Massachusetts. Board of Railroad Commissioners Massachusetts. Public Service Commission.

Annual report of the Public Service Commission, and the ... annual ..., Part 1 online

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line cars are operated. Recommendations that adjustments of service of
this character be made were included in Professor Richesr's report, and
to a certain extent have been followed. It is probable, however, that more
can be done along these lines. While the company, owing to the day rate
of pay, can save less expense in this way than is ordinarily the case, it can
utilize its cars to better advantage and improve service where improvement
is most needed.

(5) Mr. Fox suggested that the company take one car out of service on
each city line during slack hours. The saving which could be effected in
this way would be minimized by the day rate of pay, but imdoubtedly
there would be some saving. The company should, on an average, furnish
at least a seat for every passenger in the non-rush period, but Professor
Richey's survey indicated that the service can probably be somewhat re-
duced during this period without departing from this standard. It oug^t
not, however, to be reduced in the arbitrary manner contemplated by Mr.



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1919.]



SPRINGFIELD RATE CASE.



237



Fox. The latter also suggested that the 53 suigle-tnick box cars m the
Springfield division might be used in the rush hours as trailers, after re-
moving their motors and electric equipment. With cars properly de-
signed for the purpose, the principle of trailer operation is sound, but the
Commission is not convinced, upon present evidence, that the use of these
old cars in the manner suggested is either safe or otherwise desirable. It
would do no harm, however, to prepare one car for such use in order that
careful tests might be made.

(6) The cost of maintaining equipment in the past two years has be^
hi^, owing to inadequate car house and shop facUities. It has been even
necessary at times to have work done under contract by outside concerns.
The opening of the new Hooker street car house, however, and the improve-
ment of the repair shop at Carew street, have changed this situation, and
the opinion was expressed by Professor Richey in his report that the item
of car maintenance would be considerably reduced during the current
year.

(7) One item of operating expense which has been exceedingly hig^ in
the case of the Springfield company has been the amount charged for
''Injuries and Damages." The following table shows the percentage of
transportation revenue charged in recent years for this purpose by the
ten largest companies of the state: —



COMPANT.



YXAB BNDBD —



December



June 80,
1916.



June 80,
101ft.



June 80,
1014.



Bay State.

Berkshire, ....
Boston Eletrated,
Boston and Worcester,

Holyoke

Hassaohusetts Northeastern,

Middlesex and Boston,

SjningfUU,

Union, ....

Worcester Ck>nsoIidated, .



4.10
1.66
4.86
2.68
4.00
8.44
4.27
7.40
2.81
6.00



4.12
2.76
4.76
2.44
.68
8.46
4.20
7.55
2.87
6.00



4.28
4.86
4.70
2.22
6.81
8.46
8.46
7.05
2.87
6.00



4.88
4.88

4.84
2.67
6.47
4.02
8.47

2.86
6.73



Comparative figures are not available for 1917, but in that year the Spring-
field charge advanced from $175,658.44, the amount in 1916, to $227,691.83
equal to 9.23 per cent of transportation revenue, an extraordinarily hig^
percentage. Additional light is thrown by the following table, compiled
from statistics furnished to the Commission in the year ended Decem-
ber 31, 1916, showing the number of accidents per one million car miles
operated: —



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238



APPENDIX — ORDERS.



[Jan.



Springfield.



Boston
Elevated.



Ani

ohneetto
Companiei.



Killed,

Injured,

Boarding and alighting aoddenta,
Total aoddents reported, .
k



131.8

96.4

405.7



1.4

86.6

79.6

840.7



1.1
lOS.l
81.4
390.8



It is difficult to believe that the charge for "Injuries and Damages'' will
remain, in the case of the Springfield company, at the height which it
reached in 1917, or that it is impossible by better methods of operation to
reduce it below the 1916 level.

