LX
We came upon the scene just when the discussion was emerging from the second into the third of those phases into which I have divided the development of the problem. The franchises granted almost a generation before were about to expire, and new arrangements between the city and the traction company, the Big Con, as the newspaper argot would have it. Chicago had already, or almost, gone through her settlement; and though the settlement was pretty bad, it nevertheless recognized the principle that the value of a street railway franchise is a public, social, or communal value, produced by the community, and therefore belonged to the community. In Toledo the company had but about $5,000,000 of actual investment, while ithad a capitalization in stocks and bonds of nearly $30,000,000, and the difference of $25,000,000 was the community value which the magnates had been exploiting for their own benefit. We simply proposed that this value should be returned to the people. We proposed, then, that the rate of fare to be charged by the company should be large enough and only large enough to pay a reasonable return on the actual investment and to provide good service, a service that was to be dictated, regulated and controlled by the city. This principle had been established, or at least admitted in the Chicago settlement, and the same thing had been done, though on a sounder and more scientific basis in Cleveland, where Tom Johnson’s long and gallant and intelligent contest already in effect had been won. Over in Detroit the same principles had been deduced, though the discussion there was so prolonged, as proved ultimately to be the case in Toledo, that the people demanded municipal ownership, without passing through the intervening experimental stage of regulation and control.
There is of course nothing sacrosanct in three-cent fares. The movement of the people, which at the same time, in the old Russian phrase of Kropotkin, was a movement toward the people, had become an agitation for this rate. It had been begun years before by Mayor Pingree in Detroit, and was taken up in Cleveland by Tom Johnson, whose whole career in a romantic manner, at once embodied and illustrated the history of the street railway problem in the American city. The adoptionof the phrase as a shibboleth or slogan of the progressive forces was simply and easily explained, for in the mind of Johnson and in the minds of those who were like him or were influenced by him, the difference between the prevailing fare of five cents and the proposed fare of three cents somehow measured the franchise value, or that social value which belonged to the people. Tom Johnson, indeed, used often to say that he favored a three-cent fare simply because it was two cents nearer nothing, thereby revealing a glimpse of his dream of a social order in which the municipality would provide transportation just as it provides sidewalks, sewers, bridges, etc., all of which are paid for at the treasury in taxes. It was believed and held by all of us, that this franchise value should be reclaimed or retained by the people in this direct and simple manner of lowering the fare.
There was never any notion, of course, of interfering in any way with the existing rights of the company; it was to have all that to which it was entitled under its old franchises or contracts. But it was proposed that when we came to draw a new contract, the political relations of the city and the company were to be considered as of paramount importance, using the word “political,” of course in its old authentic sense, and not as expressing in any wise the sinister thing it has come to connote in the popular mind. We were determined to meet not only the conditions of the present, but to do what our forerunners in office had never done, that is, to protect the interests of the people of the future. I supposethis sounds very much like the trite generalities of the politician, but we sincerely tried to express the theory with definiteness and particularity. We sought not only a reduction of the fare and a regulation of the service in the public interest, but we wished to provide for that future day when, as a result of the certain growth of the city, the sure improvement in transportation facilities, and the inevitable development of the democratic function, the municipality is to undertake these enterprises as a proper public function.
It was these principles we tried to bear in mind in those long negotiations which we held all during the months of one spring and summer over that big table in the council chamber. We were nervous when we entered upon this work, nervous as are those who enter the finals in some tournament of sport; we did not know much about the subject, and we were confronted by the street railway magnates and their clever lawyers. But we could learn as we went along, and we always had to our assistance Newton Baker over in Cleveland, and Peter Witt, and Carl Nau, whom we had employed as the city’s accountant when the time came at last when we could examine the company’s books; they had all gone through the long civil war in Cleveland, as had Professor Edward W. Bemis, whom we afterwards engaged in his quality of expert adviser on valuations.
