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REPORT OF SPECIAL COMMITTEE 

ON 

GOVERNMENT OWNERSHIP AND 
OPERATION OF PUBLIC UTILITIES 



January 23, 1919 



GIFT OF 




* Asanriatton 
of 5faw f 0rk 




REPORT OF SPECIAL COMMITTEE 

ON 

GOVERNMENT OWNERSHIP AND 
OPERATION OF PUBLIC UTILITIES 

LIBRARY OF CONGRESS CARD A19-178 



January 23, 1919 



, 













THE Board of Directors of the Merchants' Association 
of New York, at a meeting held January 23d, 1919, 
considered, and by unanimous vote approved the fol- 
lowing report from the Special Committee on Government 
Ownership and Operation of Public Utilities, and adopted the 
following preambles and resolutions : 

Whereas: This Board at its meeting Nov. 15, 1916, adopted 
the following preambles and resolutions : 

Whereas, The Newlands Commission, created by Senate Joint ^Resolution 
No. 60, is about to investigate, among other things, ' ' the comparative 
worth and efficiency of governmental regulation and control [of public 
utilities] as compared with governmental ownership and operation " 
and 

Whereas, The fundamental principles of our form of government require; 

That the members of legislative bodies and all principal executive 
officials be periodically subject to change; 

That the number of members of legislative bodies be large and 
that representation be sectional; 

That legislative bodies, by means of laws passed by them, direct 
and control in minute details the acts of executive officials; 

That the discretionary power of such officials be restricted to the 
narrowest possible limits; 

That no outlays of public monies be made except as expressly 
authorized by law; and 

Whereas, By reason of these conditions inseparable from our form of gov- 
ernment, governmental operation of economic undertakings, whether 
Federal, State of Municipal, is characterized by: 

Extreme delay and inertia, vacillation, hesitancy and inconsistency 
in matters of policy; 

Wasteful outlays in response to sectional demands; 



395 



;t)?7 



Insufficient provision of funds when needed for necessary purposes ; 

Absence of close and harmonious co-operation between the legis 
lative directorate and the executive officials; 

Insecurity of tenure in the higher places and lack of self -interest 
as an incentive; 

Frequent change of higher officials and the injection into office 
of new and untried men; 

Unsuitable methods of selecting executive officials whereby such 
officials are not often properly qualified by expert knowledge, previ- 
ous training, experience or proved capacity; 

Hampering conditions imposed by law upon executives whereby 
they are deprived of necessary control of operation and of their 
subordinates; and 

Whereas, From these conditions naturally result imperfect co-ordination, 
lack of qualified management, bad operating methods, and general 
waste and inefficiency; both the methods and the results being dia- 
metrically opposite to those which prevail in properly managed business 
undertakings, which latter are governed solely by economic considera- 
tions, and require for their success close and friendly relations between 
the directorate and the officials; the prompt provision of funds as 
required by the economic needs of the business; high capacity, long 
experience and special training on the part of the executive officials, 
assured tenure during efficiency, self-interest, and the possession by 
such officials of a very large degree of discretion as to outlays and 
operating details; Now, therefore, be it 

Eesolved, By The Merchants' Association of New York that governmental 
methods in the conduct of business affairs are inherently defective by 
reason of the fundamental restrictions imposed by our form of govern- 
ment; and that such methods are often inefficient and wasteful and 
therefore unsuited to the conduct of business undertakings; And be it 
further 

Eesolved, That The Merchants' Association of New York is opposed to 
government ownership and operation of railroads, telephones, tele- 
graphs, and other public utilities, believing that such utilities are far 
more effectively operated under private ownership, subject to public 
regulation, than would be possible under governmental ownership and 
operation, and that it would be a national calamity to subject these 
instruments, indispensable to the welfare of the whole country to the 
hampering, inefficient and wasteful methods inseparable from govern- 
mental undertakings. 

and, 



Whereas: This Board later appointed a Special Committee 
to review the question of government ownership and 
operation of public utilities, particularly with reference 
to new conditions arising from the war; and to report 
whether or not such new conditions justify and require 
a modification of the Association's previous policy of 
opposition to the undertaking by governmental agencies 
of economic activities; and 

Whereas: Such Special Committee, after a careful and de- 
tailed study of the subject, has reported that it does not 
find any changes of conditions, resulting from the war 
which warrant or require the previous position of the 
Association, in opposition to government ownership and 
operation, to be modified; Therefore Be It 

Resolved: That the report of the Association's Special Com- 
mittee, dated January n, 1919, be and hereby is ap- 
proved and its recommendations adopted ; and Be It Fur- 
ther 

Resolved: That The Merchants' Association of New York 
reaffirms its resolutions of November 15, 1916, (cited 
above) opposing government ownership and operation of 
public utilities. 

New York, January 23, 1919. 

S. C. MEAD, 

Secretary. 



REPORT 

BY 

SPECIAL COMMITTEE ON GOVERNMENT OWNER- 
SHIP AND OPERATION OF PUBLIC UTILITIES 

JANUARY n, 1919. 


To the Board of Directors, 

The Merchants' Association of New York. 

THIS Committee has been requested to review the ques- 
tion of government ownership and operation of public 
utilities, particularly with reference to new conditions 
arising from the war; and report whether or not in our opin- 
ion such new conditions justify and require a modification of 
the Association's previous policy of opposition to the under- 
taking by governmental agencies of economic activities. 

The Federal Government by virtue of war powers delegated 
by Congress to the President has taken possession of and is 
now operating 

All steam railroads 

All express service 

Many coastwise steamships 

The Cape Cod Canal 

The Erie Canal and all other canals in the States of 

New York and New Jersey 
All telegraph service 

All telephone service except farmers' lines 
The ocean cable service. 



A resolution now pending in Congress proposes the perma- 
nent retention and operation by the Federal Government of 
these utilities, and also practical domination by the Govern- 
ment of the ocean-carrying trade (so far as American ships 
are concerned), through government ownership and operation 
of shipping; and further proposes government ownership of 
the sources of coal and oil, and distribution by the Govern- 
ment of those natural products. 

Movements for state or municipal ownership and opera- 
tion of local public utilities are in progress in various quarters. 
These in general contemplate the ownership and operation by' 
municipalities of street railways, electric light and power 
plants, gas plants and telephone plants. 

Thus it is proposed that private enterprises be excluded 
from the fields of transportation, communication, light, heat, 
and power, and that the functions belonging to those fields 
hereafter be performed by immediate governmental agencies. 

Except under war conditions the sole plea that can be ad- 
vanced to justify the operation by governments of public 
utilities is that governments can provide better service at less 
cost to the public than can private operators that is to say, 
the assumption that government operation is more efficient 
and less costly than private operation. 

We do not believe that this contention can be sustained. 
On the contrary we contend that the operations of govern- 
ments in the economic field and particularly under American 
conditions are generally characterized by inefficient manage- 
ment and excessive cost; so that under government operation 
the public would get poorer service and pay more for it than 
under private operation suitably regulated by public authority. 

The cause of inefficient management and excessive cost 
when governments undertake economic activities is simple. 
All the activities of any government are necessarily carried 

cS 



on by political machinery and that machinery is wholly un- 
suited to the economic field. 

The fields of politics and economics are dissimilar and sep- 
arate. The field of politics (meaning thereby the art of 
government) is mainly the regulation of conduct and the pro- 
tection of rights. The field of economics is the production 
and utilization of material things. The principles, the methods 
and the machinery of political administration are wholly dif- 
ferent from those of economic activities and not adapted nor 
adaptable to the latter. The differences are fundamental and 
cannot be reconciled. When, therefore, the machinery of 
political action is applied to economic undertakings it works 
badly and makes impossible the perfect co-ordination which 
can alone, in the economic field, produce efficiency and 
economy of operation. A brief comparison of the machinery 
of business with that of political action, will show clearly why 
political machinery does not and cannot work effectively in 
the field of economics. 



POLITICAL SELECTION PRODUCES A PERSONNEL 
POORLY QUALIFIED FOR ECONOMIC SERVICE. 

THE success of any economic undertaking depends in 
very large degree upon the ability and skill, the zeal 
and energy, and the soundness of judgment of the 
human agents employed therein. Ability and skill in a par- 
ticular field are the products of special and usually prolonged 
training; by far the most powerful motive of zeal and energy 
in the ordinary affairs of the world is self-interest as under- 
stood in its widest meaning; and intimate knowledge derived 
from experience is essential to sound judgment in business 
affairs. Every large business concern seeks to embody in its 
management and working organization 



Intimate knowledge 
Long experience 
Sound judgment 
Special ability and skill 
Zeal and energy. 

Having secured these qualities it seeks to retain and expand 
them by making the self-interest and ambition of officials and 
employees a dominant motive for loyal devotion to the welfare 
of the business. The motive of self-interest and ambition is 
brought into play by the free opportunity of advancement 
always open to special ability and zeal, and by the assurance 
of permanent tenure to those who are efficient. 

These requisites are always lacking in a considerable degree, 
and often entirely, in an organization created by political 
methods to perform an economic function. 

No business, whether public or private, can be operated effi- 
ciently and without great waste, under the constant injection 
at the top of new, untried and often unfit executives and man- 
agers; nor with the rank and file deprived, by lack of oppor- 
tunity for advancement, of the incentive to zeal and energy. 

Frequent change and unfitness in the higher ranks, and lack 
of opportunity and zeal in the lower ranks are dominant and 
inevitable features of political management. Political ex- 
pediency is nearly always the determining consideration in 
appointments to the higher places. Those places are the re- 
wards of political service; and the appointees, while perhaps 
proficient politicians, are seldom proficient business executives. 
Their immediate subordinates are likewise appointed for politi- 
cal reasons, and fitness is a secondary consideration. 

Thus the executives of a purely business function under 
political control are often without business experience or ca- 
pacity; they are usually without the long experience, the inti- 

10 



mate knowledge, and the special ability and skill indispensable 
to highly efficient administration; and their official acts are 
often directed by political motives opposed to the proper con- 
duct of the business undertaking. 

These initial defects due to political methods of selection 
and inseparable from political control, are magnified and per- 
petuated by the changes which follow every election. Because 
of these frequent changes, executive officials seldom remain 
in office long enough to acquire the experience and learn the 
sound methods necessary to efficiency and economy. At fre- 
quent intervals the executive heads are all, or nearly all, sup- 
planted by new appointees, likewise without the qualifications 
necessary to fitness; and whatever progress toward sound ad- 
ministration may have been recently made is likely to be nulli- 
fied by changes in methods which almost always follow changes 
in officials. 

Lack of opportunity in the lower ranks of the public service 
has a deadening influence upon the the zeal and energy of the 
entire body of minor officials and the clerical staff. The higher 
offices with their larger salaries, being usually bestowed as 
rewards for political services, are seldom open to minor offi- 
cials and clerks, however capable, and however meritorious 
their services. Therefore, they cannot rise beyond a modest 
minor position. As there is little opportunity to rise, and 
therefore no sufficient reward for ability and initiative, for 
exceptional diligence, application and devotion to duty, the 
motive of self-interest and ambition is destroyed, and only the 
minimum of service is given. 

The conditions of incompetent administration at the head, 
and perfunctory service in the lower ranks, is fatal to eco- 
nomic efficiency. The administrative heads, knowing little of 
the business, are not capable of devising and installing really 
efficient methods. They are therefore content to let the old 

ii 



methods continue as the easiest way of getting along. The 
lower officials have neither the incentive nor the power to 
depart from methods in which they have long been trained 
and to which they have become wedded by long usage; in 
fact, any attempt at change is usually resented and resisted. 

Hence the business proceeds almost wholly by force of 
long-entrenched routine, impervious and hostile to new 
methods, ignorant or unregardful of waste and inertia, hating 
reform, and deadly to the spirit of progress and efficiency. 

We have, then, at the top incompetent, temporary and fre- 
quently changed managing officials with an imperfect knowl- 
edge of their duties and without the training necessary to 
efficient management; frequent disorganization of the ma- 
chinery by the injection of new and relatively incompetent 
men ; and at the bottom a group of minor employees, without 
the opportunity for advancement which supplies the principal 
motive for zeal and energy. These are the conditions which 
dominate the public service and which make a high degree of 
efficiency impossible, particularly when applied to economic 
undertakings where perfect and continuous co-ordination, ex- 
perience and thorough knowledge are essential to effectiveness 
and economy. 

In the case of private operation we find continuously brought 
into play the qualities and the conditions which tend to maxi- 
mum business 'efficiency experience, knowledge, special 
training, and the zeal arising from opportunity and self- 
interest. 

On the other hand, in the case of public operation we find 
these essential qualities largely excluded, through the working 
of a principle of political selection suited to and inseparable 
from political action, but wholly unsuited and repugnant to 
business action, and tending greatly to impair efficiency and 
economy in its performance. 

12 



Thus because of the unsuitable principle of selection applied 
to business functions under public operation, and the frequent 
and constant changes in officials, the personnel selected by 
political methods is inevitably inferior to that selected by 
business methods. 

The conditions that produce this result cannot be changed 
so long as popular choice and frequent change of officials re- 
main fundamentals of our political system. 

It is true that government operation of public utilities was 
measurably successful in Germany. But the very reasons 
which, under the German system and being given the men- 
tality and traditions of the German people, made it fairly suc- 
cessful in that country, are the reasons why under our form of 
government, and with the spirit and traditions of the Amer- 
ican people, government ownership or operation would be 
bound to prove a failure and a grave social and economic 
detriment to the country. 

It should be understood that all that is being said in this 
report on the subject of government ownership or operation 
of public utilities is based upon the conditions which exist in 
America and which, at least in part, are necessarily incident 
to a government under free institutions. 



DISABILITIES OF EXECUTIVE OFFICIALS UNDER 
GOVERNMENT CONTROL. 

Y reason of the defective personnel arising from the 
causes set forth above, even an able executive could 
not conduct a business with high efficiency. 
There are numerous other causes of disability from which 
those having direction of a business undertaking under gov- 
ernment operation cannot escape and which make a high stand- 
ard of efficiency impossible. 

13 




The managing official of a government undertaking is in- 
variably hampered by undue and severe limitation of his dis- 
cretion. He can do only those things which he is expressly 
authorized by law to do ; he cannot exercise any power outside 
the limits prescribed by the law and is, therefore, to a large 
degree deprived of the power of initiative, a quality indis- 
pensable to high executive efficiency in business matters. 

The successful management of any large business undertak- 
ing requires that the utmost freedom of action be granted to 
the executive. It is assumed as a condition of his employment 
that his experience, training and special skill will enable him 
to exercise a wide discretion so wisely as to promote the wel- 
fare of the business. The check upon him is mainly his sense 
of responsibility for desirable results, and he is commonly left 
free, whenever circumstances require, to take such action, 
within the general policy of the business, as his judgment 
dictates. Hence his initiative is given full play and he is 
enabled, whenever occasion requires quick action, to do what- 
ever is necessary to be done. 

A political appointee, on the contrary, even when the need 
for action is immediate, can seldom move without special 
authorization, and such authorization is often, even frequently, 
a matter of many months, and sometimes of years, during 
which time the interests of the business undertaking may suffer 
severely by inability of the executive to apply needed reme- 
dies. A case in point is the present condition of New York 
Harbor. Our commerce is suffering severely for lack of press- 
ingly-needed new piers. The Dock Commissioner has re- 
peatedly made urgent representations but his initiative has 
been paralyzed by the inertia of the controlling Board. 

Such an executive has no sufficient control of the organiza- 
tion under him. He cannot control appointments (except of 
his immediate subordinates and not always those), nor 

14 



methods of operation. His organization is frequently divided 
by law into rigidly fixed Bureaus, with prescribed procedure 
which cannot be materially varied from. He is obliged to 
take the personnel which is handed him, however low its stand- 
ards of performance and however rigid and inelastic the 
methods. He cannot fix salaries nor use his discretion in the 
promotion of deserving subordinates and the placing of men 
in the positions best suited to their capacities. Nor has he 
necessary power as to outlays. The funds needed for effective 
operation are usually limited by budget allowances based upon 
estimates made long previously, before the actual needs are 
fully known. Even in the first instance, appropriating bodies 
are extremely reluctant to grant the full demands which the 
executive thinks necessary to the proper conduct of the busi- 
ness; and are still more reluctant, in case of an insufficiency of 
funds, to make additional appropriations, without which the 
function cannot effectively be performed. Hence the execu- 
tive is unable promptly to do that without which the business 
must suffer. 