(8) In his report Professor Richey pointed out that with the present
form of transfer the privilege may easily be misused, since one form of
transfer is used for all lines in the city. Good practice demands, he felt,
that a separate form of transfer be used for each route, and preferaUy a
separate form for each direction on each route. In a neighboring city
similar changes and a more rigid enforcement of transfer regulations re-
sulted in a net decrease of about 15 per cent in transfer passengers. As^
suming results only one-half as favorable in Springfield, he estimated that
the revenue of the company could, in this way, be increased some S30,000
per year, an estimate which he regarded as "very low." Although this
recommendation was made in April, 1917, it has not been carried out. la
the revised determination of additional revenue required given above,
however, allowance has been made for a S30,000 gain from this source.

Passing to the second class of operating economies and im-
provements, where new capital b required, numerous suggestions
were made to the Commission, chiefly involving the construction
of new tracks or the purchase of additional equipment. In the
past few years the company has made good progress in placing
the property in physical cbndition for efficient operation. The
unsatisfactory power situation, which was growing worse eveiy
day, has been corrected by the new contract, so that there is
now assurance of a reliable supply at a favorable rate, as well
as of the disposition of much of the present power property.
Bad car house and shop conditions in the Springfield division
have also, been improved, and it remains only to make similar
improvement in the Westfield and Palmer divisions. Track con-
ditions have been bettered, although there is still a good deal to
be done in this direction. The company has also made progress
in modernizing its equipment, and now has a fair number of
cars of the semi-convertible and prepayment type.



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1919.] SPRINGFIELD RATE CASE. 239

Aside from the maintenance work necessary to bring roadbed
and track to first-dass physical condition, additional tracks are
needed at various points. . No detailed survey has been made
by the Commission enabling it to specify the exact work of this
sort which should be done, but undoubtedly double-tracking is
desirable on certain streets and would enable the company not
only to furnish better service but to operate with enhanced econ-
omy. It may also be advisable, to lay track on streets where the
company now has no locations, to relieve Main street of a por-
tion of its burden and to make suitable connections with the pro-
posed new bridge over the Connecticut river.

Improvements are even more desirable in the case of equip-
ment. The company needs more cars, and it should also provide
for the gradual replacement of rolling stock of obsolete type with
more modem and economical equipment. On certain lines, either
trailers or two-car trains with multiple-unit control can be oper-
ated with economy and general public advantage. The same may
be said of one-man cars. In the course of the proceedings there
was much discussion of this particular type of equipment. Mr.
Fox went so far as to urge that existing cars be quite generally
operated with one man, by closing up the rear door and making
other minor changes. In view of the heavy traffic and the pres-
ent accident record, the Commission is unable to endorse this
suggestion, but clearly one-man car operation deserves very
serious consideration by this company. There are lines in the
Palmer division on which the service is now very infrequent and
inferior, where one-man cars coidd probably give better accom-
modations at lower expense, and this is true of the Westfield
division and doubtless of certain lines in the Springfield division.
It is also possible that the company may have cars which can
be reconstructed satisfactorily for this purpose at relatively small
expense, without investing in wholly new equipment. The Com-
mission strongly advises that this question be given immediate
and careful attention.

Summing up the matter of operating economies, there is, we
believe, much that the company can do -with its present property,
and without spending additional capital to improve service and
at the same time save expense and increase revenue, especially
if it is given proper municipal co-operation. If the revenue b
sufficient, there are replacements of cars and other property
which should gradually be made which will add still more to
economy and efficiency of operation. If the credit of the com-



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240 APPENDIX — ORDERS. [Jan.

pany can be restored, additions and improvements can be made
with new capital which will tend in the same direction. So far
as these changes are dependent upon the expenditure of substan-
tial sums of money, they must await the strengthening of the
company's financial condition. The economies and improvements
of service which can be made without such expenditure, however,
should be amply sufficient to offset any increase in expense which
may come during the current year from advances in wages or in
prices of materials and supplies. Neither possibility can be ac-
curately appraised, but the opportunities to reduce expense and
increase traffic and revenue are substantial and, if they are fol-
lowed up vigorously, good results should be achieved.

Return on Investment,

The final question affecting the estimate of additional revenue
required is whether the allowance made for a return on invested
capital is reasonable. In view of the continuous public super-
vision under which the outstanding securities were issued, and
the comparatively low capitalization per mile, the conclusion
may fairly be reached that these securities originally represented
capital honestly and prudently invested, upon which the com-
pany, following the precedents established by the Commission
in previous cases, would be entitled to a full return. The only
question is how far this conclusion should be modified, if at all,
by the existing depreciation of the property.

