Westel Woodbury Willoughby.

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imder the provision of the constitutional "home-rule amendment''



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690 THE AMEBICAN POLITICAL SCIENCE REVIEW

(which authorizes cities to ''acquire, construct, own, lease and operate
within or without its corporate limits, any public utility the product
of which is or is to be supplied to the municipality or its inhabitants")
a city, under a provision of its own charter empowering its governing
body to issue bonds upon its general credit for the purpose of acquiring
a street-railway or other public utility, may issue bonds for such purpose
in the absence of specific authority from the legislature; in other words,
the issue was, whether theprovision of the constitution which reserves
to the legislature the authority to limit the city's power to levy taxes
and incur debts, makes invalid any step by a city to issue bonds for
a purpose not specifically authorized by law. In March the state
supreme court in a unanimous opinion decided in favor of the city,
holding that the legislature has control only over the total amount of
indebtedness which a city may incur and has no control over the pur-
poses for which bonds may be issued. ''Municipalities of the State
are empowered by constitutional provisions to acquire any public
utility the product or service of which is to be supplied to the munici-
pality, and they may issue bonds to raise money for such purpose,
pledging the general credit of the municipality to their pajnnent within
the limitations prescribed by the legislature as to amount of indebted-
ness for local purposes. No legislative grant of power is essential."
A significant point in the decision is that which authorizes a cily having
a home rule charter to issue general credit bonds.

In May this same branch of the commission made an extensive
report to the council, stating its reasons for recommending municipal
ownership of the transportation system of the city, and submitted an
ordinance providing for a bond issue for the piupose. The council
finally submitted two bond issues : one provided for an issue of $3,000,000
for acquiring a transportation system: the plan being to have the city
purchase the more desirable parts of the company's system; the other
provided for an issue of $4,000,000 for constructing a transportation
system, the object being to enable the city to construct new lines,
purchase new rolling stock, and establish a motor bus system. The
two ordinances were submitted at the primaries, August 10, and both
were defeated, the former by vote of 8634 for to 12,468 against, the
latter, 7901 for and 11,543, against; this result thus affording another
instance of the practice under which voters will at one election approve
the policy of municipal ownership and at a subsequent election dis-
approve the financial provision for carrsdng the policy into effect.'

■ See Toledo City Journal, August U, 1920, p. 363.



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NOTES ON MUNICIPAL AFFAIRS 691

The company likewise had meanwhile experienced a characteristic
change of heart. Spurred probably by the menace of public ownership,
it had modified its former position on the valuation issue and agreed
to accept the service-at-cost franchise on the basis of an $8,000,000
valuation, substantially as drawn by the private ownership branch of
the commission. The council has voted to submit at the election this
month both the service-at-cost franchise and again the two bond issues
rejected in August. The former provides for a twenty-five year
franchise, with enlarged city control over services.*

In Detroit the street-railway situation is especially marked by the
extreme inadequacy of its transportation system, which has been
standing still for several years while the city has been increasing in
population with exceptional rapidity. On two occasions the voters
of the city have recorded their approval of municipal ownership of the
street railways by ratifying the present charter provision directing the
city to ''at once proceed to, and as soon as practicable acquire or
<5onstruct and own, maintain and operate a street railway system"
which as soon as practicable "shall be made exclusive." And twice
plans for the purchase of the system have been defeated at the polls.
Finally, at an election held April 5 of this year a plan of municipal
ownership prepared by Mayor Couzens was adopted. The plan calls
for a bond issue of $15,000,000 to be used for the construction and
operation of new lines. Work in executing this plan has been retarded
through injunction suits filed by the Detroit United Railway; but, the
first spike in the municipal street railway was driven by Mayor Couzens
<m August 23. The mayor in turn has, through the police, impeded
the efforts of the company to proceed with extension of its lines on
•certain streets.