These conditions do not prevail in well-managed private 
business undertakings. The executive practically always has 
granted him all the discretion necessary to enable him to select 
and maintain a fully efficient personnel. He also has a large 
and usually controlling influence in promptly obtaining what- 
ever funds will conduce to the effective and economical con- 
duct of the business. 

For the reasons cited, executive officials under government 
control are precluded from full efficiency, and the business is 
subjected to the ineconomy, the waste, and the absolute loss 
which is inseparable from inertia and delay in business under- 
takings, where promptitude and immediate outlay are neces- 
sary. 



REASONS WHY THE FINANCIAL NEEDS OF A PUBLIC 
BUSINESS UNDERTAKING ARE USUALLY NOT 
PROMPTLY OR SUFFICIENTLY MET. 

IN the case of a business undertaking under private control 
and good management, funds for improvements which 
will conduce to economy are promptly provided. 

In the case of public operation, the pleas of executive offi- 
cials are seldom considered upon their merits alone. Fre- 
quently the most convincing demonstration of the soundness 
of the proposed outlay fails to secure the much-needed appro- 
priation. The appropriating bodies are compelled always to 
regard the tax rate and its effect upon voters. The total 
amount at their disposal is, therefore, restricted by this para- 
mount political consideration. The aggregate amount must 
be apportioned among the various departments with reference 
to their respective needs, and those outlays always include a 
considerable number of superfluous and extravagant factors 
which cannot be dispensed with, for political reasons. Hence, 
the ultimate amount allowed for any particular function is 
determined not by its absolute needs, but by the competition 
for appropriations amongst all of the departments. For that 
reason, the amounts finally granted are frequently insufficient 
for the proper conduct of at least some of the departments. 

This condition bears most heavily upon departments which 
/ operate physical plants, in the case of which considerable ex- 
NC penditures for extensions, betterments and maintenance are 
necessary to effective performance. An appropriating body 
can most readily keep down the public outlays by withholding 
appropriations for the purposes indicated. It is generally 
argued that there is no hurry about the matter; that the ex- 
tensions and betterments can be deferred for two or three 
years, and that there is no need to spend much money for 

16 



maintenance until the plants have become definitely unserv- 
iceable. Hence, the instances are extremely rare where 
under public control sufficient capital investments and outlays 
for maintenance are made to keep the plant up to its proper 
operating efficiency and to enable it fully to provide the serv- 
ice contemplated. 

The delays in the matter of appropriations which may be 
promptly needed are almost always made greater by the need 
for concurrent action by separate bodies having concurrent 
jurisdiction. The tendency of the reviewing body is to reduce 
appropriations already insufficient, in order that it may gain 
the political prestige of advocating and compelling so-called 
economy. The effect of such gallery plays is, of course, to 
render impossible the proper performance of the function to 
be supported. 

There are other influences of great potency which tend to 
limit the appropriations without which the public business 
cannot effectively be carried on. When any considerable new 
outlays are contemplated, particularly for such a public enter- 
prise as providing electricity, gas, or street-railway service, 
those outlays are invariably the subject of prolonged and fre- 
quently bitter public discussion, usually with violent opposition 
by a considerable part of the community. This opposition is 
directed to, keeping down the public outlays without much 
regard either to the real needs of the business enterprise, or 
to the fact that the proposed outlays would really result in 
very material economies of operation and decided improve- 
ment of service to the public. The issue thus becomes political 
and the question is, therefore, decided from the political rather 
than the economic standpoint. 

The result of this condition, under which political forces 
rather than sound business reasons prevail, is that public serv- 
ice plants publicly operated are frequently starved by reason 



of the failure or refusal of the public officials to approve the 
outlays, without which a high degree of efficiency can not be 
maintained nor adequate service supplied. 



WASTEFUL DISTRIBUTION OF CAPITAL OUTLAYS* 

LONG experience by this nation in the distribution of 
money for public improvements has demonstrated be- 
yond any question that the outlays for that purpose are 
largely determined by political influence, and but little by 
economic utility. Seven hundred million dollars have already 
been spent by the United States Government for the improve- 
ment of internal waterways. Some of the improvements 
effected are of reasonable utility and would have considerable 
value as integral parts of a complete system, but there is no 
complete system; and most of the money has been expended 
for unrelated local improvements, entirely unwarranted by 
the possible benefits. The latter class of expenditures are 
brought about solely through the operation of political in- 
fluence in response to sectional demands. Those outlays are 
largely in effect an economic waste, inasmuch as they are 
practically non-productive. 

The enormous federal outlays for public buildings have 
likewise largely been distributed through the influence of sec- 
tional demand backed by political influence. A large part of 
the outlays for public buildings represents useless extrava- 
gance in the form of hundreds of expensive and ornate public 
buildings scattered in unimportant towns and villages. They 
are in large part needless for the public business and involve 
an enormous and continuing annual outlay for their upkeep. 
These illustrations indicate the methods and motives which 
govern the distribution of federal money for public purposes. 

18 



No one familiar with political methods will doubt that in case 
of government ownership and operation of railroads, tele- 
phones and telegraphs, the outlays for extensions and better- 
ments will largely in a similar manner be decided by political 
influence and not by economic utility. The pressure of politi- 
cal considerations will often be determining. The sections 
which for any reason for the moment have a controlling 
political influence will be able to secure funds for the construc- 
tion of new lines, for the erection of extravagant stations, 
and unnecessary warehouses, grain elevators and terminals, 
while other sections whose political influence is at the moment 
less potent will be unable to secure votes for improvements 
not only economically justifiable but urgently needed, and 
even of national as well as of local benefit. A case in point is 
the persistent refusal of Congress to provide for the proper 
improvement of New York Harbor where half of the com- 
merce of the United States centers, while at the same time 
annually spending millions in scattered local improvements 
of very little utility. 

Similarly in the case of local public utilities, political con- 
siderations are likely to figure largely in the distribution of 
capital outlays. This is especially true of street railways which 
under political management might, and probably often would, 
as a result of political deals be extended by the test of votes 
instead of by the test of sound policy. 

An incentive is ever presented to legislators to defeat 
more-needed improvements, unless their demands for the 
more questionable improvements be conceded. Thus while 
under private ownership the amount of capital invested in 
profitless extensions is properly restricted by economic condi- 
tions, under public ownership the economic restrictions would 
have less force and would often be overborne by the political 
considerations. As a result, under public ownership, there 

19 




would be a constant tendency to overburden the utility with 
excessive and largely wasteful capital outlays, the loss from 
which must be borne by the profitable parts of the enterprise 
or, in many cases, directly from taxation. 



POLITICAL RESULTS AND DANGERS. 

THAT grave political dangers are inherent in any scheme 
of government ownership is obvious. The creation of 
a preferred class of self -perpetuating office holders, 
regulating in a considerable measure their own compensation 
and working conditions, would constitute a distinct political 
menace to the electorate and a burden upon the tax payers. 
The temptation to demagogues to take advantage of the power 
thus presented to serve selfish and class interests against the 
public interest would be constantly present, with the interests 
of the general public the farmer, distributor . and all other 
classes of labor outside of the public service opposed to those 
seeking disproportionate advantages for themselves within. 
Class conflicts of serious import would be unavoidable. 

Exactly such a situation arose in New South Wales with 
the nationalizing of its railroads. Railroad employees by rea- 
son of their organized political power so far over-reached in 
their demands that a widespread public reaction was created, 
resulting in the disfranchising of government railroad em- 
ployees, thus destroying entirely their political power by de- 
priving them of their voting power. 

Wage making for political rather than economic considera- 
tions is fraught with danger for all concerned. It is almost 
certain to be unfair to either the public or the wage-earner. 
It may be unfair to the public through unwarranted increases 
which place an undue tax upon production and distribution 
which would handicap agriculture, industry and commerce, 

20 



and prevent competition with other nations, or it may be unfair 
to the wage-earner through the political ascendency of those 
primarily interested in reducing the costs of transportation, 
who might refuse just compensation to those engaged in its 
service. 

Any other basis than that of sound economic law which 
of course, includes willing recognition of the just demands of 
wage-earners and enlightened and sympathetic consideration 
for their welfare and contentment in the rendering of such 
public service is certain to be unsatisfactory and inequitable. 
The importance of maintaining this form of service on a busi- 
ness basis to the producer, the shipper, the merchant and the 
general consumer can hardly be over-emphasized. Each has 
an important interest in the problem, and it may be reasonably 
assumed that in the event of any substantial injustice being 
done to any important class by arbitrary political action, vio- 
lent reactions and changes would follow here as they have 
elsewhere, to the constant unsettling of the situation. 

Another result of political management is found in the 
tendency toward needless and wasteful increases in the number 
of employees in the case of public utilities under governmental 
operation. The multiplication of needless offices and super- 
fluous employees is universal in every branch of government 
service. Under private control the object of the management 
is the unification and consolidation of functions, with an ade- 
quate but not excessive personnel, while in the case of public 
control the tendency is toward the creation of numerous addi- 
tional supervisory branches and bureaus entailing an increase 
of personnel. 

The useless subdivision and the increase in officials in pub- 
lic management is mainly due to political causes, the obvious 
motive being to provide additional places for political hench- 



21 



men. Because of these conditions the cost of performing the 
work is largely and wastefully increased. 

This condition is illustrated by the present govern- 
ment railroad control, under which more than eleven hundred 
new officials are employed in the central administration at 
Washington in addition to an even greater number distributed 
in the offices of the Regional Directors. All of these have 
been added to the previously existing forces of the railroads 
when under private control, whereby the aggregate expense 
of the present railroad administration has been increased by 
many millions of dollars annually, despite the widely heralded 
consolidation and unification whose purpose was to effect 
econcv ny. 

This phase of the subject is still further illuminated by the 
experience of the French governmental railroads cited some- 
what in detail below. 



WHAT EXPERIENCE OF GOVERNMENT OPERATION 

SHOWS* 

THE defects and abuses outlined above have manifested 
themselves wherever state operation has been applied. 
With the single exception of Prussia, state-owned 
railroads have been financial failures. In general their rates 
are higher and their service poorer than those of privately 
operated railroads. Despite high rates and generally poor 
service, the state-owned railroads of Australia, New Zealand, 
Austria, Italy and France have to pay part of their fixed 
charges out of general taxation. The railroads of the three 
states last named are monuments of financial mismanagement. 
A minor part of the Australian lines was built in response to 
political pressure, and its revenues barely pay operating ex- 
penses. Canada's Inter-Colonial Railway, estimated to cost 

22 



less than $40,000,000 actually cost more than $90,000,000. 
It likewise was built under political pressure. During forty 
years' existence it has seldom earned even operating expenses ; 
and every year during its history, the Canadian people have 
been taxed to meet its defiicit. 

The financial success of the Prussian railroads is due to 
high rates, which average about twice those of American rail- 
roads, despite the fact that the Prussian roads pay practically 
no taxes and that American wages are double those of Prussia. 
Moreover, the operating costs of the Prussian roads are seri- 
ously and wastefully swelled in the item of labor costs, by the 
excessive number of employees; where American railroads 
employ one hundred men the Prussians employ approximately 
one hundred and sixty-six an excess common everywhere 
under state operation. 

The French state-owned railroads embody all the abuses 
referred to above. The French Government took over the 
Western system January i, 1909. After five years of govern- 
ment operation, the gross revenue had increased by $6,556,- 
ooo. During the same period the operating expenses had 
increased by $13,090,000. In the last year of private opera- 
tion the net revenues were $13,757,000; in the fifth year of 
government operation, with a considerable increase in traffic, 
the net revenues were $7,223,000. Under private ownership 
in 1908, 67.8 per cent, of the gross revenue went to pay operat- 
ing costs; under government ownership, the operating costs 
in 1912 had increased to 89.4 per cent, of the gross revenue, 
an increase in four years of 21.6 points, equal to about 32 
per cent, over previous costs. During the same period the 
operating ratio of the five private French companies increased 
only 8.1 points. The very disproportionate increase in the 
operating costs of the state railway was largely due to need- 
less employees and excessive wages. Where the private com- 



panics employed 174 persons, the state railway employed 
235 persons; where the private companies paid $57.00 
in wages, the State railway paid $97.00. The new appoint- 
ments were largely political. The heads were inexperienced 
and incompetent; the rank and file were disloyal and disaf- 
fected. Discipline went to the dogs; and the service became 
completely demoralized. 

The heavy increase in outlays did not produce better service 
but produced worse service. The excess cost did not go for 
improvements of the properties or for better methods; but 
for payment of excessive wages and for superfluous employees 
imposed by political influence. 

These were the results in democratic France of the applica- 
ation of political methods to an industrial enterprise. 

The telephone system in France has likewise been debased 
to the lowest level of inefficiency through the operation of 
political, in place of business management. Its equipment is 
inadequate, its management incapable, its discipline extremely 
poor, and its service detestably bad. 

In England the telephone system is state-owned, and op- 
erated by the Post Office Department. The service is unre- 
liable and subject to much delay. (In passing it may be said 
that the highly efficient telegraph service of England, for 
which the rates are very low, is provided at the cost of a heavy 
annual deficit, payable by taxation). The installation is in 
large part antiquated. It can be brought up to American 
standards only by extensive reconstruction at a cost of many 
million pounds ; and the funds required have been persistently 
refused by the Government. 

In America municipal ownership and operation have not as 
a rule resulted in either better service or lesser cost; on the 
contrary in many instances, after an initial period of good 
service and lessened charge to the public, the plants have usu- 

24 



ally gradually deteriorated until good service has become im- 
possible; and as deferred and concealed costs have developed 
the true costs have been found much greater than shown by 
the misleading and incomplete public accounts. In most cases / 
depreciation has been rapid by reason of insufficient appro- 
priations for maintenance, usually grudgingly given and often 
withheld, because of the political opposition to a high tax 
rate. A sinking fund for replacement has seldom been pro- 
vided, and in consequence when the plant has become obsolete 
a new capital investment has been required. At this juncture 
many communities have learned for the first time the true cost 
of their adventure in municipal ownership; and have realized 
that their service would have cost them less under capable 
private management, suitably controlled by the public, than 
under generally slack public management.* 

As a result of their disillusioning experience several hun- 
dred American municipalities have discontinued their attempts 
to save money by carrying on a business undertaking through 
the machinery of politics. f 

There are in America, apparent exceptions to the general 
rule of municipal inefficiency; but they are only apparent and 
not real. Seemingly excellent showings are frequently made. 
These usually cover only a short initial period. They gen- 
erally only cover obvious current costs, and omit important 
factors of future costs. Loss in taxes, interest on investment, , 
depreciation, amortization, extensions and betterments, rents 
and maintenance of public buildings whose costs are borne by 
other departments, are commonly ignored. By these omis- 
sions an apparently favorable financial showing is made; 
while a true accounting would show the reverse. 

Municipal operation has, however, been successful in var- 

* See Appen. B. p. 55 ; 
t See Appen. C. p. 69 ; 
See Appen. E. p. 77. 

25 



ious European municipalities, notably Glasgow, whose public 
utilities are managed with great efficiency and excellent finan- 
cial results. The same is true of certain German and Austrian 
cities. 

The reason for this success is simple. Politics in the Amer- 
ican sense does not enter into these municipal undertakings. 
In these places municipal activities are regarded solely as 
business matters to be managed by business methods. Elected 
officials are commonly highly qualified business men, whose 
sole concern is the efficient and economical management of the 
business affairs with which they are charged. To this they 
diligently devote their ability and training and apply the sound 
methods which experience has taught them to apply to their 
highly organized private affairs. Their managers and their 
subordinates are permanent officials, qualified by continuous 
service in their respective fields to perform their services with 
efficiency. Their tenure is secure. The changes are infre- 
quent and solely for sound business reasons. There is no 
general overturning after each election, as in America, with 
a consequent injection of inexperienced officials. There is 
no redistribution of offices as rewards for political service. 
Effective performance of the business function is the sole 
motive, and sound business methods are the sole methods em- 
ployed. In Germany, municipal officials are not only specially 
trained for the special business functions entrusted to them, 
but their tenure is practically permanent, and they are thus 
enabled to attain high proficiency. 

