Transport. 
 
 Statement by the Trustees 
 
 of the 
 
 Boston Elevated Railway Co. 
 
 In connection with the Estab- 
 lishment of a Ten-cent Fare 
 Effective July 10, 1919 
 
 Get 
 
▼. public Usiuiiy 
 
%*** 
 
 Boston, June 30, 1919. 
 
 Chapter 159, Special Acts of 1918, inaugu- 
 rated an experiment with public control of a 
 street railway. Private management of the 
 Boston Elevated Railway Company under a 
 charter permitting not over a five cent fare 
 under a public policy that imposed upon it 
 subway rentals and street improvements, 
 and with rising cost of supplies and ma- 
 terials to add the finishing touch, had result- 
 ed in failure. 
 
 Three courses were open to the Legisla- 
 ture. It could let the property go to ruin 
 regardless of iaterrupted service and waste- 
 ful cost, or it could embark upon govern- 
 ment ownership and control, or it could try 
 out government control with private owner- 
 ship. The last plan was adopted. The 
 property in effect was leased by the stock- 
 holders to the state for ten years at a fixed 
 
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rental paid in the form of interest on out- 
 standing bonds and dividends on outstand- 
 ing stock. The dividend for the first two 
 years was fixed at five per cent., for the next 
 two years at five and one-half percent., and 
 thereafter at six per cent, on par value of 
 shares. The capital stock on which these 
 dividends are paid comprises common stock 
 amounting at par to $23,879,400, and pre- 
 ferred stock amounting at par to $3,000,000, 
 an aggregate of $26,879,400 which, with 
 premiums amounting to $2,707,000, makes a 
 total investment of $29,586,828. The real 
 dividends therefore are for the first two 
 years 4.74 per cent., for the next two years 
 5.15 per cent., and thereafter 5.55 per cent, 
 on actual cash investment. 
 
 When the state trustees took over the rail- 
 way on July 1, 1918, they found a large 
 number of cars totally unfit for use, much of 
 the remaining rolling stock of obsolete type 
 unclean and unpainted, many miles of track 
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badly worn and some unsafe, power plant in 
 part out of date and repair shops inadequate. 
 The service was approaching the point of 
 collapse. The trustees faced an imperative 
 need of new capital and larger revenue. For 
 capital two million dollars were available 
 from the proceeds of the preferred stock 
 authorized in the act establishing public 
 control. This was immediately applied 
 toward the purchase of two hundred and 
 fifty new cars. Fifty centre entrance trailers 
 have been received and are being placed on 
 various parts of the system. The delivery 
 of the remaining two hundred cars, delayed 
 by war conditions, is assured within the next 
 four months. 
 
 No more capital stock can be issued be- 
 cause by law it must be issued at par and 
 the market price has been continuously be- 
 low par. No more bonds can be lawfully 
 issued because the bonds outstanding equal 
 the outstanding stock and premiums. There 
 
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was one source of additional capital. This 
 was the Cambridge Subway. The Company 
 had been allowed to build and own it as an 
 exception to the well settled and sound 
 policy that forbids private ownership of 
 public highways. Every other subway in 
 Boston has been built and owned by the 
 public. 
 
 The trustees submitted to the legislature 
 a bill to authorize the purchase of this sub- 
 way by the state as agent for the communi- 
 ties which the subway serves. The price 
 named was less than actual cost and far be- 
 low cost of replacement. The subway was 
 to be leased to the company at a rental suf- 
 ficient to meet the interest on the state loan 
 and to provide a sinking fund from which 
 to pay eventually the purchase price of the 
 subway. The bill was passed by the Senate 
 but was rejected by the House of Represen- 
 tatives. This was peculiarly unfortunate for 
 the reason that while the proceeds of the 
 
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subway could only be invested in permanent 
 improvements, such investment would mean 
 large operating economies. To illustrate, a 
 yearly saving of one hundred and twenty 
 thousand dollars would be realized through 
 the installation of rotary converters at 
 power stations. Each additional car would 
 lessen cost of transportation, adequate re- 
 pair shops would lessen cost of maintenance. 
 
 The statute establishing public control im- 
 posed upon the trustees three definite obli- 
 gations. It provides that “the trustees shall 
 within sixty days after their appointment 
 and qualification fix and put in operation 
 rates of fare which in their judgment will 
 produce sufficient income to meet the cost of 
 service.” 
 
