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 it had 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

adoption of 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 suppose this 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 written an 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 was three-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

owners such 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, but to 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--even to 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.