It is superfluous to say that contrary conditions prevail in 
American municipalities, where most offices are prizes of poli- 
tics, and incessant change with little regard to fitness is the 
rule. It is hopeless to expect the excellence of Glasgow under 
American conditions. 



26 



GOVERNMENT OWNERSHIP OF PLANT AND 
OPERATION BY CONTRACT. 

IT is often proposed that the public should itself construct 
and own the physical plants of public utilities, and secure 
their operation by contract with an operating company, 
in order to avoid the assumed evils of overcapitalization and 
secure a revenue for the public in the form of rentals or a 
share in the profits. It is further contended that this plan 
would avoid the evils of political control and secure the greater 
efficiency which is the result of private enterprise and business 
methods. 

These contentions have little weight. The practice of over- 
capitalization with its evils, whether actual or assumed, has 
been practically abolished by the operation of existing laws 
enforced through railroad and public service commissions. 
Except in possibly a few states, securities can no longer be 
issued except with the approval of regulatory public bodies. 
Before such approval is granted it must be shown that the 
funds to be raised are reasonably necessary for the purposes 
of the business. Those purposes must be specified in detail 
and application of the funds to any but the specified purposes 
is prohibited. 

The requirements as to accounting are such as to practically 
preclude the application of funds raised by the sale of securi- 
ties for any except the purposes approved. It is therefore un- 
necessary to resort to public ownership in order to prevent 
such evils as, it is commonly believed, result from overcapital- 
ization, so that in the respect indicated government ownership 
offers no advantage. Moreover, capitalization as evidenced 
by the volume of outstanding securities is now disregarded 
by regulatory bodies as a basis for rate-making, and rates are 
made with relation to a fair return on the value of the prop^ 

27 



erty actually and necessarily employed in the public service; 
and in the case of railroads with relation to competition. 

There are, in addition, serious objections to government 
ownership which seem to limit its utility and make the desir- 
ability of its general adoption questionable. Among these 
objections is the fact, as shown by the experience of nearly all 
state-owned railroads, that the cost of construction by govern- 
ments is usually materially greater than the cost of similar 
work by private enterprise. The Inter-Colonial Railroad of 
Canada affords a glaring instance of excessive cost. In its 
effect, the result of this greater cost is precisely the same as 
the effect of an over-issue of securities or stock watering. In 
both cases the capital charges are unduly high and the enter- 
prise is financially burdened to that extent. 
I As has been pointed out above, governments, whether state 
I or municipal, are always reluctant to make large capital in- 
vestments after the initial investment has been made. It is 
' therefore difficult promptly to secure additional appropriations 
for extensions and betterments, which are frequently neces- 
[ sary for the efficient operation of the properties. Inefficient 
/ service necessarily results from the failure to provide such 
appropriations. This is well illustrated in the case of the 
existing subways in this city. An unbearable congestion of 
traffic made measures of relief imperative. The only means 
possible at the time was an increase in the train capacity from 
seven to ten cars, which could not be effected without a corre- 
sponding lengthening of the station platforms, at a cost of 
several million dollars. Although the need was imperative, 
several years of bickering and delay ensued before the needed 
funds were provided, due in part to disputes as to whether 
or not the operating company should, under its contract, pay 
the additional fixed charges involved by the new investments. 
While difficulties of this class would arise only infrequently 

28 




in the case of plants whose plan was practically complete at the 
outset, their recurrence in the case of such undertakings as 
railroads and telephones would be constant, and it is certain 
that the funds required for extensions and betterments would 
never be provided to the extent and with the promptitude neces- 
sary to fully efficient operation. Efficient operation and proper // 
service depend upon sufficiency of plant, and where the opera- \ rf 
tion is under one control and the construction under another, 
it is very unlikely that the views of the municipal owner will 
coincide with those of the operating contractor, when the 
question involved is that of large additional capital outlays. 
Hence, it is fairly certain that in the application of this plan, 
plant development will lag seriously behind the standard neces- 
sary for efficient service, even when the additional revenue 
to be derived would warrant the additional outlays. 

A further difficulty is the uneconomic allocation of outlays 
in response to sectional demands, which has been discussed 
above. Much uneconomic construction is certain to be under- 
taken as a result of political pressure. The result of such out- 
lays is to starve the rest of the system by diverting funds 
which otherwise would have been provided for reasonable and 
necessary improvements upon the main parts of the system, 
which improvements are essential to proper service. 

It is quite possible, however, that in occasional particular 
cases this partnership between the public as owners of the 
property and the operating company might be productive of 
benefit, but we doubt whether the plan would often be effective. 



SUMMARY AND CONCLUSIONS. 

The preceding review of governmental operation outlines 
the reasons why it is unsuited to economic undertaking. Some 
of these reasons have been more fully stated and illustrated in 

29 



a previous report of The Association, made in 1916.* The 
principle of political selection whose application is inevitable, 
produces an inferior personnel, lacking the experience and 
sound judgment necessary to the proper conduct of business 
affairs, with resulting inefficiency, waste and excessive cost. 

The financing of economic undertakings can seldom be 
properly provided for under government control for reasons 
stated above. By reason of inferior management and insuf- 
ficient financing, government properties are likely to be in- 
sufficiently maintained, be subject to excessive deterioration, 
and generally fall short of the standards essential to adequate 
service. 

While we are not unmindful of the defects that not infre- 
quently characterize the operation by cocporations, of public 
utilities, we do not believe that those defects can be cured by 
substituting another method which in every respect of efficiency 
is much below the standards that generally prevail under pri- 
vate management. In so far as the evils which are popularly 
assumed to exist in private management are found to exist in 
fact, other remedies than the substitution of methods abound- 
ing in greater evils should be found. 

We believe that the public can best be served by utilizing 
the efficiency, enterprise and energy of private corporations 
for the continued operation of public utilities, under such 
public control as shall protect the public in its right to efficient 

1 service and fair rates; and at the same time assure to private 
capital invested in public utilities a fair return upon such 
capital. 

We do not find any change of conditions resulting from 
the war which warrant or require the previous position of the 
Association, in opposition to government ownership and op- 
eration, to be modified. 

* Copies of this report will be supplied by the Association, on request. 

30 



In our analysis of the question we have dealt mainly with 
principles which are of universal application and of continu- 
ing force; those principles apply without qualification to all 
of the varied classes of undertakings which it is proposed 
shall hereafter be operated by governmental bodies, and to all 
of those undertakings the disabilities we have outlined apply. 
The controlling consideration is that political control, oper- 
ating through political methods, is destructive of economic 
efficiency and therefore such political control should not be 
applied to undertakings of an essentially business nature. 

We therefore recommend, That The Merchants' Association 
of New York reaffirm its previous position in opposition to 
government ownership and operation of public utilities. 

We further recommend, That the Association endeavor, 
through the preparation and wide-spread circulation of suit- 
able printed statements, to inform the public of the reasons 
why public ownership and operation is no remedy for alleged 
existing evils and why it is harmful to the public welfare. 

Respectfully submitted, 

FRANK R. CHAMBERS, Chairman. 

Jos. FRENCH JOHNSON, 

OTTO H. KAHN, 

H. H. PORTER, 

FRANCIS H. SISSON, 

JAMES G. WHITE, 

Special Committee. 



Appendix A. 

MUNICIPAL LIGHTING IN MASSACHUSETTS. 

The laws of Massachusetts which regulate the operations of municipally 
owned public utilities are carefully framed to minimize financial misman- 
agement. 

They require that electric current shall not be sold at less than cost 
except with the written consent of the State Gas & Electric Commission. 
In * ' cost ' ' shall be included ' ' all operating expenses, interest on the 
investment in the plant, less assessments (for extensions), at the rate paid 
upon the bonds or serial notes * * * the requirements of the serial 
debt or the sinking fund * * * an( j a i so depreciation of the plant to 
be reckoned at not less than three per cent, per annum of its cost, and 
losses. ' ' 

Compliance with the requirements of the law as to cost accounting and 
distribution of outlays is general, and the accounts of the municipalities, 
as kept under the supervision of the Commission, therefore exhibit with 
fair accuracy nearly all the direct outlays, both present and deferred, 
which are incurred for the purpose of lighting; with the exception that 
loss of taxes is omitted from the official accounts. This item should of 
course be included to ascertain the actual cost of the lighting service. 

By reason of the restrictions of the law and its consistent enforcement 
by the State Gas & Electric Commission "the experiment of municipali- 
zation has been carried out under more favorable conditions in Massachu- 
setts than in any other State in the Union, and, perhaps than in any 
other place that we know about, not excepting England or Germany. ' ' 

Thus the financial mismanagement and the confused and misleading 
accounting which has been so frequent a cause of failure of public lighting 
plants in most States prevail only to a small degree in Massachusetts; and 
a conclusive demonstration of actual results, as shown by accurate cost 
accounting becomes possible. 

One of the most thorough and impartial studies ever made of the 
comparative results of municipal and private plants is that of Edmond 
Earle Lincoln, Ph. D.,* comprising an intensive investigation of 17 private 
And 18 municipal plants in Massachusetts. 

Mr. Lincoln's study is wholly without bias. It is a strictly scientific 

* THE EESULTS OF MUNICIPAL ELECTRIC LIGHTING IN MASSACHUSETTS : By 
Edmond Earle Lincoln, Ph. D., Instructor in Economics, Harvard 
University; Boston., 1918, Houghton Mifflin Co. We are indebted to 
the publishers for permission to use the extracts and tables in this 
appendix. 

33 



and complete presentation of all the data relating to the equipment, ca- 
pacity, operation, physical and financial management and the financial 
results of each of the 35 plants. All the data relating to each group of 
plants are carefully classified and presented in comparative tabular form. 
Every variation and difference is analyzed with care and its cause fully 
developed. The basis is thus provided for an exact comparison and a 
sound conclusion as to the relative efficiency and true financial results of 
both municipal and private plants. 

To find private plants exactly comparable in all respects with the 
municipal plants, "it was necessary to choose the smallest and in many 
cases the more poorly managed companies" (p. 82); so that in some 
respects the basis of the comparison is to the disadvantage of the com- 
panies. 

The results of Dr. Lincoln's analysis show conclusively that the public 
of Massachusetts has not derived any appreciable benefit from 
municipal ownership and operation of electric lighting. The private com- 
panies sell current to consumers at a slightly less average rate than the 
municipalities sell it (Table 28). The saving in street lighting is nominal 
(Tables 37-41). The municipal plants do not serve the public as well as 
do the private plants. The former are not as well equipped as the private 
plants, do not extend their service as fully, and avoid the less attractive 
business. Dr. Lincoln thus sums up the results of his analyses (pp. 239, 
et seq.). 

"The results of our analyses in this Chapter seem to indicate that 
the municipal plants in general have simply held their own financially, even 
though, in some instances, it may have been at the customer's expense. 
The actual profit which they are at present making is practically negli- 
gible. * * * When put on a reasonably comparable basis, the financial 
showing made by the municipal plants is considerably less satisfactory 
than that made by the companies. The only financial gain accruing to 
the communities owning their plants, is that they apparently secure their 
street lighting at a slightly lower cost per kilowatt hour than would have 
otherwise been the case. This gain, however, is too small to be of any 
consequence when considered in connection with the facts as we now know 
them. 

''Finally, so far as the financial aspects of operation are concerned, 
there seems to be little in the rates and less in the investment policy to 
cause us to feel optimistic on the subject of municipal ownership in the 
cases studied. Nor on the other hand, have they apparently made any 
conspicuous failures, except in one or two instances. (Hull and Wakefield). 
They simply seem to have had the pleasure of doing for themselves, with 
slight tangible returns, what might have been done, and perhaps better 

34 



done, by private enterprise. When we take into consideration the great 
loss which is certain to result when a number of the generating plants are 
junked and current is purchased from private concerns a tendency which 
is at present well defined both in the public and the smaller private plants 
the outlook is not reassuring." 

At the end of 1917, 28 out of 39 municpial plants were buying instead 
of generating current. A number of the municipalities scrapped their 
plants, with heavy loss. 

DETAILS OF THE MASSACHUSETTS TESTS. 

Dr. Lincoln's analyses are supported by 59 tables and 16 charts which 
fully exhibit every detail of each of the plants studied. Some of the salient 
facts derived from his tables are stated below. They are followed by 
several essential summaries which exhibit the averages of the two groups. 

Capital Investments: These are shown by Table 25. Dr. Lincoln analyzes 
the data with great care. He shows that the wide excess of the private 
plant investments (82.6%), is due in part to the fact that "the real estate 
investment, as reported by the public plants, does not in many cases repre- 
sent the true value of the property used. * * * Four of them report 
no land whatever, as it is owned by some other municipal department. 
One plant, Merrimac, reports neither building nor land. * * * If the 
value of the reported real estate, amounting to $857,368 and $356,629 
respectively, is deducted in each group, as well as about $550,000 for 
underground construction and excess increase in new poles for the com- 
panies, the average investment per kilowatt capacity becomes $167 for the 
companies and $159 for the public plants, notwithstanding the fact that 
the distributing system of the former covers a much more extensive terri- 
tory. " (Lincoln, 167). 

"The public plants have apparently played reasonably safe; but, 
unless all signs fail, they have done so at a considerable sacrifice of that 
service which they might reasonably be expected to render. And this is 
probably the most decisive consideration in the argument for or against 
public ownership." (Lincoln, 170). 

"So far as we can secure the evidence, the greater increase in invest- 
ment of the private plants not merely has been fully accounted for, but 
they even seem to have gotten a good deal more for their money than 
have the municipalities. Aside from any theorizing, these appear to be 
the facts." (Lincoln, 171). 

Another factor (alluded to, but not fully developed by Dr. Lincoln) 
is the cost of extensions and connections, which in the case of the public, 
but not always of the private plants, are paid for by the consumer. These 

35 



capital investments may be omitted from the construction accounts of the 
public plants, and the true capital investment thus be correspondingly 
understated. In any event the cost of service to the consumer is increased 
by whatever amount he has to pay for the extensions without which he 
cannot get the service. 

Thus most of the difference in capitalization (which is assumed to 
result in excessive rates) is accounted for by omission of land values by 
the public plants, and by their inferior equipment. 

' ' In view of the relations here set forth, which scarcely need further 
explanation after what has already been said about the physical equipment 
and the investment of the two groups, we might logically expect the rates 
charged by the companies for the same kind of service to be higher than 
the rates of the municipal plants, for they would need to secure a return on 
a relatively larger investment per customer. Had the increased investment 
been recklessly incurred, we could bring a serious charge against the com- 
panies. But, since the contrary is evidently the case, inasmuch as the addi- 
tions to plant account have been for the purpose of taking better care of 
the trade, it appears that the private plants are to be praised rather than 
condemned." (Lincoln, 173.) 

An examination of comparative rates follows. It shows that the higher 
capitalization of the companies did not cause rates higher than those charged 
by the municipalities. 



COMPARATIVE OPERATING COSTS AND EELATIVE EFFICIENCY. 

These are shown by Tables 26, 27 and 48. In every essential element 
of cost the showing is markedly against the municipal plants, indicating 
inferior management, and probably inferior equipment. The costs of pro- 
duction and distribution are strikingly excessive in the municipal plants. To 
manufacture current costs them an excess of 33 per cent, per kilowatt hour; 
to distribute current an excess of 20.7 per cent, per kilowatt hour. 
Their labor costs at station, per kilowatt hour are 53 per cent in excess of 
those of the private plants; their excess of fuel costs, per kilowatt hour, is 
13.2 per cent. 

The combined costs of manufacturing and distribution, per kilowatt 
hour, are: 

Municipalities 2.611 cents 

Companies 2.024 cents 

Excess Cost, Municipalities 0.587 cents 

Excess Cost, Municipalities 29 per cent. 

/ 

36 



Table 48 shows that the municipal plants delivered per employee 62,409 
kilowatt hours, while the private plants delivered 82,008 kilowatt hours the 
labor efficiency of the municipal plants thus being 26 per cent below that 
of the private plants. This possibly indicates a " loading" of municipal 
payrolls through political influence, and certainly indicates inferior man- 
agement. 

Loss of current is another particular in which the municipalities make 
a bad showing. Dr. Lincoln shows (p. 100 et seq.) that whereas 18.5 per 
cent of the current produced by the companies was unaccounted for (lost 
in distribution), the loss of the municipal plant was 24.2 per cent, their 
loss thus exceeding that of the companies by 31 per cent. "This greater 
leakage of current is probably caused largely by bad engineering. It would 
appear that the distributing system had not been properly maintained and 
improved during the past few years." (Lincoln, 102.) This surmise is 
confirmed by the labor distribution tables, which show that the municipali- 
ties employ a disproportionately small number of linemen, although their 
station employees are excessive in number, as shown above. 