Seattle occupies the unique position among large cities of the United
States in being the only one which owns and operates practically the
entire street-railway system of the city. After several years of con-
tention between the company and a hostile city government, the com-
pany, despairing of receiving satisfactory treatment from the city during
the remaining years of its franchises (which would not have expired
until 1934), agreed, late in 1918, to sell out to the city, imder terms now
considered to have been very favorable to the company. The cily
paid $15,000,000 in utility bonds, which are payable, in instalments
for twenty years, out of, and are a first lien upon, the earnings of the
utility. The first three months of municipal operation, which began

^ The three ordinances are prmted in full in the Toledo City Journal^ August 28.



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692 THE AMEEUCAN POLITICAL SCIENCE REVIEW

on April 1, 1919, showed substantial profits with some extension of
services. The succeeding months have shown steadily mounting^
deficits, with expanding expenditures due to wage increases and rising
prices of materials and supplies. The mayor has instituted an investi-
gation of the facts incident to the purchase of the system, in order to
discover evidence, if any, to support charges that misrepresentation
and other improper means had influenced the transactions. There
have been several recent fare increases under municipal ownership,
the latest embodied in an ordinance passed in June of this year providing
for a ten-cent cash fare or four tickets for a quarter; the mayor considers
this to be inadequate. This experience of Seattle is being watched with
considerable interest by students of municipal government, because
of what it may indicate as to the expediency of mimcipal operation of
street railways in this country; although it is generally conceded that
the Seattle experiment has probably been undertaken under unfavorable
circumstances.

In St. Louis and Pittsburg, in both of which cities the street railways
are now in the hands of receivers, agitation of the question of municipal
ownership has been stimulated by the conspicuously inadequate and
unsatisfactory services being rendered by the companies in these locali-
ties, and by disclosures as to excessive over-capitalization and bad
financing by the companies. The Civic League of St. Louis has initi-
ated a campaign for municipal ownership of the street railways of that
city. In Pittsburg the situation has been somewhat complicated by
the recent decision of the public service commission, which, in fixing
the valuation of the street-railway properties, used, as a basis, unit
costs for the years 1914 to 1918 — ^years of exceptionally high costs.
The resulting valuation is at such a high figure that advocacy of muni-
cipal ownership on that basis woidd be considerably handicapped in
a popular campaign. On the other hand, there are indications that
the private interests concerned would not be adverse to a sale to the
city on the basis of the valuation fixed by the commission. Efforts
to secure legislation by the Pennsylvania legislature of last year to
enlarge the powers of Pittsburg by giving it powers to acquire street-
railway facilities by condemnation (a power possessed by Philadelphia)
met with failure.

A report by the National Municipal League's committee on public
utilities, entitled "A Correct PoUcy Toward the Street Railway Prob-
lem," has been issued as a supplement to the National Municipal
Review for April, 1920. It is a revision and enlargement of the original



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NOTES ON MUNICIPAL AFPAIBS 69S

draft presented at the annual meeting of the league in Cleveland^
December, 1919. Dr. Delos F. Wilcox is chairman of the conunittee.
This report contains summaries of all previous reports of the league
on the subjects of public utilities, franchises and municipal ownership.
The present report analyzes the problems involved in what it considers
to be the menace of the present situation, characterized by speculation^
interruption and curtailment of services, with increased fares affording
only temporary and partial reUef , and conflict between state and local
regulation — in short a break-down of private management, on the one
hand, and, on the other hand, an absence of definite and constructive
policies on the part of the public authorities. The report squarely
recommends the policy of public ownership and operation of street-
railway transportation. It also indicates the problems that need to
be taken up at once, relative to the formidation of definite policies and
the preparation of definite plans for the consummation of municipal
,or state ownership.

