The Washington herald., 1921-05-10
Both potter is jealous of potter and
Craftsman of craftsman; and poor man has
a grudge against poor man, and poet
against poet.-Hesiod.
Washington Street Railways.

II company
= told at a formal hearing by its president, is
comparatively simple. 1t has little red FIRE
and few skyrockets. He frankly stated that the
franchise secured in order to make money
This IS the object of every street railway company
None too frequently the franchise is asked and the
road built in response to real demand fairly ade-
quate to justify the investment as a transportation
facility. Far more often, they come as an adjunct
to real estate boom speculative investment.
Then they are but an nducement the purchase
sot lots and have no investment justification on a
-pronise of profit in themselves save as a day
1dISP.
The first street railway in Washington was the
Washington and Georgetown indeed it was among
4the hrst in the country That was in 1862 OF
: Course 1t had horse-drawn 1t Pennsyl-
Nania avenue, Seventh and Fourteenth streets 1t
became very profitable property earning as much
20 per cent its stock In 1905 when merged
with the Rock Creek Railway Company, its bond
issues were 100000 and its stock, S2sooooo a
total of S65oo,ooo. The Rock Creek was the smaller
concern that had already lost in its operations some
S33oooo Its capital securities were under Sr25oooo
1t is rather important to find that the baby
absorbed the adult. The reason given for this is
that the Rock Creek Company had in its charter
the right to purchase connecting lines But this
clause quite satisfactory and on application
by the company Congress amended it. 1t would
have been exactly easy TO have gotten this right
. oil purchase added to the Washington and George
town franchise permitting it purchase the smaller
and feeber company which could have been bought
at probably much below its capital value
The consequence of working the other way was
that the purchase price of the Washington and
Georgetown was fixed at SIo,75oooo which ST.,
$4,000 above its total capital, and over $soooooo
/. above what the commission finds as its then fair
value. 1t equally that much above its reproduc-
tion cost. However, the $Io.75o,ooo was not over
the actual market value, though ii the object had
. been to make close business deal which would
have reduced capitalization instead OF padding it,
the purchase would have been made the other way
around
At that time the companys bonds were selling
on the market at 100 per cent premium because OF
a provso that if the permission OF Congress could
be secured increase the stock issue these bonds
could be exchanged for stock dollar for dollar. But
the time of the sale threefourths OF these bonds
had but four years to run before maturity and
it the stock, not the bonds, which controlled the
road. This stock. S2,5oo,ooo, selling at huge
premium OF over five times its face value and this
liked the purchase price, which, on that basis was
low rather than excessive
- But the milk in the cocoanut is the fact that if
tRS Washington and Georgetown had bought the
Rock Creek the joint capitalization of the two when
taken over by the Capital Traction Company could
not have exceeded S7,75o.ooo and that would have
been nicely in excess OF the investment As it was
the total cost OF the Washington and Georgetown
was added to tine Rock Creek bonds and stock, max
ing the combined capital $I2oooyooo. Congress
empowered the company, also, to issue bonds not
in excess of one-half the stock and S6oooooo in
bonds were promptly issued and the proceeds used
as the companys records show for the cost of ex-
tending underground cable construction, changing
this later underground electric for double-truck
cars and other like expenditures which the commits
sion holds partly charged against depreciation
The commission also has refused to include in
its fair value fer rate making the $1,000
600. paid in excess OF the Washington and George
town value, that is for franchise, market value
whatever it may be called 1t may be recalled that
.Nndrew Carnegie had a rule that whenever a new
t95ehine found which would reduce operating
cos,s in his mills he scrapped his old machines and
bought it. Large double-truck cars and electric mo-
,or power a like operating saving for street
railways. and just how much Of the cost of the
change should go to capital is problem.
However, with such allowances Is the commits
son thought fair and rejecting the S5,I4oooo fran
elise charge capitalized by the company, the fair
value fixed by the commission is SI425oooo. The
company's total capitalization today remains SI8-
100000. 1t has not been increased since 1895 and
Is but S37ooooo above the fair value allowed by the
commission.
AT is fair to add that the Capital Traction in all
its history has given fine service, has been we'll
managed, has paid living wages, has maintained
popularity with the public and has paid dividends
:ecofdng to its earnings, than per
cent The year after the purchase or consolidation
tho dividend was 35 per cent; in 1867 it was LIS;
1908, 22s and it then gradually increased reaching
,6 per cent in 1913, but dropping to per cent in
: rbff and 1915