As to coal the companies used it more efficiently and bought it more 
cheaply than did the municipal plants. The cost per ton to the former 
was $4.15, to the latter $4.46 an excess of 7.4 per cent. Where the munici- 
palities consume 4.69 Ibs. the companies produce an equal result by the 
consumption of 4 Ibs. a saving of 15 per cent. 

Excluding taxes an item which is included in the companies' expenses, 
but omitted from those of the municipalities the operating expenses of 
the municipalities exceed those of the companies by 20 per cent. The rela- 
tive costs per kilowatt hour delivered, are: Companies, 3.144 cents; muni- 
cipalities, 3.766 cents. 

COMPARATIVE KATES, INCOME AND ITS DISPOSAL. 

Table 29 shows the maximum rates, prevailing in the towns in each 
group. These are modified by graded scales, discounts for quantity and 
discounts for prompt payment. Their chief significance is that they show 
the purpose of municipalities to collect from users rates substantially sim- 
ilar to those charged by private companies, and from those rates to meet 
operating expenses, the fixed charges imposed by law, and the costs of 
street lighting. Table 31 shows that rates equal to those of the private 
companies do not suffice to meet all the municipalities' charges; and that 
fully to meet them, higher rates would be required. 

Table 28 shows that the actual average rates collected by municipali- 
ties from consumers (excluding street lighting) was 5.786 cents per kilo- 
watt hour. The average company rate for similar class of service was 

37 



5.461 per kilowatt hour; so that the companies' rates to consumers were 
slightly less than those of the municipalities. 

The companies, on the other hand, although paying larger administra- 
tion costs, taxes, larger interest rates on a larger capitalization, and divi- 
dends, are able to provide better service, at rates to consumers no greater 
than those charged by the municipalities. The municipalities, however, ob- 
tain their street lighting at a slightly less rate than they would be obliged 
to pay to the companies. This apparent advantage largely disappears when 
tax losses (which are not included in charges against income) are reckoned. 
Tables 37 to 40, inclusive, show that when all elements of cost are included, 
the saving in street lighting is negligible. 

An additional cost factor not included in any of the various computa- 
tions is the payment by individual consumers of the cost of extensions and 
connections. There is no means of learning the amount of this factor, but 
it would in some degree offset an assumed saving in the cost of street 
lighting. 



Appendix A. 

TABLE 15. COMPARATIVE AVERAGES OP THE Two GROUPS 
OF PLANTS 

Companies Municipal 

(Holyoke out) 
I. Generating plants: 

Capacity (K.W.) of dynamos 1,366 951 

Output (K.W.H.) 1,764,719 1,163,110 

Disposal of current (percentage) : 

Commercial and domestic lighting. 30.6 31.0 

Street lighting 14.3 24.3 

Power 42.7 43.8 

Other companies 12.4 0.9 

Load factor ( arithm etical average. .. (14) 27.7 (13) 25.5 

I weighted average (29.2) (23.5) 

Customers 1,377 1,063 

(l,205)i (l,030)i 

Population of district served. 16,817 12,113 

(14,354)i (ll,768)i 

Area of district served (sq. m.) 58.94 24.81 

(30.67)i (21.39)i 

Density of population 285.3 488.2 

(468.1)i (550.2)i 

Age of plants (years) 25.2 (18) 22.2 

(18.3)t 

Companiet Municipal 

(Norwood out) 
II. Purchasing plants: 

Output (K.W.H.) 266,715 157,173 

Disposal of current (percentage) : 

Commercial and domestic lighting. . 45.2 54.6 

Street lighting 21.0 31.3 

Power 31.3 13.9 

Other companies 2.5 0.3 

Customers 376 289 

Population of district served 5,467 2,679 

Area of district served (sq. m.) 25.06 19.60 

(19.88)i 

Density of population 218.2 136.7 

Age of plants (years) 15.4 8.0 

(6.5) 
i Excluding foreign districts served. 2 Age under public ownership. 

39 






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TABLE 26. OPERATING EXPENSES PER K.W.H. DELIVERED 
(1914-1915) 



Class of expense 


CO 
Companies 
(cents) 


(S) 
Municipalities 
(cents) l 


Per cent by 
which (2) 
exceeds (1) 


Total 


3.572 


3.766 


5.4 


Taxes 


0428 






Salaries of officers 


0.197 






Total taxes deducted 


3.144 


3.766 


20.0 


Total taxes and salaries of officers 
out 


2.947 


3.766 


24.0 


Cost of distribution 


0.648 


0.782 


20.7 


Cost of manufacturing (per K.W.H. 
made) 


1.376 


1.829 


33.0 


Labor at station (per K.W.H. 
made) 


0.408 


0.626 


53.0 


Fuel of every kind (per K.W.H. 
made) 


(14) 0.808 


(17) 0.915 


13.2 


Coal (per K.W.H. made) 


(12) 0.742 


(15) 0.933 


26.0 


K.W.H. generated per plant 


1,650,091 


1,024,023 


37.9 


K.W.H. delivered per plant 


1,437,544 


881,914 


38.8 


K.W.H. delivered (street lighting 
out) 


1,232,050 


670,276 


15.0 


Operating expenses (dollars) 


$872,935 


$562,643 


35.5 



Holyoke omitted here as elsewhere. 



TABLE 27. PERCENTAGE ANALYSIS OF EXPENSES 
(GENERATING PLANTS) 



Kind of expense 


Companies 


Municipalities 


Holyokt 


Amount 


Per cent 
of total 


Amount 


Per cent 
of total 


Per cent 
of total 


I. Operating expenses 
General analysis: 
Manufacture 


$386.109 
30,239 
158,465 

153,755 
39,776 
104,591 


44.4 
3.5 

18.2 

17.6 
4.5 
12.0 


$308,937i 
35,491 
117,794 

65,428 
25,596 


55.8 
6.4 
21.3 

11.9 
4.6 


70.7 
16.9 

11.5 
1.7 


Purchase of current 
Distribution 


Office expenses and 
management .... 
Miscellaneous 


Taxes 


Total 
Total taxes 
deducted. . 

II. Operating expenses , 
Detailed analysis 
(taxes out) 
Fuel 


$872,935 
$768,344 

$220,204 
114,590 
32,244 
30,239 
44,236 
91,633 

22,596 
35,781 
48,201 

5,388 

56,158 
30,703 

8,228 
28,143 


28.7 
14.9 
4.2 
4.0 
5.8 
11.9 

2.9 

4.7 
6.3 

0.7 

7.3 
4.0 
1.1 
3.7 


$553,246 

$158,648 
109.048 
24,5631 
35,491 
21,366 
74,094 

22,328 
40,750 

3,167 

20,285 
19,507 
1,120 
22,879 


28.7 
19.7 
4.4 
6.4 
3.9 
13.4 

4.0 

7.4 

0.6 

3.7 
3.5 
0.2 
4.1 


49.8 
16.2 
3.7 

5.1 
10.3 

1.3 

7.7 

3.8 
1.2 

"i.s 


Wages at station. . . 
Repairs at station. . 
Current purchased. 
Distribution wages. 
Repair of lines .... 
Distribution tools 
and equipment . . 
General salaries. . . . 
Salary of officers... 
Directors' allow- 
ances 


Salary of munici- 
pal light boards .. 
General office ex- 
penses 
Insurance 
Rent of offices 
All other expenses. . 

Total 


$768,344 




$553,246 









i Hull, new boiler, $9,397, omitted. 



TABLE 28. INCOME PER K.W.H. SOLD (HOLYOKE EXCLUDED) 



Item 


1910 


1915 


Per cent 
decrease 


Com- 
panies 
(cents) 


Munici- 
palities 
(cents) 


Com- 
panies 
(cents) 


Munici- 
palities 
(cents) 


Com- 
panies 


Munic- 
ipali- 
tiet 


Total operating income 
Total operating income (street 
lighting out) 


6.608 
6.531 


7.960 
7.960 


5.800 
5.503 


5.895 
5.895 


15.9 
15.7 


26.0 
26.0 


Total from sale of current 


6.758 


7.742 


5.764 


5.786 


14.7 


25.S 


Total from sale of current 














(street lighting out) 
Commercial light and powei 


6.481 


7.742 


5.461 
5.950 


5.786 
5.800 


15.7 


25.S 


Commercial lighting 1 
Street lighting 


ii/774 
7.675 


11.077 


10.062 
7.575 


10.305 


i4.5 
1.3 


' ' V.O 








(7.333)' 




(4.5)* 




Power 


3.458 


3.615 


3.047 


2'.583 


11.9 


' 28.5 


Sales to other companies. . . 


2.700 


3.000 


2.418 


4.294 


10.4 


+43.1 


Net income 


2.522 




2.227 




11.7 




Net income (street lighting out) 


0.985 


i!691 


1.332 


0.957 


+35.2 


' 'H.S 


Operating income (dollars) . . . 


$953,675 




$1,417,235 




+47.5 




Operating income (street light- 














ing out) 


757,293 


443,423 


1,152,594 


671,761 


+52.2 


+51.5 


Net income (dollars) 


312,685 




544,300 




+74.0 




Net income (street lighting out) 


116,304 


62^202 


279,658 


lobiiis 


+ 140.8 


+75 4 


Operating ratio 


67.2 




61.6 




8.3 




Operating ratio (street lighting 


out) 


84.5 


86.0 


75.0 


83.7 


11.2 


2.7 



"Commercial" lighting includes all other than street lighting. 
2 Including only companies reporting at both dates. 



43 







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TABLE 31. PERCENTAGE ANALYSIS OF CHARGES AGAINST 
INCOME 



Item 


Companies 


Municipalities l 


Holyoke 


Amount 


Per cent 
of total 


Amount 


Per cent 
of total 


Per cent 
of total 


Operating income 


$1,417,235 

22,222 


... 


$671,761 
2,957 




... 


Other income (pro- 
fit and loss items) . . 

Total 


$1,439,457 
566,521 

872,935 
90,094 
56,314 
353,870 


62.5 
6.4 
4.1 
25.4 

1.6 


$674,718 
112,075 

562,643 
62,143 
92,306 

24,596 

55,797 
8,096 


70.0 
7.7 
11.4 

3.0 

6.9 
1.0 


67.3 
7.6 
15.7 

9.2 
0.2 


Total available 
("net") 


Charges against income: 
Operating expenses . . . 
Interest 


Depreciation 
Dividends 
Sinking fund pay- 
ments 


Note and Bond pay- 
ments 




All other charges 
Total 


23,415 


$1,396,628 
42,829 


100. 


$805,581 
130,863 
(deficit) 


100. 


100. 


Balance 



Holyoke omitted. 



45 



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TABLE 33. GENERATING PLANTS: COMPARISON OF FINANCIAL 
RESULTS OF OPERATION' 

Municipa 
Companies Plants 

Operating income $1,417,235 $671,761 

Deduct street lighting income 264,641 

Comparable income $1,152,594 671,761 

Operating expenses $872,935 $562,643 

Operating ratio 61.6% 

Deduct taxes 104,591 

Comparable (?) expenses (a) $768,344 562.643 

Deduct salaries of officers 48,200 

Comparable expenses (6) $720,144 562,643 

Comparable operating ratio (a) 66.8% 83.7% 

Comparable operating ratio (6) 62.6% 83.7% 

Holyoke excluded in all of these tables. 



47 



TABLE 34. GENERATING PLANTS: COMPARISON OF FINANCIAL 
RESULTS OF OPERATION (continued) 

Municipal 
Companies plants 

Net income. . $544,300 $109,118 

Deduct street lighting income 264,641 

Total , $279,659 

Add taxes paid 104,591 

Comparable net income (a) $384,250 109,118 

Add salaries of officers 48,200 

Comparable net income (6) $432,450 109,118 

Kilowatt hours sold for all purposes except 

street lighting 20,944,853 11,394,749 

Excess of sales of companies over sales of 

municipal plants 84% 

Expected net income of companies (84% more 

than that of municipal plants) $200,777 

Advantage of companies (a) 183,473 

(6) 231,673 



4 8 



TABLE 35. GENERATING PLANTS: COMPARISON OF FINANCIAL 
RESULTS OF OPERATION (continued) 

Municipal 
Companies plants 

Case (1) 

Actual disposal of net income: 

Comparable net income (a) $384,250 $109,118 

Comparable net income (6) 432,450 

Pro'fit and loss income $22,222 2,957 

Total (a) $406,472 $112,075 

Total (6) 454,672 

Actual charges against net income: 

Interest 90,094 62.143 

Depreciation 56,314 . 92,306 

All other charges 23,415 8,096 

Total $169,823 $162,545 

Surplus (a) $236,649 $50,470* 

(b) 284,849 

Per cent on capital stock ($2,964,600) (a). 8.0 

(6). 9.5 
Per cent on total investment ($5,284,275) 

(a) 4.5 1 ?f 

(b) 5.4 

Case (2) 

Assuming equal rate of depreciation (3%), 

add to company charges $100,296 

Surplus (a) 136,353 

(b) 184,722 

Equivalent to per cent on capital stock 

of (a) 4.6 

(b) 6.2 

Equivalent to per cent on total investment 

of (a) 2.6 

(b) 3.5 

Case (3) 

Charging against municipal net income, 
sinking fund and maturing debt pay- 
ments, as the Massachusetts Law pre- 
scribes : 

Sinking fund charges $24,596 

Bonds and notes paid 55,797 

Total charges (including above) $242,938 

Deficit $130,863 

Per cent on total investment 4.5 

Deficit. f Loss. 

49 



TABLE 36. GENERATING PLANTS: COMPARISON OF FINANCIAL 
RESULTS OF OPERATION (concluded) 



Companies 
Case (1) 

Theoretical disposal of net income: 

Assuming that the same rate of depreci- 
ation (3%) is charged off in both cases 
and that the same rate of interest (4%) 
is paid on the total investment. 
Comparable net income (including profit 

and loss income (a) $406,472 

(b) 454,672 



Charges against net income: 

Interest at 4% 211,371 

Depreciation at 3% 158,528 

All other charges 23,415 



Total 



Municipal 
plants 



$112,075 



116,953 

87,715 

8,096 



$393,314 $212,774 



Surplus (a) . 

(b). 



Per cent on total investment (a). 
(6). 

Case (2) 

Assuming only an equal rate of depreci- 
ation (3%) charged off in each case, but 
that interest is paid by municipal plants 
on their entire investment at the cus- 
tomary rate (4%). 

Charges against net income: 

Interest 

Depreciation 

All other charges 



$13,158 
61,358 

0.3 
1.2 



$100,699* 



$90,094 

158,528 

23,415 



Total $272,037 



$116,953 

87,715 

8,096 

$212,774 



Surplus (a) $134,435 $100,699* 

(b) $182,804 

Equivalent to dividend on total 

investment of (a) 2.6% 34%^ 

(b) 3.5% 

Deficit t Loss. 



