Honolulu star-bulletin. [volume] (Honolulu [Oahu, Hawaii]) 1912-2010, 1913-03-13
Per GER, uPa,.ry.

But, however hat may be. the pub.
tic cannot safely tie itself up for the
EeAt forty years 20 any p2ltTy ~ per
cent. No one can fOresee the future.
BY the end of the present franchise
and still more during the latter por-
zion OF the proposed extension, the
company mag be able to pay the city
quarter OF a million Q year and yet
make a good profit for itself. The
city should EOt tie Itself down TO per.
hapS tenth or even 4 fifth of that
amount. Tie only safe provision that
can he made for 4 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 nos
fail TO get q fair return on its invest
uCnt. -~ ... .~ . g.. 49,.
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
cut OF earnings, continue to get diYi-
bends en- what the public and not the
stockholders have paid for the stock,
and that then if the public wants to
take over the road, it viii have 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 a 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
Their concessions from the public in
the way of an extension of the fran
chise. 1t has already shown a dispo-
sition. as stated above, to claim all
in sight. when the occasion has arisen
for it to Go so. The street railway is
purely 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. 1t 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
once. 1t should not extend the fran
chise without settling this matter of
watered stock and disposition of earn
ings in a fair way Much less should
ii 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 $50 place
those who are to follow us in an EN-.
harrassing position. When watered
stock has once been issued and per-
laps got into the hands of innocent
purchasers, it cannot easily be re-
called. The company should not be
allowed 10 get into more advsnta-
geous. position from which it can de-
mand further extension later on ex-
cept on reasonable terms.
Basis Must Be Reasonable.
''If the company does not propose
to make the contentious referred to,
il can have no objection, to the provi-
SIGN 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, q reasonable basis. If
the law is uncertain in this respect, it
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
be 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 it
in cash, and bonds at not less than 80
per cent of their par value, excepting
GlEClL PDU,OOV VI olOSh may DC loOuCo 90
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 a firm foun-
dation and its bonds will naturally
sell above par anyway; and the pro-
ceeds of the stock and bonds must go
into capital expenditure. These pro-
visions should go in as matters of
course. ;-.. ..--...
Provision on Earnings .a.
Then, again, as to earnings, pro-
vision is inserted, as in the Hilo fran
chise, 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 it
DayS ANYTHING in excess of s per cent,