The news scimitar. (Memphis, Tenn.) 1907-1926, 1920-03-04
What Development Cost Is.

THE state public utilities commission
allowed the Memphis Street Railway
company s7SH579 as development cost,
in arriving at the rate base, or the
amount on which the owners of the
company are entitled to a return. This
allowance is absolutely indefensibe.
Development cost is high sound
ing term. but ii simply means that the
public utilities commission has gone
back to the year 1892 and included in
the rate base of the present street car
company sufficient amount so as to
make returns frcm the year 1892 to
1901. inclusive, yield the then owners
of street car lines, in Memphis, per
cent. And the present Memphis pub
lie will be required to pay the present
street car company return of 71a per
cent on this amount which, it is
claimed, represents a deficient return
between the years 1892 to 1901.
In the first place practically none
OF this so-called early loss was sus-
tanned by tine present Memphis Street
Railway company for the reason that
the Memphis Street Railway company
was not even incorporated until 1895.
These early losses therefore, were
sustained by earlier companies and the
present Memphis Street Railway COM
pany has ABSOLUTELY no connection with
them, except for the fact that later on
1t took the property of those com
panieS over. This would not entitle
the present company to recoup these
losses as. doubtless, the present COM
pany paid much lower price for the
companies which they bought out, be-
cause those eAH Yer cornnaflies alai1,led
they We're sustaining losses, and there
fore those so-called earlier losses
doubtless really benefited the Memphis
Street Railway company Ia permitting
it tc~purchase the property of the older
companies at cheaper price.
Got Lines Cheap.
In other words, the earlier COM
panies were disposed TO sell their prop
erty because they claimed they were
not making a sufficient return, and,
quite naturally the present company
took advantage of that fact and bought
the property at cheaper price.
But the state public Utilities COM
mission sets up that the present Mem
phis public must pay the owners of the
present street car company a return
upon losses sustained by other compa-
nies from 1892 to 1901.
Those earlier, so7caled, losses, were
incurred at a time when the public was
not in a position to regulate, or limit
the earnings of the company, and when
all the gains that the company made,
or might have made, would have been
the absolute properly of the company,
and If these gains were paid out in
dividends there would be absolutely no
way to require their repayment by the
company,
1.-THE state public utilities commission
sets UP that the former street car COM
panies, operating in Memphis, should
have earned, during the period from
| 1892 to 1901, an arbitrary rate of reurn
of 7 per cent or a net income for that
I,Apinl Af co QE0
The utilities commission further
more sets up that those former street
| car companies actually earned $2,297,-
| 1856, leaving a se-called deficit between
this arbitrary per cent and what they
| actually earned, of $7S7579, and in this
good year 1920 the people of Memphis
| are called upon to pay the present street
car company return of ~ per cent
| on this so-called deficit, which the stat
| public utilities commission claims was
sustained in part 2S years ago.
F; THE former street car companies
may \have been mismanaged, none!
may have been wasted, which woull
! have naturally resulted in a deficien
| return, but even so no mention Ii
made Of that fact, but simply becausI
the records of those former companies
| indicate that they failed to make thi!
! arbtray return of per cent fol
their owners, the present Memphis pub.
| lie is required to pay the present own.
ers Of the present street car compan!
7ls per cent on the deficit,
THE including of this development
cost dating back % years, to a perloC
even before the present street raiwa,
company was chartered, is unjust t
! the Memphis public, but even includn:
that amount in this absurdly high ratt
base 6-cent fare viii stil yield tn,
present owners a fair return on thei
! present investment"