The general, rule followed by the Commission has been to make
no deduction for accrued depreciation, in fixing the basis for fL
return, unless failure to provide for it has been due to the pay-
ment of unwarranted dividends, or some other form of misman-
agement; and the expression ^'unwarranted" has been inter-
preted to mean dividends greater than what has been termed an
"investment rate on money" (see Holyoke Rate Case, 5 P. S.
C. Rep., pp. 91, 92). In this instance the company for many
years, and until 1911, paid dividends of 8 per cent. Beginning
in 1896, however, premiums were paid in on the issue of new
stock, so that the return on the actual cash invested has been
materially less than 8 per cent. Since 1900 it has been less than
6j per cent; since 1907, less than 6 per cent; and in the past
21 months, less than Ij per cent. A substantial amount of the
stock was issued at the high price of $170 per share. While the
company, therefore, can by no means be absolved from blame
for its failure to provide adequately for depreciation, there are
mitigating circumstances. In view of the prices at which stock



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1919.] SPRINGFIELD RATE CASE. 241

has been issued, the company would, aside from this question of
depreciation, be fairly entitled to maintain a rate of 8 per cent
on par. In the revised estimate of additional revenue required,
allowance has been made, instead, for a stock return of 6 per cent
on total cash invested — the equivalent of about 7.1 per cent on
par. In view of all conditions, this might well be regarded as too
liberal; but there is so much uncertainty as to the revenue
which any increase in rates will produce and the actual results
in other cases have so generally fallen below the estimates thai,
for present purposes, it may reasonably be allowed to stand.

Summary.
Summarizing this phase of the matter, our conclusions, so far
as the estimate of additional revenue required is concerned, are
as follows: —

(1) The further allowance for depreciation, over and above the amount
expended or set aside for this purpose in 1917, which is included in this
estimate is too high by about S45,000.

(2) WhUe there is reasonable prospect that expense may be relatively
increased in the current year, by reason of advances in wages and prices,
the opportunities for reducing expense and increasing traffic, without the
usQ of additional capital, are at least a sufficient ofifset.

(3) The return on invested capital allowed in the estimate is not less
than is fair and reasonable.

For the purpose of considering the increase in fares proposed
^y the company, the amount of additional revenue justly and
reasonably required may, therefore, be placed in round figures
at $400,000. In view of the probability that the present General
Court, upon recommendation of the Street Railway Investigation
Commission, may at least reduce the burden imposed by the
present excise tax and subject jitney competition to state regula-
tion and restriction, this estimated amount may be regarded as
liberal.

Financial ResvUs by Divisions.

Upon request of the Commission, evidence was submitted by
the company as to the financial results from operation in the
three divisions. No such segregation is made in the accounts
kept by the company, but a special study was made for the pur-
pose of developing this information for the year ended June 30,
1916. The investment in the Palmer division was separated by
taking the capitalization of the Springfield and Eastern Company,
at the time of consolidation, and adding additions and improve-

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242



APPENDIX — ORDERS.



[Jan.



ments made in that division since that date, and a similar process
was followed in the Westfield division, starting with the capitali-
zation of the Western Massachusetts Company at the time of
consolidation. Receipts and expenses in many cases could be
accurately apportioned, but it was necessary to pro-rate certain
items on a car mile or other suitable basis. The following table
shows the investment in each division; the income available for
a return upon the investment, either in the form of interest or of
dividends; and the percentage relation which this income bears
to investment: —



DzYttXOK.


Invwtment.


Inoomo.


Percent.


flpringfieM


$6,848,745


$850,768
36,211
28,054


6.66


WeBtfield.

Palmer,


1.038,235
1,513,672


8.50
1.85





The striking thing about this table is that it shows that the
Springfield division, notwithstanding the long rides which are
possible for the 5-cent fare, was producing very fair financial re-
sults as recently as the year ended June 30, 1916. It also brings
out very clearly the fact that the share for share consolidations
with outlying roads, effected under the auspices of the New York,
New Haven and Hartford Railroad Company, have been one of
the chief causes of the financial difiiculties of the Springfield
Street Railway Company.