The federal electric railways commission, appointed by President
Wilson in May, 1919, to investigate conditions of the electric railway
industry, submitted its report on July 28 of this year. The commission
was composed of eight members representing the following, respectively:
members of public utility commissions, electric railway owners, street-
railway employees, investment bankers, mayors, and the United States
departments of conmierce, labor, and the treasury. Its investigation
covered questions of franchises, rates, taxation, management, public
relations and regulation, labor conditions, — all in relation to actual
conditions, causes of conditions, and necessary readjustments. The
commission being broadly representative, the present report,* compris-
ing discussion and recommendations and signed by all the members,
appears to be carefidly balanced and constructive, although, in the
words of the report itself, it "necessarily represents decided concessions
by some of its individual members." On the issue of public or private
ownership the report recommends the continuance, "for an extended
period," of private ownership and operation (under proper regulation
and with further trial of the cost-of-service plan), with public ownership
as an ultimate alternative policy and also as a legally possible present
alternative so as to safeguard pubUc interests under private ownership.
Its "conclusions and recommendations" on this subject are, in part,
as follows: "Cost-of-service contracts are in the experimental stage,

• The report is published in full in the Electric Railway Journal for August
28, pp. 398-411.



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694 THE AMERICAN POLITICAL SCIENCE REVIEW

but, where tried, they seem to have secured a fair return upon capital,
established credit, and effected reasonably satisfactory public service.
Such contracts may safely be entered into where the public right even-
tually to acquire the property is safeguarded." ''The right of the public
to own and operate public utilities should be recognized, and l^al
obstacles in the way of its exercise should be removed." ''While
eventually it might become expedient for the public to own and operate
electric railways, there is nothing in the experience thus far obtained
which will justify the assertion that it will result in better or cheaper
service than privately opef ated utilities could afford if properly regu-
lated." A complete report of the testimony taken by the commission
is to be printed and distributed to leading libraries, all regulating com-
missions, and mayors of leading cities. Tlie great majority of witnesses
who appeared before the commission as representatives of the electric
railway companies favored the cost-of-service franchise.

At the conclusion of the commission's hearings it engaged Dr. Delos
F. Wilcox to digest and analyze the testimony taken by the commission
and make suggestions with reference to its report. Dr. Wilcox made
a comprehensive analysis of the testimony and recommended public
ownership as the proper .poUcy indicated by the testimony. The
commission has not published Dr. Wilcox's report; but it has announced
that a simmiary, prepared by him, is to be printed with the report of
the testimony. Dr. Wilcox has recently distributed to the press a
lengthy statement criticising some aspects of the commission's report,
analyzing the results of recent fare increases upon traffic and revenues,
and arguing for public ownership and operation as the only adequate
solution of the street-railway problem.

Several developments have occurred in Cleveland during the past
year under the famous Tayler service-at-cost franchise. In December,
1919, following increased revenues during the preceding three months,
a reduction in street car fares from' 11 tickets for 50 cents to 6 tickets
for 25 cents was announced. In January of this year, the city council
amended the original franchise so as to permit a seven instead of six
per cent return on the capital stock. Late in August the president
of the railway company annoimced that, because of recent decrease
in net revenues, fares will be automatically increased to the maximum
provided in the franchise — 6 cents fare, or 9 tickets for 50 cents, with
charge of one cent for transfers. A proposed bond issue of $15,000,000,
urged by the Cleveland rapid transit commission, to enable the city
to build a subway traction terminal under the public square, with



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NOTES ON MUNICIPAL AFFAIRS 695

feeders from four directions, was defeated by a two to one vote at an
election in April.

A proposed cost-of-service franchise for the Minneapolis State Rail-
way Company, whose present fifty year exclusive franchise will expire
on July 1, 1923, was defeated by over 7,000 votes in the election in
November, 1919. The chief grounds of objection were the alleged
excessive valuation provided in the proposed franchise and the alleged
excessive return provided, seven per cent. There is some local fear that,
in view of the present unsatisfactory service and the repeated failures
of the city and company to come to terms, the legislature of 1921 may
establish state regulation of transportation in Minneapolis.