TABLE 37. COST OF STREET LIGHTING TO MUNICIPALITIES 
OWNING THEIR GENERATING PLANTS ' 

Cost of street lighting as it appears from the returns: 

Net income from operation $109,118 

Other items of income 2,937 



Total $112,075 

Charges against income: 

Interest actually paid 62,143 

Depreciation 92,306 

Other cost items 8,096 

Total $162,545 

Deficit in return for which street lighting is secured $50,470 

Number of K. W.H. used for street lighting 3,589,262 

Apparent cost per K.W.H. (cents) 1.400 

Price charged for street lighting by companies (cents) 7.575 

Apparent gain per K.W.H. as a result of municipal owner- 
ship (cents) 6,175 

Equivalent to (about) $221,800 

1 Holyoke omitted throughout. 



TABLE 38. COST OF STREET LIGHTING TO MUNICIPALITIES 

OWNING THEIR GENERATING PLANTS (continued) 

Sinking fund and maturing debt payments included (since 

they are incurred as a result of municipal ownership) : 
Total income available $112,075 

Total charges from preceding table $162,545 

Sinking fund payments 24,596 

Note and bond payments 55,797 



Total $242,938 

Deficit to be charged against street lighting $130,863 

Apparent cost per K.W.H. (cents) 3.640 

Price charged by companies (cents) 7.575 

Apparent gain (cents) 3.935 

Equivalent to (about) $140,400 



TABLE 39. COST OF STREET LIGHTING TO MUNICIPALITIES 

OWNING THEIR GENERATING PLANTS (continued) 

Add to deficit shown in Table 38 the taxes lost by municipal- 
ities owning their plants, computed at the same rate paid 
by companies: 

(a) Taxes at 0.428 (cents) per K.W.H. delivered $64,200 

(6) Taxes at 12 per cent of operating expenses 76,724 

(c) Taxes at 2 per cent on total investment 58,480 



Deficit (a) $195,063 

(b) 207,587 

(c) 189,343 



Cost of street light per K.W.H. (cents): 

(a) 5.420 

(6) 5.770 

(c) 5.260 

Gain per K.W.H. (cents): 

(a) -. i . 2.155 

(6) 1 .805 

(c) 3.315 

Equivalent to (a) $77,600 

(6) 64,800 

(c) 82,800 

52 



TABLE 40. COST OF STREET LIGHTING TO MUNICIPALITIES 

OWNING THEIR GENERATING PLANTS (continued) 

Same as Table 39: 

Except, to make the data comparable, add salaries of 
officers to expenses, computed at the same rate per 
K.W.H. delivered as in the case of the companies 

(0.200 cents) $30,000 

Equivalent to rate per K.W.H. used for street lighting of 

(cents) 0.830 

Which, added to the above rates, makes the cost of street 
lighting per K.W.H. (cents) 

(a) 6.250 

(6).. 6.600 

(c) 6.090 

Total apparent gain to municipalities: 

(a).. $47,600 

(6) 34,800 

(c) 52,800 

TABLE 41. COST OF STREET LIGHTING TO MUNICIPALITIES 

OWNING THEIR GENERATING PLANTS (concluded) 

Interest computed on entire investment (at rate paid on out- 
standing debt) : 

Total available income $112,075 

Charges against income: 

Interest (at 4%) $116,953 

Depreciation 92,306 

Other cost items 8,096 

Total $217,355 

Add taxes lost (0.428 cents per K.W.H. delivered) 64,200 

Total charges $281,555 

Deficit $169,480 

Cost per K.W.H. for street lighting (cents) " 4.710 

Gain over company rate (7.575 cents) 2.865 

Equivalent to (about) $101,100 

In order to put the public plants on the same bases for 
comparison as the companies, we should deduct from 
this apparent gain: 

(a) Additional interest which would be paid under 

private ownership (1 %) 29,238 

(6) Salaries which would have been paid to officers . . . 30,000 

Total $59,238 

Equivalent to rate per K.W.H. used for street lighting of 

(cents) 1.650 

Making cost per K.W.H. (cents) 6.360 

Apparent gain from municipal ownership of $41,800 

Equivalent to per cent on investment ($2,923,825) of 1.4+ 

53 



TABLE 48. COMPARATIVE EFFICIENCY OF LABOR 



Item 


1910 


1915 


Per cent 
increase 


Com- 
pany 


Munici- 
pal 1 


Com- 
pany 


Munici- 


Com- 
pany 


Munici- 
pal 


I. Generating plants: 
Total number of employees 


194 


179 


313 


230 


61.4 


30.0 


Corrected for 1915 






295 


240 






Number of salaried offi- 














cers 






33 









Number K.W.H. delivered 














per employee 
Corrected for 1915 


74,616 


49,071 


78,077 
82,008 


65,044 
62,469 


4.6 


31.1 


Including salaried officers 






74,500 








Operating income per em- 
ployee, excluding street 














lighting 


$3,904 


$2,477 


$3,682 


$2,915 


5.7 


+17.1 


Corrected for 1915 






$3 868 


$2,800 






Including salaried officers 






$3,514 








Net income per employee, 
excluding street lighting. 


$600 


$320 


$894 


$474 






Corrected for 1915 






$948 


$455 






Including salaried officers 






$853 






:::; 


II. Purchasing plants: 
Total number of employees 






58 


46 






Corrected for 1915 






52 








Number K.W.H. delivered 














per employee 






55,536 


52,788 






Corrected for 1915. .. 






(62,000) 








Operating income per em- 
ployee, excluding street 














lighting 






$3,920 


$3,280 






Corrected for 1915 






(4,376) 








Net income per employee, 
excluding street lighting 






$344 


$140 






Corrected for 1915 






(384) 













1 Holyoke and Norwood omitted throughout on account of their size. 



54 



Appendix B. 

EXAMPLES ILLUSTRATING THE TENDENCY TO PHYSICAL 
AND FINANCIAL MISMANAGEMENT BY MUNICIPALITIES.* 

The following typical examples illustrate the characteristic defects of 
municipal management, namely: Undue cost of construction, inadequate 
plant, insufficient maintenance, high labor and fuel cost, unskilled superin- 
tendence, failure to provide for depreciation, and omission from cost ac- 
counting of depreciation allowances, sinking-fund charges, interests, rents, 
lost taxes, outlays from taxes, etc. 

Allegheny, Pennsylvania. The municipal plant began operation in 
1890 giving only City service. The cost was $562,000. Investigators for 
the National Civic Federation called the plant "poorly designed, inefficient 
and expensive to operate," and stated that the appropriations for equip- 
ment had been neglected to such an extent that "the electrician had to 
build his own switchboard out of such junk as he could collect from machine 
shop yards." They stated the payroll could be reduced from fifteen to 
eighteen per cent, and criticised the use of the plant for political employ- 
ment. 

Alliance, Ohio. In 1914 the Chairman of the Finance Committee re- 
ported to the Council that the waterworks was losing $18,250 a year. 

Baltimore, Maryland. An audit of the books of the waterworks in 
1911 showed that the department was operating at an annual loss of 
$400,000 and that an increase in rates averaging thirty per cent, was 



Belle fontaine, Ohio. An investigation made in 1914 showed that 
gas cost $2.25 per thousand feet to manufacture while the deficit on the 
waterworks, including interest and other fixed charges, was $10,077.31 in 
1913. The electric plant was so run down that it could not give adequate 
service, and at least a third of the street lights had to be left off every 
night until enough people went to bed to permit the generators to carry 
the street lighting load. 

* Summarized from * * Facts on Municipal Ownership in Two Hundred 
Sixty-eight Towns and Cities;" by Glenn Marston: (Public Serv- 
ice Publishing Co., Chicago). 

Mr. Marston says: "Nearly two hundred of the places listed in this book 
have been personally investigated by the author. In other cases 
the information has been secured from the most reliable sources, 
generally city and state officials and reports." 

55 



Bloomington, Illinois. The street lighting plant was made to show 
low operating cost by making no allowance for depreciation. The plant 
had to be entirely rebuilt in 1906 at a cost of $40,000. The old machinery 
was sold for $3,300 though the plant had cost $87,000. A contract could 
be made with a traction company which would save the city $10,000 to 
$15,000 a year over the present cost of running the plant. 

Bowling Green, Ohio. The city went into the gas business about 1895 
and sold out for $6,000 in 1899. The original investment was $60,000. 
In addition there were losses in operation estimated at $50,000, making 
the total loss to the city for five years of municipal ownership $104,000. 

Burlington, Vermont. The accounts of the municipal light plant had 
shown small annual profits. Depreciation of the plant, however, had not 
been properly charged off. By 1915 the plant was completely worn out, 
and the depreciation fund amounted to only one-seventh of the cost of 
the plant. In other words, there was an investment of $124,085 not 
provided for by the depreciation fund, which amount it was necessary to 
write off with the exception of $16,975 which represented land and buildings. 

Butler, Missouri. H. M. Cannon, Manager of the municipal electric 
plant wrote in 1914 as follows: ''I have had enough experience with 
municipal ownership to know it is a dismal failure. I have figures to show 
that our plant has always been a failure and an expense to the people. 
The trouble with municipal ownership lies in the fact that in the larger 
cities it soon drifts into public corruption and favoritism and in smaller 
cities, where the Council changes every year, the men and management 
never know what to depend upon, have no interest in the business other 
than their wages and let things go to rack. ' ' 

Cedar Eapids, Iowa. In a decision of the Iowa Supreme Court in 
1913 the Court pointed out that municipal ownership was very costly to 
the people of Cedar Eapids. The people voted to buy the waterworks with 
the understanding that the rates would be reduced. The rates were not 
reduced but, instead, a special tax levy was made to meet expenses con- 
nected with the plant which could not be met from the revenue of the plant. 

Chicago, Illinois. The loss on the municipal electric plant operated 
by the Sanitary District of Chicago amounted to $199,781.10 in 1911. The 
total losses during the four years of operation up to that time amounted 
to over $600,000. The actual expenses of the electric department of the 
Sanitary District for 1911 were $901,723.47, while the total income from 
the sale of electric current amounted to $701,942.37. In order to make a 
showing more favorable than the above, officials charged part of the invest- 
ment costs to other departments and neglected to make adequate provision 

56 



for depreciation. On January 8, 1914, the Chicago Tribune, always a 
defender of the Sanitary District administration, said : ' ' The demonstrable 
fact is that the present cost of producing electricity is at least twice as 
high as it should be. This excessive cost is due to three general conditions: 
Unsystematic engineering plans, grossly padded payroll costs, unbalanced 
consumption of the power of the plant. These three faults are all due 
to politics/' : !j i 

The waterworks have been run at a loss for years. Dabney H. Maury, 
consulting engineer for the "Merriam Commission, " reported in 1911 that 
the plant was obsolete and large sums were needed to put it in good condi- 
tion. Aldermen placed this sum at $15,000,000. 

Chicopee, Massachusetts. C. W. Whiting, consulting engineer for the 
Municipal Electric Light Commission of Chicopee, made an examination 
of the plant in 1911 and found equipment which had cost $65,000 to be 
worn out and practically useless. He found it would be necessary to spend 
$90,000 to put the plant in condition adequately to serve the city. The 
allowance for depreciation had been made a bookkeeping charge only. 

Cleveland, Ohio. The State Bureau of Inspection and Supervision of 
Public Offices examined the books of the South Brooklyn municipal electric 
plant for three years ending 1908 and showed the costs per are lamp. The 
following table compares the true costs as developed by the state audit, 
with the costs reported by the municipal manager and the costs of service 
per lamp in adjacent territory served by the Cleveland Electric Illuminating 
Company : 

1906 1907 1908 

Municipal Manager $58.25 $73.37 $48.13 

State Audit 81.10 73.15 69.25 

Electric Illuminating Company 69.72 67.92 54.96 

During the four years ending 1909 the lights furnished by the municipal 
plant cost $133,000. If these lights had been furnished by the Cleve- 
land Electric Illuminating Company they would have cost $109,000, show- 
ing a loss to the city of $24,000 on the small proportion of lighting done 
by the municipal plant. 

Public Service Director Lea, in July, 1910 ; said of the two municipal 
light plants owned by the City of Cleveland: "For weeks accountants 
have been trying to arrive at a correct posting of the records of the two 
plants so as to enable us to tell whether they are paying or losing. I 
am satisfied that both plants have never earned a cent if depreciation is 
figured in. Figures already compiled tell us this, but the system of book- 

57 



keeping employed has not been detailed enough to show an accurate account- 
ing " (Elsewhere will be found a summary of the results of an investiga- 
tion into Cleveland's lighting accounts for the year 1915 which de- 
monstrates a loss although the official published accounts showed a moderate 
profit). 

Concord, Massachusetts. Up to 1910 depreciation had never been 
charged for by this town. In that year it would have been, according to 
law, $4,320 (3% of $144,021) and would have created a deficit, as the 
cash balance was only $1,645.21. The city appropriated $5,000 for operat- 
ing expenses and spent $20,000 in 1909, a large part of which went for 
replacing worn-out equipment which had not been charged off to deprecia- 
tion. 

Coraopolis, Pennsylvania. Deficit on operations for 1911 $2,507. A 
large floating debt for construction in each department, the deficit on 
construction being $8,488 on water and $18,282 on electric light. The city 
report is made in such a manner that it is impossible to tell whether these 
deficits represent the total losses or not. There is no depreciation account. 
Depreciation seems to be met by successive new bond issues. 

Council Bluffs, Iowa. Municipal ownership has not lowered water 
rates but has increased taxes by at least five mills according to a report 
of the State Examiner of Public Accounts made early in 1914. The meter 
rates for water are the same under municipal ownership as under the old 
company. The flat rates are higher. Under private ownership the people 
were taxed two mills to pay for hydrant rental. Now they are taxed two 
mills on account of water bonds and five mills additional to meet running 
expenses. 

Crawfordsville, Indiana. In 1910 Professor J. W. Esterline, of Purdue 
University, was engaged to examine the municipal electric light plant with 
a view to rehabilitation. He recommended that the entire plant be scrapped, 
as it was worn out and obsolete. He estimated the cost of a new plant 
at $93,000. 

Cuyahoga Falls, Ohio. In 1913 an investigation showed that the 
municipal water and light plants incurred a deficit of $14,057. It was 
also found that the plant was ready for the scrap heap and that political 
interference prevented the plant from being run economically. 

Edmonton, Alberta. According to W. T. Woodroofe, superintendent 
of the municipal street railway, there was a deficit of $26,495 during the 
year 1912. The Official Gazettey the city's publication, reported that the 
loss on the municipal street railway up to January 1st, 1914, was $405,394. 

Elgin, Illinois. The municipal lighting plant was turned over to a 

58 



private company in 1904, after sixteen years of unsuccessful operation, 
during which time the loss is estimated to have been at least $100,000. 
In 1911 the city tried to sell its generating machinery (which the company 
had found too antiquated to operate) and, although this machinery had 
cost the city $50,000 twelve years before, the only bid received was $1,000. 
Depreciation was at the rate of eight per cent, for which no allowance had 
ever been made during the time the city operated the plant 

Escanala, Michigan. After five years' trial of municipal operation, 
the Finance Committee of the Council recommended that the plant be sold 
on account of inefficient management and losses. Later the generating 
plant was abandoned and current was purchased from a private company. 

Eugene, Oregon. The water plant was purchased from a company in 
1908 and has lost money ever since. The report for 1912 showed a deficit 
of $14,791.36. This is almost half of the total revenue, including money 
paid by the city out of taxes for hydrant rental. The loss on the electric 
plant in the same year was at least $16,000 and probably more. Faulty 
construction has caused large loss. 

Findlay, OMo. This city tried municipal ownership of a gas plant 
but ran heavily in debt and sold the plant in 1899, the outstanding obli- 
gations at that time being over $60,000. The capital outlays upon the 
plant amounted to over $310,000. The plant was sold for $150,000. The 
former superintendent of the municipal plant said : l ' When the city owned 
the plant unnecessary expenditures were constantly being made while in 
many cases necessary improvements were ignored. The pipe line, some of 
which was thirty years old or more, was in very bad shape. A large amount 
would have been necessary to put the plant into shape by the city. It 
was therefore sold. No city can own and properly operate a gas plant." 

Forest Grove, Oregon. In 1909 a municipal light and water plant was 
built, bonds being voted on the promise of low rates. In the summer of 
1910 the rates were raised to a higher point than those paid by customers 
of private companies in nearby towns. Customers were also forced to 
buy their own electric light and water meters. In 1912 the plant was shut 
down and sold. 

Fort Wayne, Indiana. H. P. Page, certified public accountant, made 
an investigation of the municipal electric light plant in 1910, which showed 
that the plant lost $29,784.47 between September 1, 1908, and January 1, 
1910. 

Forth Worth, Texas. In 1911 the city abandoned its electric street 
lighting generating plant and has since purchased power from a private 
company. In 1911 there were 446 arcs and 500 incandescent lights sup- 

59 



plied from the municipal generating station. In 1912, a year after be- 
ginning to take current from the private company, there were 700 arcs 
and 1,150 60-watt mazda lamps, yet the cost of this greatly increased sup- 
ply was no more than the cost of the much smaller installation which had 
been supplied from the municipal plant. 

Galva, Illinois. Total receipts from the municipal water and light 
plant for the year ending March 31, 1910 $4,258.76. Operating ex- 
penses $4,191.33. Interest $900. Depreciation at seven per cent. 
$1,260. Sinking fund at two per cent. $360. Total deficit $2,452.27, or 
more than half the total income from both plants. 