 Again it provides that “if on the last day 
 of June, 1919,” it appears that “during the 
 preceding three months the income has been 
 less than the cost of the service,” the trus- 
 
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tees shall within one month thereafter put 
 into effect “a higher grade of fare.” 
 
 It provides further that it shall be the 
 duty of the trustees to maintain the property 
 of the company in good operating condition, 
 and to make “provision for depreciation, 
 obsolescence and rehabilitation.” 
 
 When the railway was turned over to the 
 trustees the deficit for the preceding six 
 months of private management, though no 
 dividends had been paid and little attempt 
 made to maintain the property, was five 
 hundred and seventy thousand dollars. In 
 the first month of public control, namely, 
 in July, during which the five cent fare was 
 continued, the deficit, augmented by divi- 
 dend rental, maintenance charges, higher 
 cost of supplies and materials, wage increase 
 and rental of the Dorchester Tunnel, was 
 seven hundred thousand dollars. The trus- 
 tees introduced a seven cent fare. That 
 fare failed to meet the cost of service by 
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about $600,000 per month. An eight-cent fare 
 was then established which has been in 
 force since December 1, 1918. 
 
 The eight cent fare, after a thorough test, 
 has also failed to meet the cost of service, 
 the net operating cost for the six months 
 ending May 31, 1919, having been $1,519,974 
 in excess of the receipts. 
 
 The statute provides that at the end of 
 the year which closes today accumulated de- 
 ficits shall be met by a payment from the 
 state treasury, the amount so paid to be as- 
 sessed upon the cities and towns in which 
 the railway is located. There is a common 
 notion that this payment of deficits is a 
 contribution by tax payers to car riders. On 
 the contrary the statute makes it a loan to 
 be repaid to these communities when and as 
 fast as receipts shall exceed the cost of serv- 
 ice. The car rider continues to carry the 
 entire burden of the service. 
 
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Under the statute as quoted, the trustees 
 are now required to advance the fare. A 
 study of receipts and expenditures shows 
 that it would l/e unwise if not unlawful to 
 experiment with a nine cent fare. The aver- 
 age cost of carrying a passenger under 
 existing conditions without consideration of 
 the obligation to repay deficits or the o*t- 
 conre of the pending arbitration over a 
 further advance in wages, exceeds nine cents. 
 There is also to be considered the uncertain- 
 ty of the effect of the higher fare upon net 
 revenue owing to loss of passengers. Under 
 the eight cent fare there was in December a 
 loss of nearly 15 per cent, in travel. From 
 the natural growth in business and from re- 
 turning patronage that percentage had grad- 
 ually fallen in May to nine per cent. What 
 the loss will be under a still higher fare no 
 one can predict. Under the circumstances 
 the new fare has been fixed at ten cents. 
 
 Within the year operating expense has 
 
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been reduced wherever it seemed practicable 
 without injury to the service. The number 
 of officials and in several instances the 
 amount of salaries has been reduced. Legal 
 expenses have been substantially lessened 
 and the operating department reorganized. 
 
 Believing that state officials should come 
 in direct touch with the public and their 
 representatives in state, city or town gov- 
 ernment, the trustees have employed no 
 legislative agents or other intermediaries. 
 
 There are certain items in the cost of 
 operation that have special interest : 
 
 Two million four thousand dollars is an- 
 nually reserved for depreciation. For the 
 eleven months ending May 31, 1919, for 
 which complete figures of operating cost are 
 available, the charge amounts to $1,837,000. 
 This reserve is based upon independent ex- 
 pert opinion as to what should be set aside 
 yearly in order to provide for renewals and 
 replacement as necessity arises. It is based 
 
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upon the constant wear and tear in the use 
 of depreciable property. The plight in 
 which street railway companies are found 
 here and elsewhere is largely due to the 
 neglect of this operating expense for which 
 the statute properly requires provision. 
 Applied to the individual fare since De- 
 cember i, 1918, the increased allowance for 
 depreciation amounts to .497 cents per 
 passenger. 
 
 In the eleven months $1,243,2 22 have been 
 expended in rental dividends to stockholders 
 which annually aggregate $1,403,970 as the 
 fixed return upon their investment. This 
 applied to individual fare amounts to .416 
 cents per passenger during the past six 
 months. 
 
