time, the company is free to charge a lower rate on any of these lines if it deems that competition or other conditions make such a change desirable. It is our understanding that a 7-cent rate is proposed on the line from Needham to Newton Upper Falls, where 8 cents is now charged, in the hope that the lower fare may encourage through travel over this line into Newton and Boston. A new transfer is also proposed at Needham Square between the Wellesley and Newton lines, and this change, we believe, is reasonable.

If the company will file a new schedule embodying the changes thus indicated, it will be allowed to take effect on short notice. If this is done, however, the new fares should be regarded as temporary in character and subject to later modification if a more thorough investigation of traffic conditions shows that a better system of fares can be devised. The Commission is not satisfied that this company is right, and practically all the other large companies of Massachusetts wrong, with respect to the advantage of a comparatively low minimum fare and the retention and encouragement of short-haul traffic. The idea that riding must ultimately be confined to those who find the service a necessity and that no benefit can be gained by attempting to attract any other class of riders is based upon a pessimism with which we have little sympathy. That this idea is not a prevalent one in the industry may be gathered from the following editorial paragraph taken from the Electric Railway Journal of June 22, 1918:

It was our recent privilege to look over a traffic study made in a town of 50,000 people with a view to proving the need, at a forthcoming hearing before the State Commission, for a higher rate of fare. Quite a surprise was sprung upon the management when its expert produced statistics of travel not by lines but by fractions of lines. Here, for example, was a line 4 miles long on the first 2 miles of which 70 per cent of the traffic originated, whereas the remaining, outer, 13 miles produced only 30 per cent. Two things immediately became obvious: First, that many short riders would walk if they had to pay more than 2 cents a mile; second, that the long riders were getting too much service at an absurdly low rate of fare. This condition proved so prevalent that the company has already decided not to ask for a flat increase in fare but simply to put all the facts before the Commission that the latter may decide whether real relief can be obtained in better ways than by the driving off of short riders.

We are aware that the management expenses have been cut to the bone and that the general manager has been overburdened

and laboring under great difficulties. At the same time, the Commission has confidence that it will pay this company, poor as it is, to make a more careful study of traffic conditions and of the whole rate problem than we have been given any reason to believe that it has yet made, and in such a study we will gladly assist to the extent of our ability. The Inspection Department will be directed to begin this work at once, and the Commission will reserve the right to reopen the case for further consideration at any time when such action appears desirable. The investigation pursued by the Commission will also cover questions of operation.

In conclusion, a word should be said in regard to the financial policy of this company. Substantially all the common stock is owned by a holding company organized in the form of a voluntary association and known as the Boston Suburban Electric Companies. This holding company was formed in 1901 and acquired, at about that time, most of the companies which were afterwards consolidated as the present Middlesex and Boston. The remainder were acquired a few years later. While these companies, which were thus brought under common control, were operated from the beginning in combination under a single management, the separate corporate organizations were maintained in some cases for several years, and the process of technical consolidation was not completed until 1912. During the intervening period some of the companies had net earnings applicable to dividends, but others did not. The policy was followed, however, of declaring dividends in the case of the more prosperous companies practically up to the extent that the earnings would permit, while the deficits of the other properties continued to increase. The Newton and Boston Street Railway Company, in particular, which sold power to some of the other companies, accumulated a deficit which amounted at the time of its consolidation to $281,692, or more than the par value, $200,000, of its outstanding stock.

As a result of this policy, the total dividends paid in every year up to 1913 were in excess, often largely in excess, of the combined net earnings of the system, so that, when the final merger was effected in 1912, the consolidated company was found to have a profit and loss deficit of more than $250,000. While the policy which was thus pursued with respect to dividends prior to the time of technical consolidation was no doubt legally permissible, it seems to the Commission that it was unsound and detrimental to the best interests of the shareholders of the holding company.