Georgetown, Ohio. Deficit for 1913, including fixed charges, over 
seventy-seven per cent, of the total revenue. 

Glouster, Ohio. As a result of an investigation it was shown that it 
cost 64 cents per kilowatt hour to make electricity in 1913. 

Griffin, Georgia. Deficit for 1911 $12,809.46, without including lost 
taxes. 

Hagerstown, Indiana. The State Examiner reported in 1913 an opera- 
ting deficit of $3,222.71, .covering the preceding four years. In addition, 
payments on account of the electric light fund were made of $4,161.19. 
He says: "Municipal ownership has not proved a success in Hagerstown. " 

Hamilton, Ohio. In 1906 a report made to the state auditor said: 
"The administration of the Board of Public Service, extending over the 
period stated heretofore, is marked with evidence of mismanagement, extra- 
vagance and unbusinesslike methods in the operation of public properties 
placed in their hands." The city reports do not include interest, deprecia- 
tion, lost taxes or legal expenses, and therefore purport to show a profit 
which quickly disappears and becomes a large deficit in the case of each 
plant when the total cost to the taxpayers is included. C. S. Metcalf, State 
Examiner of the Bureau of Inspection and Supervision of Public Offices, 
examined the municipal water, gas and electric plants in 1911 and found 
them all losing money. His figures on the gas plant for 1909 are as fol- 
lows: Actual revenue, $46,277.80; total actual expense, $71,108.81; loss in 
taxes, $2,221.80; loss to city, $27,052.01. In his report Mr. Metcalf said: 
"Two and a half years ago the electric light plant, which was built in 
1903, was a complete wreck, and the figures obtained from careful examina- 
tion into the cost from bond issue and from transfer from tax levy, showed 
for the life of this plant, fifteen years, a cost per arc lamp of $113,33, 
while other cities furnished by private plants showed a cost of from $55 
to $75." 

' ' For the privilege of municipal ownership the taxpayer had to pay the 

60 



interest on the bonds, the sinking fund levy for the retirement of the bonds 
and stood a tax levy each year for street lighting nearly as great as the 
levy would have been had the city purchased its electric current from a 
private corporation. 5 ' 

An investigation made in 1914 disclosed that although the city had 
abandoned its gas manufacturing plant, which is a wreck, and purchased 
its natural gas, the losses in 1913 on this service came to over $40,000, 
while the losses on the electric plant were $23,956.27 and on the water- 
works $55,580.80. 

Hudson, Massachusetts. In 1911 the receipts of the plant were $22,- 
030.46 from sale of energy. The total cash spent during the year was 
$27,792.72, not including any allowance for depreciation. The report for 
1911 shows the loss on the plant since establishment to be $20,024.94. The 
State Commission on Gas and Electric Light gives the loss as $21,443.51. 
The average lighting rate is twelve cents per kilowatt hour. In towns, at- 
joining, the private companies charge a maximum of ten cents per kilowatt 
hour. The large manufacturers refuse to patronize the city plant because 
of high power rates. 

Huron, Ohio. The city books do not give any record of the cost of the 
municipal electric light plant, which was finally abandoned and the ma- 
chinery installed in the waterworks. The 1912 deficit was $7,717.61, that 
of 1913 was $11,506.78 and for the first half of 1914 was $4,596.69. The 
deficits average about 150% of the gross revenue from private consumers 
after making a proper credit for street lighting and hydrants. 

Johnstown, Ohio. The 1913 deficit on operation alone was $2,399.91. 
Allowing a credit of $675 for street lights and hydrants and including the 
fixed charges and expenses, the actual deficit was $4,837.41. 

Kalamazoo, Michigan. In 1912 the citizens had to vote $125,000 to re- 
build the municipal lighting plant which was worn out. No depreciation 
fund was available. 

Lalcewood, Ohio. Expert accountants found the cost of street lights 
on moonlight schedule to be $129,56 per year in 1905. The plant was sold 
in 1906 and a street lighting contract made at $55 per year. 

Langdon, North Dakota. Cost of municipal electric plant, $17,500; 
sold for $9,000 after four years' operation; loss during time the city owned 
the plant, $17,500. 

Lawrence, Michigan. Gas is sold for $1.25 per thousand cubic feet and 
the operating expenses alone come to $1.37 per thousand cubic feet. In 
addition, the taxpayers have to pay the interest, sinking fund, and depre- 

61 



elation and make up lost taxes, beside paying the deficit in operating ex- 
penses. 

Logansport, Indiana. In seventeen years operation up to 1913 there 
was a surplus in only one year which was apparently secured by failing 
to maintain the plant properly. Deducting the apparent surplus of that 
year, the deficit during the period named was $297,869. 

Loudonmlle, Ohio. The municipal water and electric plant had a deficit 
of $8,522.46 in 1913 and in addition the people had to issue $20,000 of 
bonds to repair the plants. 

Province of Manitoba, Canada. The first year's operation of the tele- 
phone system under government ownership (1911) resulted in a deficit of 
$50,000 despite an advance in rates o'ver the former charges of the Bell 
Company. The Government, when agitating for public ownership, promised 
reductions in rates averaging over fifty per cent. Instead of keeping these 
promises, it was found that the Government could not operate even at the 
old Bell rates and there has been an advance in many of the rates instead 
of a reduction. Government officials are flooded with complaints of deteri- 
oration in service since the Province took over the system. 

Marietta, Ohio. Cost of street lighting supplied by the municipal 
street lighting plant on a moonlight schedule, $69.25 in 1913. The lights 
were off completely for several months owing to high water. A private 
company offered to do the lighting for $55 per lamp with deductions for 
outages, so the city is losing at least $14.25 per lamp through municipal 
ownership. 

Marion, Indiana. Cost of street lighting per lamp per year, under 
municipal management, for current alone, $35.88. Cost for current alone 
under new contract with private company $22.05 per lamp per year, making 
a saving to the city of $13.83 per lamp in addition to the reduced rate for 
commercial lighting. 

Martin's Ferry, Ohio. From 1908 to 1913 inclusive, the deficits were 
nearly fifty per cent, of the total revenue from private consumers. The 
total deficits during the six years investigated amounted to $68,860 after 
allowance of from $6,000 to $8,000 a year for street lighting. 

McArthur, Ohio. After allowing over $50 each for the street lights, 
which burned only until midnight on a moonlight schedule, the deficit on 
the operation of the electric plant in 1913 was over 200 per cent, of the 
income from consumers. 

62 



Milan, Ohio. The deficit on the municipal water and electric plants in 
1913 was over 100 per cent, of the gross revenue, including the amounts 
paid by the town for street lights and hydrants. 

Moline, Illinois. The city was able to save over $35 per lamp per 
year in addition to getting improved lamps, by giving up its municipal 
electric plant and making a contract for street lamps. The plant cost 
$25,000 and was sold for $7,900. 

Montpelier, Indiana. The electric light plant was built by the city in 
1901 and sold for $1.00 in 1905. It cost $38,000. The plant was com- 
pletely worn out. 

Murray City, Utah. An investigation showed that the plant estimated 
to have cost $60,000 had cost $85,459.08 and that $15,000 to $25,000 would 
be required to complete it. The receipts for the first six months, including 
payment for street lights, were $2,000 and the expenses including interest 
but no other fixed charges were $8,774.28, making a loss of $6,774.28 during 
a period of six months. 

Muskogee, Oklahoma. An investigation made by the Muskogee Times 
Democrat disclosed the fact that the revenue of the city waterworks for 
1913, including hydrants, was $87,203.70 while the expenses were $123,575. 
The deficit was $36,371.23. The excessive payroll was given as the chief 
reason for the deficit. 

Napanee, Ontario. In 1911 the city sold its municipal electric plant to 
the Seymour Power & Electric Company. The company gives continuous 
service and not night service only. It reduced the price of arc lamps $15 
below what the city charged itself, reduced the price of tungsten street 
lamps $5.00 each and reduced the residence rate 2 cents per kilowatt hour. 

Nashville, Tennessee. The report for the year 1910 on the municipal 
light plant purports to show that the total cost of operating the system was 
$63,821.37, including interest. As a matter of fact, the actual money spent 
by the city that year on account of city lighting was $105,891.58 which did 
not include any allowance whatever for depreciation nor for a sinking fund 
to retire the bonds, none of which have been paid. The manager states 
that $500,000 has been put into the plant. Except for the bonds amounting 
to $150,000, all this money has come out of the general tax funds in addi- 
tion to the money for operation, most of which comes from taxes, as the 
plant does a street lighting business only. Some of the street lighting is 
paid for by merchants. 

Nelsonville, Ohio. Deficit on waterworks for 1913 $9,851.11, or nearly 
200 per cent, of the total income from consumers. The electric plant lost 

63 



$9,106.14 in addition to the payments made by the city for hydrants and 
street lights. 

Norristown, Pennsylavnia. In 1911 the municipal street lighting plant 
reported the cost of street lamps at $39 per year. The city's accounting 
methods are indicated by the fact that in the years 1908 and 1909, repairs 
to street lamps amounting to $57.70 per lamp were capitalized instead of 
being charged as interoperative expenses. 

Norwood, Ohio. In 1913 the deficit on the electric plant was $12,972.76, 
and on the water plant over $36,000, after giving credit for such public 
service as was given by the plants. 

Province of Ontario, Canada. A Joint Legislative Committee of the 
State of New York in 1913 made a thorough analysis of the results of 
state and municipal ownership of the hydro-electric lighting system in 
Ontario which derived its power from Niagara. It reported that the 
Ontario Hydro-Electric Commission would be losing at least $200,000 a 
year in its power transmission scheme if the books were kept properly. 
The taxpayers aJso had to meet the expenses of the Commission, amounting 
to $173,090, which have never been included in the expenses of operating 
the system. 

Oxford, Ohio. The municipal water and electric plants failed to earn 
enough to keept the plants in good condition and they became so run down 
that in 1914 it was necessary to spend $32,500 to rehabilitate the properties. 
The town charges itself $70 per year each for arc lights burning on a moon- 
light schedule to midnight only. 

Pittsburgh, Pennslyvania. In 1911, according to the report of the 
Board of Water Assessors, the deficit in operating the municipal water- 
works amounted to $337,463.54, not including sinking fund or depreciation. 
Mayor Magee recommended an increase in rates. 

Pittsfield, Illinois. The Mayor is quoted as follows : ' ' Cheaper to pay 
the Pittsfield Electric Company than do it ourselves. We ran it ourselves 
for several years and have had it run by contract at least five years, saving 
money by contracting it to outsiders." 

Pullman, Washington. The city council in 1907, in its resolution to 
sell the municipal light plant at less than half its cost, said : ' ' The electric 
light plant owned by the City of Pullman has proven to be a burden to 
the taxpayers of the city and the same cannot be operated by such city so 
as to repay the cost and expense of operation. " 

Heading, Ohio. Failure to include fixed charges in the accounts of 
the municipal water and electric plants misled the people for many years 

6 4 



into thinking the plants were successful. An investigation made in 1914 
showed that the losses of the plants, after interest, sinking fund, deprecia- 
tion and lost taxes were included, amounted to $12,505.91 in 1913. 

Reading, Massachusetts. After several years experience with an electric 
light plant, the voters refused in 1911 to undertake the municipal owner- 
ship of a gas plant by reason of the losses incurred in operating the electric 
plant. The management of the electric plant had been very aggressive, 
yet the receipts from customers amounted to only $33,962.38 while the cost 
of running the plant was $45,125.09. The taxpayers had to make up the 
losses. 

Red Bud, Illinois. ' ' Expenses of plant from May 1, 1909, to May 
1, 1910, including electrician's salary, $4,660.36. Income from fiscal year, 
$1,988.58. We have no published itemized report. This was published in 
City Clerk's bulked report last May." 

Seattle, Washington. In 1911 the Taxation Committee of the Seattle 
Chamber of Commerce reached the following conclusions and embodied 
them in a report : ' ' The plant collects direct from the taxpayers an average 
of $181 per kilowatt per year for street lighting while private consumers 
are getting the service at from $45 to $80 per kilowatt per year The 
street lighting requires twelve per cent, of the maximum demand at the 
power plant and the taxpayers pay thirty-two per cent, of the total gross 
receipts of the plant. The plant cost $3,500,000 and is not making enough 
to pay operating expenses and fixed charges even though the city itself 
contributes a third of the gross revenue. In 1912 the private company 
offered to do the street lighting at the same rate at which they furnished 
current to commercial customers. This would have resulted in a saving of 
$127,000 a year, but was rejected. The management of the plant publicly 
admits that it grants discriminatory rates to those in a position to demand 
them." 

Sebewaing, Michigan. When the village went into municipal owner- 
ship in 1911 it was stated that $10,000 would build a suitable plant. The 
cost was $17,000, and the tax rate was advanced from three-fourths of one 
per cent, to 1% per cent, the year after the plant started operation. 

Sharon, Wisconsin. In a case affecting the municipal water and light 
plant of Sharon, before the Eailroad Commission of Wisconsin, decided 
January 11, 1912, the Commission says: "With respect to the rates for 
water and gasoline gas, the statement of earnings and expenditures shows 
that, after paying the expenses of operation, excluding interest charges 
upon the funded indebtedness, there is a large deficit in both the gas and 
water departments for each of the three years given. Inspection of the 

65 



expenditures discloses that no allowance for depreciation, as such, has ever 
been made by the village." 

Shepherdstown, West Virginia. At letter from the Mayor says : ' ' The 
town electric plant was installed in 1901 at a cost of $4,800 and sold for 
$3,200. The reasons for selling were that no fund was accumulated for 
depreciation and the town could not afford to pay for its proper superin- 
tendence, and almost every year there was a change of officials. The rates 
were too low. ' ' The plant was sold in 1907. 

Sioux Falls, South Dakota. This plant was abandoned. In 1907 the 
city auditor wrote : ' ' Reasons : Bad management and politics made cost 
of running very high. Cost per light could never be figured out on account 
of bad bookkeeping and failure to seperate operation and construction. ' ' 

Spokane, Washington. An investigation made in 1913 disclosed the 
fact that the waterworks deficit for 1912 was $225,329.71, which did not 
include services of other city departments, legal expense, of which there 
was a great deal, or lost taxes. The gross revenue, including running 
services, was $472,972.75, while the cost of operation, including interest, 
depreciation and sinking fund, came to $698.302.46. The deficit was 
largely due to the practice of issuing bonds to meet the cost of operation 
and depreciation, and to the political influences which governed the plant 
for many years. 

Toronto, Ontario. The city auditor, reporting on the operation of the 
municipal electric distribution system, which purchases power from the 
Ontario Government Hydro-Electric System, found that, at the close of 
business June 30, 1912, the system had lost $290,639.65 after about two 
years' operation. Too low rates and too many employees were given as 
the reasons for the shortage. 

Vancouver, Washington. In June, 1902, the municipal electric plant, 
costing $70,000, sold for $11,000, including a franchise in which the pur- 
chasers agreed to give lower rates than had ever been given by the city. 
Even with high prices, the plant had always lost money. 

Wakefield, Massachusetts. According to the report of the municipal 
gas and electric department for 1911, the town had always paid more out 
of taxes for the maintenance of the municipal plant than it would have 
had to pay for lighting by a private company. The average annual amount 
taken from taxes up to 1903 was $13,074, while the cost .of lighting by a 
private company was estimated at $8,500 a year. From 1907 to 1911 the 
average taken from the tax levy amounted to $15,540 per year. In 1913 
the town decided to shut down its electric plant and purchase current. 

66 



Williamsburg, Ohio. The 1913 deficit was $3,695.03, after allowing 
credit for street lights. 

WillougKby, Ohio. In 1910 the municipal electric plant, after only a 
few years' operation, broke down and left the town in darkness for 
months. It was found that the plant was worn out and not worth repair- 
ing. A contract was therefore made with the company. The town's loss 
through municipal ownership was about $75,000. 

Wilmington, Ohio. The municipal light plant was sold in 1903, after 
ten years' operation, for $12,000. There had been $110,000 spent on the 
plant, but it was a ' ' complete wreck, ' ' and was giving only intermittent 
service. The people were so disgruntled that they refused to sanction 
further expenditure. The popular vote in favor of the sale was 896 to 34. 

