Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1921-07-02
RIGHTS OF THE CAR RIDERS
MUST BE CONSIDERED FIRST
Supreme Court Seems to Hold That
They Take Precedence Over Divl-
dends on Watered Stock

'TNHE decision of the Supreme Court on
- the right Of the Public Service Com
mission to compel the underlying tran
SIT companies in this city to submit to it for
examination the leases with the L. Il. L.
Is substantial victory for the people.
1t Sustains the contention of the under
lying companies that they are not subject
to the supervision of the Public Service
Commission, and Overrules the Superior
Court decision that these companies which
were chartered as public service corpora b
tonS, must remain public service corpora =
uons so long as they continue in existence
and must submit to the jurisdiction of the
State commission
1t. however, sustains the right of the Pub
lie Service Commission to fix reasonable
rate of fare to be charged by the L. X. Z.
This fare must in equity be such as to pro
due reasonable return on the value of the
property under the control of the F. II. r.
There is nothing in the decision which will
compel the Public Service Commission to
consider the rentals paid to the owners Of
the underlying companies as affecting the
value OF the property rented.
II the reasonable rate of fare" does not
produce sufficient revenue to enable the
L. X. L. to pay the rentals and to pay
dividends on its capital stock then it is un
to the owners of the property to make such
readJustments as the conditions require.
If the bankruptcy of the L. r. Z. is in
volved in this readjustmGnt, that is one of
the risks its owners took when they made
the original contracts And then the next
company in line must undertake the opera
tion OF the cars at the prescribed rate of fare
and so on until the omelct is unscramblcd
or until the water is squeezed out of the
capitalization or until some chartered com
pany is reached which can operate the cars
and meet the reasonable and necessary fixed
charges
If this is what the decision means. and it
is difficult to read any other meaning into
its rather indefinite wording. then the point
for which the advocates of Il rewriting of the
underlying leases have been cOntcnding is
sustained The result for which they have
been hoping can be brought about by in
direction and the people can be relieved of
the cxOrbitant and burdcnSome charges that
have been laid upon them for years because
greedy men over reached themselves in an
attempt to secure themselves and their heirs
and assigns in the enjoyment Of illCgitmatc
profits.
The effect of the decision will be the same
as that of decisions of the United States
supreme Court in sustaining the rate making
power of the Interstate Commerce Commits
sion. In the early days of that Commission
rates were fixed which the railroads insisted
were too low TO enable them to meet the
charges laid upon them by long standing
contracts. The Court held that the public
should not be burdcncd by charges involved
in fulfilling the terms of ineQuitabc con
tracts and that the rates fixed by the Inter
state Commerce Commission. which yielded
a fair return on capital legitmately in
vested, should stand.
This is in line with the aims for which
the critics Of the underlying leases have
been contcnding in this city, 1t does not
matter how it is brought about. whether
by revision Of the terms Of the leases or
by the successive bankruptcy of operating
companies until the fixed charges are reduced
to such figure that there will be n surplus
above operating expenses to pay dividends
and to establish the credit of the company
so it can raise capital for needed extensions
The valuation of the property operated by
the p. K. 7. is now in progress 1t will
be completed in a few months. Then the
Public Service Commission will have before
it for the first time all the data needed to
guide it in fixing rCaS 1nablo rate of fare
1t knows now from the reports of the
operating company what the operation
charges are and what is the number Of
passengers carried. But it does not know
what the total gross income should be be-
cause it does not know what Il fair return
on the value of the property is
The decision seems to point ont the way
to relieve the car riders Of the necessity Of
paying such a rate of fare as will yield to
the holders of the securities Of the undcrly-
capital invested.