-
1Hand q further extension fater on ex-
cept on reasonable terms.
|, Basis Must Be Reasonable.
"If the company does not propose
to make the contentious referred to,
! it can have no objection to the proyi.
sion in the bill which / have prepared.
If it does not propose to make those
contentious, the public cannot for a
moment think of granting an extern
sion until the company surrenders
! these extraordinary privileges and
comes down to reasonable basis. Ii
the law is uncertain in this respect, ii
ought to be settled now when there
! is an opportunity to settle it and not
be put off by granting an extension OF
the franchise and having the work to
ibe done over again with the company
! still having the whip-hand.
THE provisions inserted In the bill
prepared by me are similar to those
, which Congress at my suggestion re-
Gently inserted in the Hilo street rail
way franchise bill. In that case the
company is allowed to issue capital
stock only to the amount paid for il
in cash, and bonds at not less than SO
per cent of their par value, excepting
that $4,000 of stock may be issued as
promotion stock. In the bill which
now propose. the company is allowed
! to keep the several hundred thousand
! dollars of watered stock that it has
already issued and is merely prohib-
| TIED from issuing any more watered
stock from this time on, and is requir-
| ed to issue its bonds at not less than
! par because it is now on firm foun-
dation and its bonds will naturally
sell above par anyway; and the pro-
ceeds of the stock and bonds must &C
into capital expenditure. These pro-
visions should go in as matters Of
! course. -@.
Provision on Earnings
Then, again, as to earnings, pro-
vision is inserted, as in the Hilo. fran
ichise, that the corporation after pay.
(! ing the cost of operation, interest
sinking fund on the bonds, ETC., may
pay for extensions and improvements
and cumulative dividends on its
stock at the rate of per cent per an.
mum, and shall pay, in so far as II
pays anything in excess of 8 per cent
one-fourth to the company and three.
I fourths tn the CITY This gives the