Winfield, Kansas. The report of the municipal electric light plant for 
1911 showed total receipts for current amounting to $25,573.72 and expenses 
amounting to $27,574.26 without any allowance for interest, depreciation 
or sinking fund. A book charge of $6,737.90 is made for depreciation "but 
no money is provided to take care of the charge. 

Winnipeg, Manitoba. The total revenue of the municipal electric plant 
for the year ending April 30, 1913, was $475,509.57, while the expenses, 
including interest, sinking fund and depreciation were $529,442.60, accord- 
ing to the plant's report, making the deficit $52,024.88. No account is 
made of services rendered free by other city departments, lost taxes, etc., 
which, if included, would increase the deficit. The second annual report 
of the Manitoba Public Utilities Commission shows that for the year ending 
November 30, 1913, the municipal electric light plant had a deficit, includ- 
ing fixed charges, of $83,432.90, while the private company operating in 
competition with the municipal plant had, after meeting fixed charges, a 
net revenue of $373,677.26. 

Winthrop, Massachusetts. An official committee, representing the town, 
in 1912 investigated and reported upon the question of municipal owner- 
ship. It found that if the town operated its own plants it would be neces- 
sary to raise the price of gas and electricity from the present rate of 90 
cents per 1,000 cubic feet of gas and 11 cents per kilowatt hour for elec- 
tricity to approximately $1.30 and 14 cents respectively. It said: "If your, 
committee had been able to find from its investigation that the town could 
sell -electricity at 11 cents per kilowatt hour or gas at 90 cents per 1,000 
cubic feet, or if your committee could have found by its investigation that 
under municipal ownership electricity could be sold to private consumers 
a cent per kilowatt hour cheaper than it could be obtained from the com- 
pany, such a slight advantage as that would not seem to justify the hazard 

6 7 



and risk and the upsetting of town affairs that would be incident to the 
years of litigation which would follow the vote for municipal ownership. " 

Wyandotte, Michigan. This plant has never paid interest or sinking 
fund on its bonds, has been rebuilt several times during its life of twenty- 
two years, the reconstruction funds in each case coming out of bond issues 
instead of being charged to operating expenses, and has been subject to 
political influences most of the time, according to the statement of a former 
official made in 1913. 

Xenia, Ohio. The municipal light plant was sold in 1896 for $2,500, 
about one-tenth of its original cost. After the plant was sold a contract 
was made for street lighting which effected a saving of $40 per year per 
lamp. 



68 



Appendix . 

DEFUNCT MUNICIPAL LIGHTING PLANTS.* 

The 277 cities, towns and villages named below comprise but a part of 
those which after a trial of municipal ownership and operation of electric 
lighting plants, have ceased, in whole or in part, to operate the plants. In 
practically all these cases municipal operation was undertaken in the 
belief that the community would obtain electric service at materially less 
cost than if obtained from private companies. Experience demonstrates 
that this belief was mistaken. Most of the municipalities sold or scrapped 
their plants at a heavy sacrifice, and thereafter obtained from private com- 
panies service at materially less cost. In some cases, municipalities closed 
down their generating plants, but continued to operate their distributing 
plants, buying the current from private companies. These cases are indi- 
cated by an asterisk (*). 

ALABAMA FLORIDA 

Columbia West Tampa 
Fort Deposit 

GEORGIA 

ARKANSAS *Barnesville 

*Argenta Carrollton 

England *Dalton 

Nashville *East Point 

Edgewood 

CALIFORNIA *Forsyth 

Berkeley *Griffin 

Gilroy * Jackson 

Lemoore *Jonesboro 

Modesta *Lawrenceville 

* Santa Clara *Monroe 

*Ukiah *Monticello 

*Newnan 

CONNECTICUT Pelham 

*Jewett City *Winder 
*Norwich 



* This list is abstracted from ' * A List of Defunct Municipal Lighting 
Plants" compiled by Arthur Hastings Grant. Since its issuance 
numerous municipalities, particularly in Massachusetts and Michigan, 
have ceased to operate generating plants and now buy current at 
less than former cost of municipal production. Mr. Grant's com- 
pilation summarizes the causes of abandonment in each of the cases 
cited, as shown by official records and statements, and other sources. 



IDAHO 
*Weiser 

ILLINOIS 

Braidwood 
Buckley 
Clayton 
Coal City 
Cuba 

*East Dubuque 
Elgin 
Findlay ' 
Galena 
Girard 
Hampshire 
Joliet 
Kansas 
Kinmundy 
La Grange 
Lockport 
Marengo 
Moline 
Neponset 
*Oglesby 
Pittsfield 
Princeville 
Sandwich 
Sycamore 
Table Grove 
Wheaton 

INDIANA 
Ashley 
Bourbon 
Brownstown 
Butler 
Churubusco 
Dunkirk 
English 
Goodland 
Jonesboro 
Lowell 
Madison 
*Marion 
Mentone 
Michigan City 
Montpelier 
Muncie 
New Carlisle 
Sheridan 
Summitville 
Wabash 
Walkerton 



IOWA 
*Afton 
Audubon 
Chari+on 
Clarion 
Colfnx 
Delta 
Earlville 
Fayette 
* Grimes 
Leon 
Lisbon 
Lyons 
Marcus 
Marshalltown 
*Pocahontas 
Sioux Rapids 
Spirit Lake 

KANSAS 
Bucklin 
Council Grove 
Emporia 
*Hanover 
La Crosse 

KENTUCKY 
Hickman 
Midway 
Murray 
Somerset 

LOUISIANA 
Mansfield 

MARYLAND 

* Cumberland 
Kockville 

MASSACHUSETTS 
Hull 

Millers Falls 
Needham 
*Wakefield 
West Springfield 

MICHIGAN 

Charlotte 

Dexter 

East Tawas 
*Escanaba 
*Fremont 

* Gladstone 



MICHIGAN (Continued) 
Grand Ledge 
Hart 
Mendon 
*North Branch 
Northville 
Bichmond 
Eomeo 
Shelby 
* Shepherd 
South Lyon 
Tawas City 
Trenton 
Zeeland 

MINNESOTA 
*Buffalo 
*Delano 
*Duluth 
*East Grand Forks 

Elbow Lake 

Fulda 

Graceville 
*Kasota 
*Lake City 

Mahnomen 

Paynesville 

Perham 
*St. James 

St. Peter 
*Shakopee 

South Stillwater 

Tracy 

Winnebago 

MISSISSIPPI 

Crystal Springs 

Ellisville 

luka 

Pontotoc 

Poplarville 

MISSOURI 

Brunswick 

Burlington Junction 

Dexter 

Huntsville 

Lawson 
*Linneus 
*Monett 
*Pierce City 
*St. Charles 

Savannah 



MONTANA 
Town send 

NEBRASKA 
*Friend 
*Hampton 
*University Place 
Valley 
*Wood Eiver 

NEW JERSEY 
Allenhurst 

NEW HAMPSHIRE 
Peterboro 

NEW YORK 

* Bergen 
Cape Vincent 
Charlotte 
Frankfort 
Gravesend 
Green Island 
Hempstead 

*Ilion 
Le Eoy 

* Mohawk 
tNew York City 
*Skanea teles 

Waddington 
Wappingers Falls 

NORTH CAROLINA 

Burlington 
*Concord 
*Fayetteville 
*Gastonia 

Goldsboro 
*High Point 
*Lexington 
*Mooresville 
*Mount Olive 
*Statesville 

Wadesboro 

NORTH DAKOTA 
Casselton 
Langdon 

OHIO 

*Amherst 
Athens 
Beverly 
Bowling Green 



OHIO (Continued) 

Bradford 

Cridersville 

Findlay 
*Hamilton 
*Hubbard 

Lakewood 

Madisonville 

Milan 

Milford Center 
*Niles 

Osborn 

Portsmouth 
*St. Qairsville 

* South Vienna 
Tiffin 
Toledo 

Upper Sandusky 
*Westerville 
Willoughby 
Wilmington 
Xenia 

OKLAHOMA 
*Durant 
Lehigh 

OREGON 
Hillsboro 
Lakeview 

PENNSYLVANIA 
*Ellwood City 
Emaus 
Forty Fort 
Lehighton 
McAdoo 
Shickshinny 
*Souderton 
West Newton 

SOUTH CAROLINA 
Batesburg 

* Cher aw 
Chester 

*Laurens 

SOUTH DAKOTA 

* Sioux Falls 



TENNESSEE 
Dayton 
Huntington 
*Lebanon 
Lewisburg 
South Pittsburgh 
Winchester 

TEXAS 

*Fort Worth 
Honey Grove 
Itaska 
McKinney 

VIRGINIA 

Alexandria 

Buena Vista 

Christiansburg 

Fredericksburg 

Pulaski 

Wytheville 

VERMONT 
*NorthfieJd 

WASHINGTON 

Ballard 

Chehalis 

Kent 
*Port Angeles 

Pullman 

Vancouver 
*Waterville 

WEST VIRGINIA 
Harrisville 
Shepherdstown 
Wheeling 

WISCONSIN 
*Boscobel 
*Cuba City 

Hudson 
'Lake Mills 
*Mazomanie 
*New Richmond 
*Sauk City 

Washburn 



tWilliamsburg Bridge Lighting Plant 



Appendix D. 

COLUMBUS, OHIO. 

Allusion has been made in the body of this report to the tendency 
of municipalities to delay improvements necessary for essential purposes, 
to change policies with change of management, and thereby to interfere 
with the effective operation of plants. It has also been stated that 
muncipalities generally fail to consider in their cost accounting essential 
items of deferred costs. Columbus, Ohio, supplies an example of both 
these tendencies. 

The Bureau of Municipal Eesearch of New York was employed by the 
city of Columbus, in 1916, to make a survey of the municipal activities 
of that city. Following is an abstract of statements of fact contained in 
the Bureau's report: 

In April, 1911, bonds to the amount of $75,000 were sold to provide 
two new lighting substations and a considerable extent of subsidiary equip- 
ment. ' ' It was believed that the establishment of the two substations and 
the erection of high-tension main distribution feeders would result in a 
more economical utilization of electrical current by the introduction of 
electrical devices tending to increase the power factor. 

"Although five years have elapsed, the plan has not been carried out 
to completion, and although the substations have been erected they have 
not been placed in operation as yet. The original bond issue was not 
sufficient to complete the erection of the building and to purchase and 
install the necessary transmission lines and other electrical transmission 
equipment. Bonds in the amount of $35,000 were issued in 1912 to com- 
plete the rearrangement of the distribution system and replace certain 
old lamps and to make other readjustments of the lighting facilities. 

"After the adoption of the original plan, the management of the 
lighting plant changed; the change was accompanied by a change in 
policy and a rearrangement and readjustment of the already adopted 
plan." * * * 

Thus during at least five years the lighting plant suffered the loss of 
interest charges upon an idle investment of from $75,000 to $110,000, and 
the more economical utilization of the product was not provided for. 

' l The existing situation in connection with the operation of the 
lighting plant and distribution system, together with the work in course 
of construction, is highly undesirable. The Superintendent of the lighting 
plant is responsible to the Director of Public Service for the operation of 

73 



the existing system. On the other hand, it is difficult to fix definitely the 
responsibility of the Consulting Engineer in charge of the completion of 
the substations and the extension of the residential lighting system. * * * 
"The vacillating policy which has existed during the last five years, 
or since the original inception of the new distribution plan, indicates that 
the present policy-determining and administrative methods in connection 
with the function of electrical generation and distribution are eminently 
unsatisfactory. 

"The city, through its council, is about to embark upon an extensive 
increase in its commercial customers, and it is proposed to solicit private 
residential lighting consumers. This work is being undertaken without 
any definite policy as to the extent or manner of solicitation and there is 
no assurance that future administrations will not revoke the present policy 
and determine to abandon the residential lighting field. ' ' 

The report elaborates upon the unsuitability of the existing govern- 
mental machinery of Columbus properly to deal with so highly a specialized 
function as electrical lighting. It recommends a complete reorganization of 
machinery and methods of control and concludes : 

"It is only through the establishment of such a Board that the city 
of Columbus can ever hope to obtain a continuity of policy respecting all 
matters electrical and to obviate the repetition of a situation similar to 
that which now exists." 

EFFECT OF EESIDENTIAL CONSUMERS UPON COST. 
Upon this point the report says: 

"The lighting plant is competing with the private electrical company 
on a rate basis for power consumption purposes and all additional day 
load power consumers which the plant may be able to obtain will tend to 
flatten out the average daily load curve. If consistently continued, this 
equalizing of the electrical load will tend to approach uniform twenty-four 
hour production with a consequent reduction of fixed charges on all generat- 
ing and transmission equipment, boiler room auxiliaries and structure. 

"By adding the residential lighting load, the peak load of the plant 
will be increased for the reason that current consumption for residential 
lighting purposes will be low through all hours of the day except 5 P. M. 
to 12 midnight, and any additional equipment which may be necessary to 
fill out the additional peak load will be practically idle between the hours 
of 12 midnight and 5 P. M. of the day following. Since the street lighting 
load is concurrent with the residental lighting load up to 10:30 
P. M., when a slight falling occurs due to the shutting down 
of four-fifths of the cluster lighting system, and since the residential 

74 



lighting load will practically cease some time prior to 12 o'clock midnight, 
it follows that the addition of the residential lighting load will increase 
the fixed charge per total K.W. output of the plant. Unless the rates are 
very carefully adjusted to take this fact into account, those utilizing city 
power for private residential lighting will receive a portion of this service 
at the expense of the taxpayers of the city. 

' ' The policy inaugurated and determined upon whereby private resi- 
dential lighting customers will be solicited is questionable in the extreme 
and it is suggested that the city might have more profitably decided upon 
a campaign for the solicitation of power consuming customers between the 
hours of 6 A. M. and 6 P. M." 

In effect, the foregoing paragraph emphasizes the well-known fact 
that the addition of a considerable number of small residential consumers 
tends very materially to force an enlargement of the generating plant, with 
a consequent increase in capital charges, and also largely to increase the 
ratio of distribution costs. Hence a plant which is able only to cover its 
costs by supplying large power and business consumers at a low rate is 
practically certain to incur a material deficit if to its existing power and 
business customers it adds a large number of small residential consumers. 
The cost of supplying the latter is relatively very great and can only be 
met by a material increase in the rates of charge. 

FINANCIAL STATEMENTS AND STATISTICS OF LIGHTING PLANT ARE OPEN TO 

CRITICISM. 

' ' The municipal lighting plant prepares a balance sheet, profit and loss 
account and operation statement each year. The last available statement 
at the time of the survey was for the year ended December 31, 1915. This 
shows the assets and liabilities of the lighting plant in detail and is a 
more informing financial statement than is prepared by any other depart- 
ment of the city government. As to the accuracy of the figures contained 
in this report, no statement can be made for the reason that an audit is in 
no sense a part of a survey. 

' ' No provision has been made in the account to cover the amortization 
charges on the $902,500 indebtedness on the lighting plant on December 
31, 1916 (f). The sinking fund installment necessary to redeem these 
bonds at maturity, calculated on a 3^. per cent, actuarial basis, would 
amount to over $20,000 per annum. Although the accounts of the lighting 
division do not show this item, it is carried as an expense of the city and 
provided for by the trustees of the sinking fund. 

"In the 1915 operating statement there is a reserve for depreciation 
of approximately $31,000 in addition to maintenance charges of between 
$13,000 and $14,000 covering repairs to the power plant, the distribution 

75 



system and the municipal and commercial equipment. In the year 1913 
approximately $41,000 were set aside for depreciation, and for the year 
1914, over $45,000. For both years the depreciation was figured at a 
flat rate of 5 per cent. It will be noted that although the city has spent 
a considerable sum on construction and extension work during the past 
two years, the amount set aside for depreciation was reduced by approxi- 
mately one-third in 1915. The adequacy of the reserve for depreciation 
cannot be substantiated for the reason that the original cost of property 
was not available at the time the survey was made. Consequently, only an 
estimate can be made as to the amount which should be set aside from 
time to time if a conservative reserve is to be established to meet deprecia- 
tion and obsolescence. 

"It should be noted also that no liability for accounts payable is 
shown on the balance sheet. Without a more detailed investigation than 
can be expected on a survey, it is not possible to state definitely whether 
all outstanding liabilities were included in the statements for 1915. The 
fact that no item appears as a liability on the balance sheet in respect to 
accounts payable would presuppose that no provision was made for out- 
standing accounts before closing the books for the year ended December 
31, 1915. 