Certain evidence was offered by the remonstrants tending tp
show that the lines in the outer divisions pay better than the
above table would indicate. This evidence, however, was based
on car hour earnings, which are often misleading imless consid-
ered in connection with car mile earnings and earnings per mile
of track. While the figures given above are only approximations,
the history of the Springfield and Eastern and the Western Mas-
sachusetts companies, together with the present showing of lines
similarly located in other parts of the state, leads the Commis-
sion to believe that they may be accepted as reasonably correct.

The Increases tn Fares.
From the conclusions already reached it will be seen that the
problem before the Commission is to permit this company to
increase its fares in such a way that it may have reasonable ex-
pectation of securing about $400,000 additional revenue and, at



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1919.] SPRINGFIELD RATE CASE. 243

the same time, to spread this burden equitably among its pa-
trons. It will also be seen that this problem has two dearly
defined phases. The situation in the Palmer and Westfield divi-
sions, with their interurban and rural lines, differs radically from
the situation in the Springfield division, and the method of treat-
ment proposed by the company is not the same.

Palmer and Westfield Divisions.

The method of raising fares proposed in these outlying divi-
sions is to increase the unit rate from 5 cents to 6 cents and
abolish most of the existing overlaps. The latter change would
cause passengers to pay a double or a treble fare in certain cases
where they now pay a single fare. The company estimates that
the^ gain from the introduction of the 6-cent rate would be
$39,426, and from the abolition of the overlaps, $22,024, — a
total of $61,450. In preparing this estimate, allowance was made
for a loss of 8 per cent in riding, where only the increase in unit
fare would be involved, and a loss of 15 per cent where the
payment of an additional fare would be necessary. Judged by
the experience of other companies, these allowances are not ex-
cessive. The estimate was based, however, on the riding in the
year ended June 30, 1916, and the passenger revenue of the
company in 1917 was 8f per cent larger. Assuming this to be
the measure of the increase in these two divisions, the total esti-
mate becomes $66,559, instead of $61,450.

Even upon this revised basis, it is evident that the increase is
not too large from a revenue standpoint, li the income of the
company in these two divisions had been $66,559 larger in the
year ended June 30, 1916, it would have earned, according to the
table already presented, only a little more than 5 per cent on
its investment, and this makes no allowance for depreciation
requirements and the subsequent advance of wages and prices.
It is also evident that an increase in the unit fare alone, from 5
cents to 6 cents, would produce most inadequate results. With-
out the abolition of overlaps, the estimate of gain would be re-
duced to $42,603.

The abolition of the overlaps, however, woidd have very un-
desirable and unjust consequences. Taken in connection with
the increase in the unit fare, it would mean that for certain rides,
although the distance traveled might be small, the charge woidd
be increased from 5 cents to 12 cents. In a few cases, for longer
rides, it would be increased from 5 cents to 18 cents. It needs



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244 APPENDIX — ORDERS. [Jan.

no argument to prove that such increases as these would be
greatly resented by the population served. Disregarding con-
siderations of equity, it is at least doubtful whether the result
would be advantageous to the company. The traffic loss of 15
per cent, which has been estimated, is conservative. Rather than
pay a fare 140 per cent or, in some cases, 260 per cent higher,
patrons would in many cases walk where they now ride, and if
any considerable number of workingmen were affected at any
point, jitney competition would almost surely develop.

The existing 'overlaps, it seems, have come into existence grad-
ually and by a very natural process. There is nothing unusual
about them, for they are found on practically all lines in the state
where there are successive zones in each of which a 5-cent or
larger fare is charged. They are the only means, under such
conditions, whereby the injustice can be avoided of charging a
double fare for short rides from one zone to another. On the
other hand, if they are not to be abolished, and if the existing
system of charging is to be preserved, the only possible means
of securing the additional revenue necessary in these divisions
is to increase the unit fare beyond 6 cents, to 7 cents or even
to 8 cents, an expedient which experience has shown to be of
doubtful wisdom.