A valuable report on service-at-cost franchises has recently been
issued as a legislative document by the state of New York, imder the
title — ' 'Service-at-cost franchises in effect in America. An identical
analysis of plans in effect in Cleveland, Montreal, Boston, Dallas,
Cincinnati, Youngstown, and on the Eastern Massachusetts Street
Railway Company and the Westerville Division of the Columbus [0.]
Railway, Power and Light Company, and the General Massachusetts
Service-at-cost Law."* A useful report on the operation of the service-
at-cost franchise in Cincinnati was issued in August by the director
of street railways of that city. Rochester, New York is one of the
latest cities to adopt this form of franchise. It recently entered into
such an arrangement with the conlpany which operates the street
railways of that city. The agreement is to extend for a period of two
years subject to renewal if desired by the city. The agreement concedes
to the city extensive control over services, extensions, and betterments,
this control to be exercised by a commissioner of railways appointed
by the mayor at a salary of $12,000 to be paid from the revenues of
the street railwa3rs. Under this franchise an advance to a 7 cent fare,
with 6 tickets for 26 cents, was put into effect on August 28. In Akron,
Ohio, negotiations looking to a service-at-cost franchise are under way
between the city authorities and the street-railway company.

Two important reports on the transit situation in New York City
have been issued during the past year. A report prepared by Dr.
Wilcox and signed by thirty-three other men interestod in municipal
affairs in New York City, bears the title "Transit L. roblems of New
York City: an analysis of the difficulties in the way of the continuation
of the policy of private ownership and operation, and of the obstacles
to be removed in preparation for successful public ownership and

• Legislative Document No. 96, 1920. 157 pp.



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696 THE AMERICAN POLITICAL SCIENCE REVIEW

operation." The title reveals the poUcy recommended in the report;
but the difficulties — legal, financial, and poUtical — involved in that
solution are carefully canvassed. ''The Traction Crisis in New York"
is the title of a report written by Dr. Charles A. Beard. This rei>ort
analyzes the difficulties of the present situation, considers the various
ways of relief, and proposes a "settlement promising permanent relief."
The proposed settlement would continue private ownership and oper-
ation, but under a reorganization which would secure: (1) imified
operation and regulation, (2) a tentative franchise, with capitalization
Umited to bona fide expenditures to create property, (3) assurance of
a fair return on honest capital, (4) division of profits, above a reasonable
return, between company and city, (5) preparation of the way to munici-
pal ownership on definite terms when desired by the city.

The National Municipal Review has during the past year continued
its articles dealing with recent street-railway developments, under the
title of "The Fate of the Five-cent Fare." Recent articles, describe
street>-railway history in San Francisco, Toronto, Detroit, Indianapolis,
Minneapolis, Pittsburgh, and Seattle.

The city commission of Nashville, Tennessee, has recently passed
an ordinance prohibiting the operation of one-man street cars in that
city. The demand for such an ordinance came chiefly from the labor
unions.

In Jime of this year the Cleveland city council adopted an ordinance
providing strict regulation of motor bus transportation. The ordinance
requires: (1) a liability insurance policy to be taken out by a company
or person operating motor busses — a policy of $60,000 for operating one
or two busses, and $30,000 additional (with $1,000 more of property
liabiUty) for each additional bus; (2) license fees from both owners and
drivers; and (3) that fixed routes be named before issue of an owner's
license.

Housing and Rent Problems. The widely prevailing housing
shortage and rental difficulties in cities have produced a variety of
activities, by pubUc and private agencies, in the way of investigation,
relief, and control. Various studies have been made to discover facts
and remedies as to rent profiteering and means for bringing about a
resimiption of normal building. The mimicipal reference Ubrary of
New York City has recently published a useful bibUography on "Rent
Profiteering," by Miss R. B. Rankin. Organizations have been formed
in several cities to provide assistance for families of limited means,



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NOTES ON MUNICIPAL AFFAIRS 697

to enable them to buy or rent homes under terms less burdensome than
those now generally prevailing. An example of this sort is the Bridge-
port (Conn.) Housing Company, organized by merchants, manufac-
turers, and bankers, with a capital of a million dollars, limiting its
earnings to six per cent. It has built group houses, providing homes
for sale at from $3350 to $5400 — payable ten per cent down and one
per cent a month thereafter, or for rent at from $18.50 to $46 a month.

