The Richmond Virginian. (Richmond, Va.) 1910-1920, 1920-04-13
A-B-C of FINANCE
PROTECTING YOUR SAVINGS
ny HAROLD r. GREENE.
Manager Bond Department. Guar
anty Trust Co. OF New York.

Telephone, light and power and
electric railway companies, because ot
the semi public nature of their ser
vices. are commonly referred to as
public utilities"
To carry on their business and
serve the public well. such enterprises
must invest large sums in plants AMI
money needed for this purpose is
raised by the sale of bonds, which Ill
character and variety do not differ
essentially from railroad bonds. and
which, when well chosen, are quite
as attractive to the discrim mating in
weston.
Permanently and stability of reve-
nues characterize public utilities as
class. Not only is a continued supply
of light and power, rapid transit and
general communication facilities nee
enee OF the public, but the normal
growth of the community practically
insures a steadily increasing volume
OF business.
The nature of a public utility re-
ouires the use of streets or inter-
urban highways for car tracks. pipes
or wires. and it is a recognized eco
HOUiIC WASTE 10 give TWO
similar franchises for operation in the
sAme field. Such a duplication of ser
vice obviously entails the occupancy
of n unnecessary amount of valuable
road space. the double tearing UP OF
pavements for repairs and alterations
and other annoyances. Thus, com
munities have found by experience
that they are better served BY one
public utility. efficiently operated and
~ rxytcA har l,Yy frr4~
petng concerns.
Generally speaking. each public
utility company holds a franchise
which, although comforting a monop-
oily IN its particular field, is contract
designed to AFFORD due protection to
the public against the abuse OF the
corporations exclusive privileges. Al
first. these franchises were perpetual
or for long term OF years; the morn
recent practice. however, is to grant
them for a shorter term, subject 10
revocation upon due notice with pro-
vision for the municipality TO taks
over the plant upon an agreed basis
of valuation.
The terms of the franchise are i'm
rortant, for the franchise or contract
under which the company operates
gives it the right to use the public
streets, and. where necessary to pre-
empt private property for the public
service and its own profit.
Perhaps the most interesting fea-
lures to an investor are those relating
to the length of the period covered
by the franchise, and on what terms
the franchise may be renewed. some
times the city has an option % pur-
chase the property at a stipulated
price even before the franchise ex-
pires, as in Chicago, while in New
York the city owns the subway syS-
tenn and merely leases il TO the OPP
Grating company for a term of years
Unless the terms sof renewal are quite
definite, bonds should mature hot>~-
the franchise expires, as in negotiating
new franchise the company may los,.
some of its valua Bile privileges.
Though occasionally a franchise
may be subject to alteration at the will
of the granting authorities. its mos
burdensome conditions is likely to be
the limita ton placed on the rates to
be charged. To be sure. some suc,7
restriction is a necessary condition Of
any legalized monopoly. Certainly it
wc,.ld be unthinkable to let cor
poration endowed on account of it's
public character with such unusua
privileges, protected by the people
from competition, charge "all the
traffic will bear The difficulty has
been to find plan that wc9ld pro-
tect the publlc from eXtorttOn With
out strangling the company during
any prolonged period of rising costs.
This has been notably true of the
electric railways, which throughout
the land have found the conventional
scent fare inadequate to meet tho
increased wages and prices that have
been one Of the consequences of the
world war.
Fortunately for the investing public
state commissioners have often been
more liberal than local officials, who
Cor political reasons, would enforce the