they assume that the water which the city uses approximates in value the losses of taxes due to the substitution of an industry owned by the city for a privately owned industry. If a city adopts the policy of operating its waterworks on the basis of earning interest on its investments, it should determine in advance what is meant by such earning-whether it is to be on a basis that requires allowances for taxation, depreciation, and sinking funds on the one side and for cost of water consumed on the other, or whether some other possible combination of these costs and allowances is to be used.

basis.

A city may adopt the policy of furnishing the water to its citizens The cost at cost. But what is meant by this phrase "at cost"? Does that term include any of the allowances for interest on investments, taxes, and depreciation, or not? This is something for cities to determine, for they should not allow the business to drift into any of the possible methods of management without conscious knowledge of what the actual basis of management is.

The city may, from considerations of public policy, conduct Public policy. its waterworks and other industries so as to furnish public utilities to its citizens at less than cost. In that case it should determine the basis on which that cost is determined, so as to know what the taxpayers are contributing, directly or indirectly, by reason of the establishment of industries, in meeting interest on their indebtedness, and in paying off through sinking funds or otherwise the original costs of industrial plants.

In this connection, attention is called to the fact that in a few states the statutes, in establishing limits for municipal borrowing, except the debts of waterworks. This exceptional treatment of the debts of waterworks is based upon the legislative policy of having this class of municipal industries so managed as to pay all operating expenses, including interest, and provide for the amortization of loans from their income. On this basis of management their debts are properly exempted from consideration in legislation limiting the borrowing power of cities, since the interest and principal of such debts are fully met from industrial income,

The debts

of water

works.

Importance of a definite policy.

Overcharges by the company.

and thus do not rest as a burden upon the taxpayer or constitute an economic lien upon their property. With this limitation of indebtedness, it is incumbent upon the city officials not only so to manage the waterworks as to realize these expected results, but also to show by proper accounting methods that such managerial results are being attained.

The Bureau of the Census does not concern itself with determining what is the true policy on which cities should manage their waterworks and other industries. It wishes, however, to emphasize the fact that methods of management should rest on some policy, directed by sound accounting control, which will present to the public all detailed information needed to show the results of management in conformity with the policy adopted.

209. A Mayor's Fight for Good Electric Light Service

The Hon. James M. Head, former Mayor of Nashville, Tennessee, in an address before the annual conference of the National Municipal League in 1906, gave an interesting account of his struggle to free the city from the control of an electric lighting corporation that was giving poor service:

I found the electric light company with a contract with the city for ten years, about five years of which had expired. They supplied the city with lights at eighty-five dollars per arc light per annum. They were charging the people of the city eighteen cents per kilowatt for electricity, both of which charges I regarded as extortionate. I went to the company and asked for a readjustment, and the cancellation of their contract with the city. I was laughed at. No consideration was given to me, and I was again up against a serious proposition. Fortunately, however, in looking back through the acts of the Legislature, I found authority for the city to issue one hundred and fifty thousand dollars of bonds, to buy or build an electric light plant to light the streets, but with no power to sell electricity to private consumers - simply to light the public buildings and streets of the city.

The Legislature assembled in 1901, and I concluded that I

carried to the

would ask the Legislature to amend the city charter and give the The contest city the power to sell electric light, heat and power to private con- legislature. sumers. It was a matter in which no one was concerned but the people of Nashville. The City Council unanimously endorsed it. The people of Nashville were practically unanimous for it, all except those interested in public service corporations, and I went before the Legislature thinking I would have no trouble. I had the fight of my life. Every corporate influence in Tennessee was represented before that Legislature with its personal, financial and other influences to defeat that bill and prevent the city of Nashville from acquiring that little right to sell electric light, heat and power to private consumers. I spent nearly my entire time during the session of the Legislature trying to secure that right for the city.