"Notwithstanding the fact that no charge in respect to the amortiza- 
tion of the bonded indebtedness appears in the profit and loss account, the 
lighting plant shows only the sum of $216.41 profit for the year 1915, which 
may be turned into a loss if all outstanding liabilities at the end of the 
fiscal year under review have not been included. 

"The statement of bonds outstanding does not agree with the records 
of the sinking fund trustees owing to the omission of a series of electric 
lighting supply (4 per cent.) bonds amounting to $18,000 issued in 1905, 
due 1935. " 

While, therefore, the Columbus lighting plant appeared in 1915 to be 
only self-supporting, this result was reached by scaling down the deprecia- 
tion reserve from $45,000 to $32,000 and the probable omission from the 
liabilities of outstanding unpaid accounts and by failure to include the 
sinking fund payments as an element of lighting cost. If these items be 
included (such inclusion in Massachusetts being required by law) the plant 
would show a substantial deficit; and a rate materially above that of the 
competing private companies for the class of service under discussion 
would be necessary. If a considerable number of small residential con- 
sumers be added, as is contemplated, the loss would be still further increased 
unless the rates be correspondingly advanced. As a matter of fact, the 
city of Columbus has since taking on the residential business found it 
necessary to adopt the latter alternative and increase its residential rates 
to five cents per K.W. hour. 

7 6 



Appendix E. 

MISLEADING FINANCIAL ACCOUNTS OF MUNICIPAL LIGHTING 
AND WATER PLANTS. 

Allusion has been made in the foregoing report to the frequency of 
misleading and incomplete public accounting which, by omitting from the 
published financial accounts of lighting and water plants important items 
and deferred and indirect costs, often for a time delude communities into 
the belief that the public plants are financially prosperous, when in fact 
they are heavy losers. 

These omitted costs paid from other funds, and seldom appearing in 
the plant accounts are: 

Interest payment on bonds issued for plant; 

Sinking fund payments; 

Depreciation losses; and 

Loss of taxes on plant. 

When these are added to the operating cost, the apparent profit usually 
shown by incomplete municipal accounts is almost invariably converted 
into a large deficit. 

The tendency to delusive financial showings in the case of municipal 
plants is general. To illustrate it, the public accounts of most of the 
municipal plants in Oklahoma are summarized below. 

In 1915 Harold V. Bozell, Director of the School of Electrical Engineer- 
ing, University of Oklahoma, made a personal survey of most of the prin- 
cipal municipal light and water plants in Oklahoma. The results of his 
study were embodied in a published report entitled, "Data on Municipal 
Plant Operation in Oklahoma." From Mr. BozelPs report we have ab- 
stracted the financial reports of the several municipal plants as shown by 
the official accounts. 

These accounts usually comprise only a statement of receipts from 
operation, and of operating expenses. These income accounts are sum- 
marized in the following tables. In each case there have been added the 
items of expenditure omitted from the accounts of the public plants, and 
in each case a material deficit is shown by the accounts as thus corrected. 
Owing to the insufficient data afforded by the accounts, a fully accurate 
analysis is not practicable, but the results are fair approximations. 

The interest charges are computed from the amount of the outstand- 
ing bonds at the rate of interest actually paid. The depreciation has been 

77 



computed at the uniform rate of 5 per cent., which, in view of the insufficient 
maintenance of many of the plants, is a low rate. The sinking fund charges 
have been computed upon the actuarial basis, which assumes annual pay- 
ments proportioned to the life of the bonds and annual reinvestment of 
the fund and accumulated interest a method which is seldom followed in 
small communities. This method, however, shows the minimum which 
would be required for a sinking fund. The allowances fo: value of service 
supplied to the municipalities are estimated on the number of street lights 
and hydrants, allowing $50 for each arc light, $25 for tungsten series, and 
$50 for hydrants, the rates charged on the books of several of the munici- 
palities, but materially higher than charged by several private companies 
in the same locality. 

The item of tax losses, which should properly be included, has been 
omitted by reason of inability to ascertain the full value of the plants and 
the local tax rate. If this item could be ascertained and included, the 
extent of the deficit would be correspondingly increased. With one excep- 
tion, these municipalities operate bo'th light and water plants and do not 
segregate their accounts. 

The maximum rates for lighting range from 10 to 16 cents, and the 
minimum rates from 5 to 10 cents, per kilowatt hour. To make the plants 
self-supporting, it would be necessary in all but a few cases to increase 
the rates to the extent of from 50 to 100 per cent, and in some cases even 
more. Except where indicated, the accounts cover both light and water 
service. 

BLACKWELL 

Earnings : 

Cash Eeceipts $11,407.99 

Value of Service to City (as charged) 4,941.92 $16,349.91 



Operating Outlays (No allowance for Depreciation) 7,740. 



Apparent Profit from Operation $8,609.91 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 
Interest on Bonds 

($131,00051/2% and 6%) $7,660. 

Depreciation (5% $131,000) 6,550. 

Sinking Fund Payments 2,567.50 $16,777.50 



Actual Deficit $8,167.59 

78 



CHEROKEE 
Earnings : 

Cash Eeceipts $7,800. 

Value of Service to City 5,325. $13,125. 

Operating Outlays (No allowance Depreciation) 7,980. 

Apparent Profit from Operation $5,145. 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 
Interest on Bonds 

($25,000 @ 6%) $1,500. 

Depreciation (5% $25,000) 1,250. 

Sinking Fund Payments 437.50 $3,187.50 

Actual Profit* $1,957.50 

CLAREMORE 

Earnings : 

Cash Eeceipts $17,965.15 

Value of Service to City 9,701.24 $27,666.39 

Operating Outlays (No allowance for Depreciation) 13,376.91 

Apparent Profit from Operation $14,289.48 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 
Interest on Bonds 

($160,000 @ 5%) $8,000. 

Depreciation (5% $160,000) 8,000. 

Sinking Fund Payments 2,400. 18,400. 

Actual Deficit $4,110.52 



This showing is very questionable. The bond issue of $25,000 was 
applied wholly to the lighting plant. The capital investment in the 
water plant is not shown, and the charges based thereon therefore 
do not appear. 



79 



CLINTON 
Earnings : 

Cash Eeceipts $15,817.59 

Value of Service to City 3,225. $19,042.59 

Operating Outlays (No allowance for Depreciation) 15,605.36 

Apparent Profit from Operation $3,437.23 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 
Interest on Bonds 

($40,000 @ 6%) $2,400. 

Depreciation (5% $40,000) ; . . .2,000. 

Sinking Fund Payments 1,100. $5,500. 

Actual Deficit $2,062.77 

CORPELL 

Earnings : 

Cash Eeceipts $13,937.95 

Value of Service to City 3,055.00 $16,992.95 

Operating Outlays (No allowance for Depreciation) 14,908.10 

Apparent Profit from Operation $2,084.85 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($37,500 @ 6%) $2,250.00 

Depreciation (5% of $22,000, cost of light 

plant) 1,100.00 

Sinking Fund Payments 1,031.25 $4,381.25 

Actual Deficit $2,296.40 

EDMOND 
Earnings : 

Cash Eeceipts $6,296.13 

Value of Service to City 2,200.00 $8,496.13 

Operating Outlays (No allowance for Depreciation) 5,472.46 

Apparent Profit from Operation $3,023.67 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($45,000 @ 5%; $55,000 

@ 6%) $5,550.00 

Depreciation (5% of $100,000) 5,000.00 

Sinking Fund Payments 1,587.50 $12,137.50 

Actual Deficit $9,113.83 

80 



FAIRVIEW 
Earnings : 

Cash Eeceipts $11,030.59 

Value of Service to City 3,000.00 $14,030.59 

Operating Outlays (No allowance for Depreciation) 10,956.64 

Apparent Profit from Operation $3,073.95 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($145,700 @ 6%) $8,742.00 

Depreciation (5% of $145,700) 7,285.00 

Sinking Fund Payments 2,549.80 18,576.80 

Actual Deficit $15,502.95 

KINGFISHER 
Earnings : 

Cash Eeceipts $13,106.49 

Value of Service to City : 4,750.00 $17,856.49 

Operating Outlays (No allowance for Depreciation) 13,098.49 

Apparent Profit from Operation $4,758.00 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($94,000 @ 6%) $5,640.00 

Depreciation (5% of $94,000) 4,700.00 

Sinking Fund Payments 2,585.00 12,925.00 

Actual Deficit $8,167.00 

MARLOW 
Earnings: 

Cash Eeceipts $6,634.68 

Value of Service to City (as charged) 603.15 $7,237.83 

Operating Outlays (No allowance for Depreciation) 7,219.53 

Apparent Profit from Operation $18.30 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($20,000 @ 5%; $18,000 

@ Q%) $2,080.00 

Depreciation (5% of $38,000) 1,900.00 

Sinking Fund Payments 1,015.00 

$4,995.00 
Less waterworks bonds repurchased 303.69 4,691.31 

Actual Deficit $4,673.01 

8l 



NEWKIRK 
Earnings : 

Cash Eeceipts $7,220.86 

Value of Service to City 3,000.00 $10,220.86 

Operating Outlays (No allowance for Depreciation) 5,585.48 

Apparent Profit from Operation $4,635.38 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($50,000 @ 6%; $30,000 

@ 5%) $7,500.00 

Depreciation (5% of $80,000) 4,000.00 

Sinking Fund Payments 1,975.00 13,475.00 

Actual Deficit $8,839.62 

PAWHUSKA* 
Earnings : 

Cash Eeceipts $16,626.70 

Value of Service to City 3,200.00 $19,826.70 

Operating Outlays estimated (No allowance for Depreciation. . 9,000.00 

Apparent Profit from Operation $10,826.70 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($130,000 @ 6%) $7,800.00 

Depreciation (5% of $130,000) 6,500.00 

Sinking Fund Payments 1,875.00 16,175.00 

Actual Deficit $5,348.30 

PAWNEE 
Earnings : 

Cash Keceipts $16,402.26 

Value of Services to City 2,200.00 $18,602.26 

Operating Outlays (No allowance for Depreciation) 15,099.66 

Apparent Profit from Operation $3,502.60 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($20,000 (5) 6%; $20,000 

@ 5%%) $2,300.00 

Depreciation (5% of $40,000) 2,000.00 

Sinking Fund Payments 650.00 4,950.00 

Actual Deficit . $1,447.40 



* Light, Water and Gas. 



82 



PERRY 
Earnings: 

Cash Eeceipts ............................. $11,731.43 

Value of Service to City (as charged) ......... 5,064.00 $16,795.43 

Operating Outlays (No allowance for Depreciation) ......... 16,150.71 

Apparent Profit from Operation ................... $644.72 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($80,000 (5) 5%%) ........ $4,400.00 

Depreciation (5% of $80,000) ............... 4,000.00 

Sinking Fund Payments ..................... 1,600.00 10,000.00 

Actual Deficit .................................. $9,355.28 

PONCA CITY 
Earnings : 

Cash Receipts ............................. $15,341.53 

Value of Service to City .................... 3,200.00 $18,541.53 

Operating Outlays (No allowance for Depreciation)* ........ 20,204.92 

Deficit from operation. . . ......................... $1,663.39 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($106,500 @ 5%) ......... $5,325.00 

Depreciation (5% of $106,500) .............. 5,325.00 

Sinking Fund Payments ..................... 3,195.00 13,845.00 

Actual Deficit ................................... $15,508.39 

PURCELL 

Earnings : 

Cash Eeceipts ........... ................... $11,709.95 

Value of Service to City .................... 2,100.00 



Operating Outlays (No allowance for Depreciation) 



Apparent Profit from Operation ................... 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($100,000 @ 5%) ......... $5,000.00 

Depreciation (5% of $100,000) ..... -. ........ 5,000.00 

Sinking Fund Payments ..................... 2,000.00 



Actual Deficit 



$13,809.95 
10,432.49 
$3,377.46 



12,000.00 
$8,622.54 



* Includes salaries of employees, aggregating $5,220 per year, seemingly 
omitted in city's account of expenditures. 



SALLISAW 

Earnings : 

Cash Eeceipts $16,650.00 

Value of Service to City 2,400.00 $19,050.00 

Operating Outlays (No allowance for Depreciation) 16,973.00 

Apparent Profit from Operation $2,077.00 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($102,500 @ 6%) $6,150.00 

Depreciation (5% of $102,500) 5,125.00 

Sinking Fund Payments 1,793.75 13,068.75 

Actual Deficit $10,991.75 

SAYRE 
Earnings : 

Cash Eeeeipts $8,431.44 

Value of Service to City 3,000.00 $11,431.44 

Operating Outlays (No allowance for Depreciation) 8,139.00 

Apparent Profit from Operation $3,292.44 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($56,000 @ 6%.) $3,360.00 

Depreciation (5% of $56,000) 2,800.00 

Sinking Fund Payments 980.00 7,140.00 

Actual Deficit $3,847.56 

SNYDER* 
Earnings : 

Cash Keceipts $4,839.77 

Value of Service to City 1,300.00 $6,139.77 

Operating Outlays (No allowance for Depreciation) 7,610.53 

Deficit from operation $1,470.76 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($85,000 @ 6%) $5,100.00 

Depreciation (5% of $85,000) 4,250.00 

Sinking Fund Payments 2,337.50 11,687.50 

Actual Deficit $13,158.26 



First lighting plant installed in 1907 from waterworks fund; scrapped 
four years later and new plant erected from bond issue of $25,000. 

8 4 



STILLWATER 
Earnings : 

Cash Eeceipts $23,224.69 

Value of Service to City 3,800.00 $27,024.69 

Operating Outlays estimated (No allowance for Depreciation) . 11,600.00 
Apparent Profit from Operation $15,424.69 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($35,000 @ 6%; $70,000 

@ 5%) $5,600.00 

Depreciation (5% of $105,000) 5,2.50.00 

Sinking Fund Payments . 2,362.50 13,212.50 

Apparent Profit $2,212.19 

TONKAWA 
Earnings : 

Cash Eeceipts $3,604.00 

Value of Service to City 2,000.00 $5,604.00 

Operating Outlays (No allowance for Depreciation) 6,522.33 

Deficit from Operation $918.33 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($35,000 @ 6%; $32,000 

@ 5y 2 %) $3,860.00 

Depreciation (5% of $67,000) 3,350.00 

Sinking Fund Payments 1,542.50 8,752.50 

Actual Deficit $9,670.83 

WEATHERFORD* 
Earnings : 

Cash Eeceipts $18,446.97 

Value of Service to City 3,200.00 $21,646.97 

Operating Outlays (No allowance for Depreciation) 15,377.70 

Apparent Profit from Operation 6,269.27 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($82,500 @ 6%) $4,950.00 

Depreciation (5% of $82,500) 4,125.00 

Sinking Fund Payments , 1,593.75 10,668.75 

Actual Deficit . $4,399.48 



* Water, Light and Ice. 



WOODWARD 
Earnings : 

Cash Eeceipts $24,506.94 

Value of Service to City 5,500.00 $30,006.94 

Operating Outlays (No allowance for Depreciation) 18,600.00 

Apparent Profit from Operation $11,406.94 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($130,000 @ 6%) $7,800.00 

Depreciation (5% of $130,000) 6,500.00 

Sinking Fund Payments 2,275.00 16,575.00 

Actual Deficit $5,168.06 

WYNNEWOOD 
Earnings : 

Cash Eeceipts $13,928.25* 

Value of Service to City 3,340.00 $17,268.25 

Operating Outlays (No allowance for Depreciation) 12,382.79 

Apparent Profit from Operation $4,885.46 

Outlays from Taxes or Other Funds, Incurred for Light and 
Water, but Omitted from those Accounts. 

Interest on Bonds ($14,000 @ 5%%; $41,000 

@ 5%%) $2,820.00 

Depreciation (5% of $55,000) 2,750.00 

Sinking Fund Payments 2,000.00 7,570.00 

Actual Deficit $2,684.54 



* Includes $1,213.25 taxes collected to maintain Fire Department. 



86 



UNIVERSITY OF CALIFORNIA LIBRARY 
BERKELEY 

Return to desk from which borrowed. 
This book is DUE on the last date stamped below. 



JAN 28 1948 



LD 21-100m-9,'47(A5702sl6)476 



Y.C 83105 




UNIVERSITY OF CALIFORNIA LIBRARY