 While the legal title to this propertv is 
 vested in the stockholders, the complete con- 
 trol has passed to public trustees. Stock- 
 holders have no voice in the management, 
 and no control over service receipts or ex- 
 
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penditures. The trustees serve no private 
 interests. 
 
 One million three hundred sixty-five thou- 
 sand six hundred twenty-six dollars have 
 been paid to the City of Boston in subway 
 rentals that now represent an annual charge 
 of $1,491,560, the amount having been in- 
 creased this year by $473,000 upon the open- 
 ing of the Dorchester tunnel. These rentals 
 in the opinion of the trustees are unjust to 
 the car rider. The additional amount as- 
 sumed during the period of the eight cent 
 fare as applied to the individual fare has 
 cost .183 cents per passenger. A bill was 
 introduced in the Legislature to relieve them 
 from this burden during public control of 
 the railway but failed of enactment. 
 
 Twelve million two hundred seventy-two 
 thousand one hundred eighty-five dollars 
 have been spent during the eleven 
 months for wages which thus con- 
 stitute forty-five per cent, of the total 
 
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of fixed charges and operating ex- 
 penses. The total wage increase for the 
 period was $3,996,883, of which $2,750,000 
 was due to the award of the War Labor 
 Board, the remainder due to the increase in 
 going rates of craft organizations and to ad- 
 ditional service and higher standard of main- 
 tenance. The increase in wages as applied 
 to the individual fare amounted to 1.751 
 cents per passenger, in the six months 
 period ending May 31st. Under present 
 conditions the trustees declined to grant the 
 recent demand of employes for still higher 
 wages. In consequence that demand is now 
 under consideration by the War Labor 
 Board before which final arguments were 
 made last Wednesday in Washington. 
 
 Two million three hundred twelve thou- 
 sand seven hundred twenty-eight dollars 
 have been expended for maintenance and re- 
 pairs of track and repaving of streets for no 
 part of which any provision is made in the re- 
 
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serve for depreciation. This item divides into 
 expenditures necessary to insure the safe op- 
 eration of cars, expenditures required by the 
 relocation of tracks to permit the use of new 
 cars and expenditures incident to the street 
 improvements which are ordered by city and 
 town governments. The trustees are 
 obliged to accompany such street improve- 
 ments with reconstruction of tracks that in 
 certain instances would not otherwise be re- 
 placed for some years to come. The amount 
 expended for this latter work during the 
 eleven months was $511,000. 
 
 Increased cost from rising prices of sup- 
 plies and materials has been felt most in the 
 matter of coal, which, during the period 
 named, has advanced in price to such an 
 extent as to make an additional outlay of 
 $405,000 and when applied to the individual 
 fare, amounted to .126 cents per passenger 
 during the six months ending May 31st. 
 
 To meet the deficit which has been cre- 
 
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ated by reason of the added cost of the 
 service, the trustees have established a ten 
 
 cent fare to become effective on the ioth 
 day of July. 
 
 Public interest in the service is as keen as 
 it is in the fare. To imagine that a new 
 management, hampered by the depreciated 
 character of the railway, unprecedented war 
 conditions, and the lack of capital and in- 
 come, could promptly bring the impaired 
 service to a proper standing, gauge the cost 
 and fix a fare commensurate and reasonably 
 cheap, is to imagine what common sense for- 
 bids. Realizing what their task meant, the 
 trustees laid out a program which will cover 
 a term of five years. A substantial begin- 
 ning has been made toward the consumma- 
 tion of that program bringing with it new 
 cars, new track, better trains in subways, 
 larger accommodations on surface lines, 
 cleanliness and ventilation of cars. 
 
 What of the future? Without being un- 
 
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duly optimistic the trustees believe that the 
 cost of the service measured by fares, is 
 reaching its highest level ; that gradual im- 
 provement in service with gradual reduc- 
 tion in fares is to be expected. In brief, they 
 are confident that the goal which they have 
 had in view — a service of high standard at 
 lowest possible cost — is not unattainable. 
 The time within which this goal can be 
 reached will depend upon the promptness 
 with which the deficit of the past year is 
 made good and upon the relief that the Leg- 
 islature may give through just and wise 
 legislation. 
 
 James F. Jackson, Chairman , 
 Winthrop Coffin, 
 
 Stanley R. Miller, 
 
 Sam'l L. Powers, 
 
 John F. Stevens, 
 
 Trustees. 
 
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