Significant experiments have been made in the way of state and
municipal governmental activity to meet the critical situation produced
by constant rent increases and the ejectment of tenants. Effective
work in assisting in the solution of the rent problem has been done by
the rent and housing committee of Boston, appointed by Mayor Peters
and organized in March of this year, to adjust differences between
landlords and tenants and study housing needs generally. In carrying
out the former purpose this commission has already achieved results
in over a thousand cases, through securing compromises, persuading
owners and tenants to adjust their own differences, obtaining extensions
on vacate notices, referring some cases to boards of health, fire depart-
ment, or police department, finding vacant houses, and in other ways.

The legislature of Massachusetts recently passed an act authorizing
any city to appropriate money for the erection of homes to be sold to
families in need of homes. The city of Boston has taken steps to resort
to that means of solving the problem, attempts in that cily to create
a private housing corporation having failed.

Several cities have adopted the policy of increasing assessments on real
estate properties m cases where landlords make extortionate rent
increases. This (dan was recently followed in Detroit where members
of the city council act also as members of the board of tax review.

In July, 1919. the legislature of Wisconsin amended its general cor-
poration law in such way as to enable individuals to organize coopera-
tive housing companies and to authorize city councils and county
supervisors to subscribe preferred stock in such corporations and, in
this way, engage in housing activities. The law places a limit of $5000
upon the cost of any single dwelling built by such a company; pro-
hibits sale of land except in case of winding up the affairs of the cor-
poration or of closing mortages or liens or of disposing of land not
needed; prohibits lease of property except to, and for the use of, a stock-
holder (with certain exceptions as to ex-soldiers); limits the stock of
any tenant to the value of the premises occupied by him; limits divi-
dends to five per cent; and provides for the prompt retirement of pre-



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/^^



THE AMERICAN POLITICAL SCIENCE REVIEW

ferred stock. The act is based on the recommendations of the Mil-
waukee housing commission.

As many cities have been looking to the so-called "Ball rent law"^
(passed by Congress in October, 1919, for the District of Columbia)
as a model for ordinances to check rent profiteering, the decision of the
court of appeals of the District of Columbia in June of this year, declar-
ing that law to be unconstitutional, is of considerable interest. The
act, declaring that, for the piirposes of this act, all rental property is
affected with a public interest, created a rent commission of the District
of Columbia, composed of three members holding office for the life of
the conmiission, which was fixed at two years by the law. Under the
act this commission is empowered: (1) to deal with controversies over
rents, — to fix fair and reasonable rents and grant permission, and
determine rental, for sub-leases; and (2) to deal with possession cases,
with power to prescribe staiylard forms of leases and, under certain
conditions, extend tenancies beyond the expiration of leases. The
act forbids eviction of a tenant except upon one of three grounds:
(1) failure of tenant to pay rent or to perform other valid conditions of
the lease or contract; (2) desire of the landlord to repair or tear down
the property in order immediately to construct new rental property
approved by the commission; (3) desire of landlord to secure the
property for hofn/a fide occupancy by himself, his family or dependents.
The commission has handled a large number of cases, has compelled
reduction of rents in many cases, adjusted many controversies without
formal hearings, and decided many possession cases.

The case in which the Ball act was declared unconstitutional arose
t)wrough the suit of a purchaser of a property to secure possession
from the tenant whose lease had expired. The court of appeals, to
which the plaintiff appealed after the trial court had given judgment
/for the defendant, held the act to be invalid on the ground that it
' denies the right of trial by jury in property disputes, impairs the obli-
gation of contracts, and is not a proper use of the police power of
Congress. It held that the renting of property in the District of
Columbia is a private business which can not be impressed with a
public interest merely by legislative fiat or by an arbitrary exercise of



Online LibraryWestel Woodbury WilloughbyThe American political science review → online text (page 69 of 77)