Faced by this situation, the only other alternative is to adopt
an entiitely different system of charging. As a matter of fact,
there is very little to commend in the present system. It is full
of inconsistencies and discriminations and has no logical or scien-
tific basis. The fact, already stated, that in the Palmer division
the zones vary from 7.42 miles to 1.7 miles in length, and in the
Westfield division from 9.09 miles to 1.05 miles, is sufficient evi-
dence of this fact. The abolition of the overlaps would merely
make a situation which is already bad considerably worse. The
new system of charging which is being introduced gradually on
interurban lines in this commonwealth and elsewhere is far more
logical and has the advantage of causing each passenger to pay
for approximately the service that he receives, and no more.

Under this system, which has been called the "copper zone"
plan, the road is divided into sections of approximately one mile
each, and rates are based on a certain charge per section. Usu-
ally this is 2 cents, but it may be made Ij cents or 2j cents, or,
indeed, any other rate. When the passenger boards a car he
tells the conductor his destination and pays a fare based on the
distance to be covered, receiving a voucher in return. Thus, if



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1919.] SPRINGFIELD RATE CASE. 245

/

his journey is within five different sections and the rate is 2
cents per mile, he pays a fare of 10 cents. Usually a minimum
fare is established of 5 cents or 6 cents. At the end of his jour-
ney the passenger surrenders his voucher.

The advantages of this plan are obvious. Instead of progress-
ing in violent jumps of 6 cents each, as under the system pro-
posed by the company, fares would gradually advance, according
to the distance traveled, by small steps, so that between 6 cents
and 12 cents there would be, for example, intermediate fares of
S cents and 10 cents. A disadvantage, on the other hand, is
that it imposes a somewhat difficult task upon the conductor in
the collection of fares, and one that is particularly difficult when
open cars are used, or if a large number of passengers board the car
at any one point. It cannot be said that the plan is yet beyond
the experimental stage, but the experiment is promising, and one,
in our judgment, which very clearly deserves encouragement.

In the present instance, the inconsistencies and disadvantages
of the system now in use are so great, and would be so accentu-
ated by the changes proposed by the company, that there is
more than ordinary reason for trying this new plan. In the judg-
ment of the Commission it should be adopted, at least for a
trial period. What the results would be from the revenue stand-
point it is impossible to estimate from any data now in the pos-
.session of the Commission. If the rate were placed at 2 cents
per mile, the average charge per mile for through traffic on the
interurban line from Brimfield to Springfield would be higher
than the 1.74 cents under the plan proposed by the company.
On the similar line from Westfield to Huntington it would also
be slightly increased. On the other hand, the mileage plan would
reduce the charge for many local rides, particularly in the town
of Palmer; but there should be less falling off in riding. Upon
the evidence, the company might be justified in placing the rate
somewhat higher than 2 cents per mile, or in securing equivalent
results by making the length of the zones somewhat shorter than
one mile. We believe, however, that it would be wiser to in-
augurate the new system*, with the exception noted below, upon
the basis of a straight rate of 2 cents per mile, witli a minimum
charge of 6 cents for any ride covering not more than three
zones. Experience has ^hown that it is difficult to secure sub-
stantial increases in revenue from lines of the character which
make up these two divisions, and that, when rates are placed
i;oo high, the increase may prove largely theoretical.



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246 APPENDIX — ORDERS. [Jan.

Departure from a uniform application of the plan should, in
our opinion, be made in one respect. The town of Westfield is
large enough to deserve treatment following the urban practice.
In other words, it is entitled to a uniform fare, with free transfer
privileges, within a territory reasonably limited. As a matter of
fact, it would be difficult to apply a mileage zone plan to the
short local lines in this town. Our recommendation, therefore,
is that Westfield be given a uniform local fare of 6 cents, cover-



Online LibraryMassachusetts. Board of Railroad Commissioners Massachusetts. Public Service CommissionAnnual report of the Public Service Commission, and the ... annual ..., Part 1 → online text (page 33 of 64)