Finally I succeeded by a very close vote. After acquiring that The company's power, I again endeavored to readjust the contract which the charges private company had with the city. They refused, and I im- reduced. mediately undertook the building of an electric light plant. By the time the foundations of that electric light plant were laid, the private company came forward and voluntarily (?) reduced the price of electricity to private consumers from eighteen cents to twelve cents per kilowatt. Before the plant was completed, the private company was making every contract it possibly could with private consumers for a term of years at five and six cents per kilowatt. When the plant was completed, there were about three years of their contract with the city unexpired.

I went to the representatives of the private company and told them that the city was now ready to engage in the electric light business, and wanted to know what they would do. At first nothing. But finally they concluded that the contract with the city did not pay them anything anyway; that it was an expense to them, and that they had a demand for all the light and power that their plant could furnish, and if I wanted to I could take over the lighting of the streets and public buildings of the city. So on the first of September, 1902, the city took over the lighting of

The city

undertakes

its own

lighting.

its public streets. For the year prior to that, the city had paid $49,270 for lighting its streets and public buildings.

For the year after the city took charge of it we furnished to the city more than double the amount of light that we had previously had at a cost of $33,500. The cost of producing electricity, including operating expenses, interest upon bonds, repairs, improvements and everything except an estimate for the depreciation of the plant, was the first year a little over two and one-half cents per kilowatt, and it is being produced to-day at about 2.10 cents per kilowatt.

When the private company agreed for the city to take over the lighting of its streets and public buildings, I agreed with them as Mayor during the remainder of my term of office that the city would not engage in any private business, provided they continued to furnish electricity at the prices they were then charging, and I understand that since my retirement from office, that agreement has been kept, and the lighting company is making more money to-day than it did when it charged eighteen cents. The city is lighting its streets and public buildings and is not engaging in private work. But if the city had never turned a wheel of that plant costing $150,000, it would more than have paid for itself in three years in the reduction that it obtained for the private consumers of the city in the price of electricity. It could afford to keep that plant standing idle, and never turn a wheel, and it would save to the people the interest upon the investment ten times over every year.

210. Work of a Tenement House Department

The first report of the Tenement House Department of New York City contains this general summary of a gigantic task accomplished in less than two years (1902-1903):

On January 1, 1902, a new department of the city government known as the Tenement House Department was created. Since that time all the tenement houses in New York have been examined

and their condition ascertained. Tenement conditions in many instances have been found to be so bad as to be indescribable in print; vile privies and vile sinks; foul cellars full of rubbish, in many cases of garbage and decomposing fecal matter; dilapidated and dangerous stairs; plumbing pipes containing large holes emitting sewer gas throughout the houses; rooms so dark that one cannot see the people in them; cellars occupied as sleeping places; dangerous bakeries without proper protection in case of fire; pigs, goats, horses and other animals kept in cellars; dangerous old fire traps without fire escapes; disease-breeding rags and junk stored in tenement houses; halls kept dark at night, endangering the lives and safety of the occupants; buildings without adequate water supply the list might be added to almost indefinitely.

before the

The cleansing of the Augean stables was a small task compared The task to the cleansing of New York's 82,000 tenement houses, occupied department by nearly three millions of people, representing every nationality and every degree in the social scale. The task that confronted the department, was not, however, limited to this. Without organization, without employees, with all its problems before it, it was on the very day that it came into existence confronted with an organized and vigorous attack in the Legislature upon the fundamental principles of the law for whose enforcement it was created. Without previous records, with almost no information in regard to the condition of the existing tenement houses, it was called upon to carry out an important and far-reaching scheme for their improvement, involving the structural alteration of over 40,000 buildings.

force.

In the period under consideration in this report a new branch The developof the city government has been organized, its machinery created ment of a and a force of about 400 employees trained, disciplined and educated; far-reaching and important advances in legislation have been secured as a result of the department's action, and radical and vicious attempts to break down the tenement laws defeated. Living accommodations for 16,768 families, or 83,840 persons,