Perhaps at first we laid too great stress on three-cent fares, though I do not know how we could have done otherwise. Dr. Delos F. Wilcox, who has writtenan excellent work on the whole subject, had advised us indeed that a disproportionate amount of energy and effort had already been expended—not by us, only, but by all those in other cities who were in similar struggles—in the direction of low fares. He pointed out, I remember, that five cents in that day was worth little more than three cents or three and a half cents had been a decade before, according to the scale of prices then current; he thought that in terms of general prices the public had already secured three-cent fares without knowing it. It was a question of some subtlety and some intricacy, to be left to economists; we could not feel that our battle had been won so easily, and we did not undertake to console the people with the recondite theory. We had before us, in vision, and sometimes in their corporeal reality, the weary and exasperated strap-hangers, and the human sardines on the rear platform with their valid complaints; they all wanted low fares, good service, and seats. An old street-car man once said that to provide seats for everybody is an impossibility, and to prove this assertion he humorously classified humanity into three groups: “workers, clerkers and shirkers.” Each morning, he said, the workers go down at seven, the clerkers at eight, and the shirkers at nine, and that therefore it is easy to provide them all with seats in the morning hours; but that as all three classes wish to go home at the same hour in the evening, it is then physically impossible to provide them all with seats.
But whether or not too great stress wasthree-cent fares we learned during those months of wearisome and futile negotiations, that the theory was not scientific. The people were entitled to their money’s worth in service, the company to adequate pay for the service it rendered, and as the basis of the whole transaction was a public necessity, the city had the right to control the service, to dictate what it should be. The old theory was that the people existed for the street-car company; the new principle was quite the reverse; the street-car company was but a temporary instrument of social service, and the social right was paramount to all others.
The company therefore was entitled to a fare sufficient to enable it to provide the service thus demanded, and to do this it must charge enough to pay its operating expenses, taxes, and interest, enough to meet the cost of improvements and depreciation, and to pay a reasonable return on its investment. It was not entitled to any speculative return. There was no longer on the company’s part that risk its predecessors in interest, the pioneers or promoters or whatever they were, had been compelled to take; its investment was no longer precarious; nothing, indeed, could be more certain than the stability of street railway investments. Their securities, based upon a public necessity, supported by the diurnal comings and goings of all those thousands and hundreds of thousands of people, had become in a certain very real sense, a fixed burden upon the people of the city, a burden as fixed and inevitable as taxes. In the hands of private ownerssuch securities, under a franchise ordinance properly drawn, partake largely of the character of municipal bonds, which indeed they resemble in fundamentals and ends. The issue of securities was therefore to be as jealously guarded as an issue of municipal bonds, and overcapitalization, the prolific source of so much evil, was to be prevented. The enterprise had become as stable as any human institution can be, and with the limited risk there was to be applied the familiar principle of limited profit. The principle was recognized in Cleveland, where the return fixed as reasonable was 6 per cent., which is but little more than municipal bonds pay. And when this principle is established, municipal ownership almost automatically follows; investors used to large speculative profits, are ready to sell out to the municipality; thus, by indirection, democracy comes into her own.
It was easy enough to fix most of the elements of this return; the accountants could do that, in their intricate discussions of car-miles and curves and straight lines of depreciation and points of saturation in traffic, and all that, but the tremendous difficulty was to determine just what the investment was and what was a reasonable return on that investment.
It is this pass to which all such negotiations, conducted in sincerity, come at last; it is this on which the whole question hinges, it is this that might as well be done first as last, namely, to evaluate the property of the company. It is necessary not only to get at the investment and the return thereon, butto ascertain what the city must pay when it comes to take over the street railway system.
But we did not do it at first, and we did not do it at last. At first it was impossible to get it into the councilmanic head that it was at all necessary, especially since it cost money to retain the “experts,” as they are called, to do the work. They were prone to that old vice of the human mind which leads it to imagine that when it has stated the end to be achieved it has at the same time stated the means of achieving it,—like the advice to the bashful man “to assume an easy and graceful attitude, especially in the presence of ladies”—and when council was finally convinced and had provided the funds for the experts, we could not agree as to who should be employed. That is, the human equation was apparent. There was unhappily nobody but men to make evaluations, and all the engineers who were competent were employed by street railway companies, and expected or hoped to continue to be employed by street railway companies, and they had evolved so many fantastic notions of “intangible” value that they could account for almost any excess in artificial capitalization, and make the grossest exhibition of corporate greed in watering stocks appear like veritable self denial in frugality and economy. We selected Professor Bemis to represent the city, because he was one of the few of the “experts” committed to the people’s cause; he had advised Tom Johnson throughout his long war. But the company never could be brought to select anybody, or to agree upon the third arbiter—evento accept the Judge of the United States Circuit Court when, against the advice of the whole administrative circle, I proposed him.
Again and again in our prolonged negotiations we returned, as in a vicious circle, to this point; again and again we reached this impasse.