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tablish a mileage system, dividing the road into 28 zones, averaging about 1 mile in length, making the rate 2 cents per zone, with a minimum fare of 5 cents good for a ride in any two adjacent zones. When the total fare computed shows a half cent, the company proposes to collect the full cent. The cash fare for a ride of three zones would thus be 8 cents, rather than 7 cents; but provision is made for the sale of 10 tickets for 25 cents, so that patrons may in all cases obtain rides at the exact rate of 2 cents per zone. It is estimated that the new tariff would produce a total passenger revenue of $170,643 as compared with $96,810 in 1917, an increase of 76.3 per cent.

The company was organized in 1899 and the outstanding stock and bonds were all issued with the approval of the Board of Railroad Commissioners. The capitalization on March 31, 1918, was as follows:

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The indebtedness evidenced by the notes has been incurred without public supervision, but the amount is comparatively small. The permanent investment per track mile is but $22,156.

All the stock has been owned since 1907 by a voluntary association, known as the New England Investment and Security Company, which also controls the Worcester Consolidated, Springfield, and Interstate Consolidated companies. In general, all four companies have the same executive officers, salaries being prorated on the basis of gross earnings. As a result, the management expense of the Milford, Attleborough and Woonsocket is low, the amount spent for salaries of general officers in 1917 being but $897. Until about 1913 the New England Investment and Security Company was controlled, directly or indirectly, by the New York, New Haven and Hartford Railroad Company. Control is now in the hands of its preferred shareholders, but the railroad company still has the largest financial interest. The Milford, Attleborough and Woonsocket stock was originally acquired by the holding company in exchange for half the amount of New Haven stock, then paying 8 per cent.

The bonds bear interest at the rate of 5 per cent, but mature on October 1, 1919. Dividends have been paid in but eight of the 18 years in which the road has been operated, as follows:

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Operating revenue reached its maximum in 1913 and has since fallen off, while operating expense during the same period has steadily increased, as shown by the following table:

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Passenger revenue has decreased more rapidly than the total operating revenue, being offset in part by the gain from freight and express traffic which, although still small in volume, has increased five fold since 1913.

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The chief increase in expense has been in the item "Conducting Transportation," which includes wages of motormen and conductors and was 48.4 per cent larger in 1917 than in 1913. Cost of power increased 31.6 per cent. Maintenance has grown as

follows:

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In view of the fact that the 1917 maintenance expenditures included $2,458 for depreciation reserve, while no similar appropriation was made in 1913, the increase in this item has not been large.

In 1917, earnings failed by $8,264 to pay operating expenses, taxes and interest on debt. The company has based its case in support of the new schedule of rates upon the following estimate of revenue required:

Operating expenses (estimated for 1918),

Depreciation which should be set up in addition to that now being set up annually on account of depreciation of rolling stock,

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Taxes (estimated for 1918),

Return on investment (6 per cent of $638,900),

Contingency allowance (1 per cent of gross),

Revenue required,

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$114,446

10,731

5,100

38,334

1,703

$170,314

A further estimate was submitted indicating that the new rates would provide a yearly revenue of $170,643, or about the amount required.

The estimated operating expenses for 1918 compare with actual expenses in 1917 as follows:

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The estimates for "Equipment," "Conducting Transportation" and "Traffic" were accepted by the remonstrants as reasonable, but it was urged that the other items were too high and that the total estimate might fairly be reduced from $114,446 to $105,291, a decrease of $9,155. The Commission was not convinced that the remonstrants were right in this contention, but the question is not now important, for the company, as the result of an arbitration award by Mr. Henry B. Endicott, executive manager of the Public Safety Committee of Massachusetts, has recently given the men an increase in wages estimated to amount to more than $15,000 per year. In view of this award, which has raised the maximum wage for blue-uniform men from 34 cents to 43 cents per hour, there can be little doubt that the total operating expense for the ensuing year will exceed the sum estimated, if the property is properly maintained.

The company manufactures its power in a small plant which is not of the most modern design. The cost naturally compares unfavorably with the cost in larger and better equipped stations, and it was urged that the road could save expense by buying from some hydro-electric or other large power supply company. Under present conditions, however, it appears that it would be difficult to make an advantageous arrangement of this sort. The investment in the present plant would remain, and it would be necessary to add converting apparatus, exceedingly difficult to obtain in war time, even if the company could raise the necessary capital.

The further allowance for depreciation included in determining revenue required is $5,985 less than the amount at first estimated by the company, the reduction being made along lines indicated by the Commission in the Springfield rate case, decided March 30, 1918. It would permit a provision for depreciation far larger than has been made in the past, but, if adequate provision had been made heretofore, the company would now have a reserve available for the replacement of old cars and semi-obsolete power equipment. It is true that depreciation requirements are relatively less on a small country road like this, operating in part on private right-of-way, than in the case of the larger city systems; and it also seems that the company has included in its maintenance estimates more items properly chargeable to a depreciation reserve than it has made allowance for. A careful analysis of the property would be necessary before reaching a definite conclusion in regard to this matter, but it is safe to say that the further al

lowance for depreciation, over and above renewals provided for in maintenance, should not be less than $7,500.

The company's allowance for "return on investment" is 6 per cent of the book value of physical property. This would be sufficient, after meeting interest on funded and unfunded debt, to pay dividends of slightly more than 7 per cent. No such dividends have ever been paid by the company, even during the period prior to 1913, when it was free to raise its fares without Commission approval. In other words, the company is now seeking, if this estimate may be taken as an expression of its desire, to obtain a return which has been consistently beyond its reach in normal times when it was apparently content with existing .fares.

A brief review of the company's record in the past is desirable in considering this question of return. As shown above, while little provision for depreciation has been made, dividends in the aggregate have been meager, and it cannot be said that the failure to care for depreciation has been due to excessive payments to the stockholders. Their return has been considerably less than they were justly entitled to receive. While much of the property is old and below modern standards, it has been maintained in fairly good physical condition. Inspectors of the Commission report that the condition of roadbed and track on the whole is above the average for country lines in the commonwealth. Relations between the company and the communities which it serves have been friendly, and, if the latter have not been satisfied with the service, they at least have made very few complaints to the Commission. Aside from these facts there is nothing in the company's history which calls for comment, except two investments which seem to have been ill-advised. Shortly after operation began, certain real estate and water power rights were sold for $20,000, which was paid in bonds of the Worcester Textile Company which have had little, if any, value. The company also invested about $28,000 in a park at Hoag Lake, which for some time has been abandoned. This latter investment, however, was made at a time when parks were believed to be a desirable adjunct to the street railway business, and when other companies were very generally making similar investments.

Taking all facts into consideration, including the failure to receive an adequate return in the past, 7 per cent on the stock investment could not fairly be regarded as unjust or unreasonable under ordinary circumstances. It may seriously be questioned,

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