If the companies which were brought under common control had been consolidated from the start, no one would have contended that the amounts could properly be paid out in dividends which actually were paid, and it does not seem that the mere fact that a technical merger had not been effected, although the companies were in fact combined as one system, changed the situation from the standpoint of sound business policy. It is true that the dividends paid were not large, but, while this is an alleviation, it does not alter the essential character of the policy. It was pursued, it should be said, prior to the enactment of the Public Service Commission law and at a time when the Board of Railroad Commissioners had no power to suspend tariffs and only recommendatory authority over rates.

Since the final consolidation in 1912, the company has consistently paid practically all the dividends that its yearly earnings would permit, without regard to the large accumulated deficit and with little regard to a proper provision for the maintenance and depreciation of its property. At the public hearings in the fare case last summer, the attention of counsel for the company was directed to the fact that it had not expended the 20 per cent of its gross revenue for maintenance and renewals recommended by the Commission in its 1914 decision, and he was asked whether the dividends which had been paid were justified under these conditions. In reply he stated that "if the property is kept in a reasonably safe condition in the judgment of the operating officers of the company, they feel that they are entitled to pay a moderate dividend" (Record, p. 505). Later he elaborated this answer as follows (Record, p. 506):

I think that I can fairly say that the board of directors believe that if the property is kept in a safe condition so that they have no apprehension from accidents that could be prevented by the exercise of reasonable precaution, that a moderate return to the stockholders, paid from year to year, stands on the same basis as a payment to the employees - and that they are entitled to make it.

In other words, it is the policy of this company, notwithstanding the fact that its capital stock is clearly impaired by the accumulated deficit, to say nothing of depreciation, to regard moderate dividends practically as a fixed charge, to be paid in preference to the up-keep of the property, provided only that it is kept in "reasonably safe" condition.

Such a policy in competitive business would be regarded as destructive of the best interests of the owners of the property and

contrary to principles of good finance, and it is difficult to believe that the mere fact that this company is a public service corporation, rather than an ordinary industrial enterprise, makes such a difference that a practice of this sort becomes sound which would otherwise be unsound. If the prosperity of a street railway company were merely a matter of rates and any deficiency in earnings could be regarded as wholly temporary pending an advance in charges, there might be more ground for such claim, but this is not the case. Prosperity is not only dependent upon rates, but also upon location and general conditions. As the counsel for this company has rightly said, there is an "inherent economic limitation" in the amount which a company can secure for its

service.

If the company is ultimately to be put squarely upon its feet, it will be necessary to wipe out the accumulated deficit, charge off abandoned property and improve the physical condition of the property now in use. Under the circumstances and especially under present conditions, the stockholders may well consider whether the policy which has been and is now being pursued with respect to dividends is not one which is likely in the long run to prove detrimental to their best interests.

MILFORD, ATTLEBOROUGH AND WOONSOCKET

FARES.

Notice of Milford, Attleborough and Woonsocket Street Railway Company of proposed changes in rates of fare for passengers upon its railway.

BENTLEY W. WARREN for Milford, Attleborough and Woonsocket Street Railway Company.

JOHN C. LYNCH for Towns of Bellingham, Franklin, Hopedale, Mendon, Milford, Plainville and Wrentham.

The Milford, Attleborough and Woonsocket Street Railway Company is a small company which owns and operates about 30 miles of single track in rural territory southeast of Worcester and near the Rhode Island line. The following table shows the towns which it serves, with their population in 1915:

In the case of Blackstone, Hopedale and Mendon, the road merely runs through a corner of the town. There are two lines which intersect in the town of Bellingham, the four termini being Milford, Caryville (in Bellingham), Plainville and the Rhode Island state line. The cars run through from the latter point over the tracks of the Rhode Island Company into Woonsocket, and at Plainville the Interstate Consolidated company connects for Attleboro. The chief business is between Milford, Franklin and Woonsocket.

Fares have not been changed materially since the road began operation. The unit is 5 cents and the seven zones vary from 5.4 miles to 1.3 miles in length. The company now proposes to es