improvements for rendering social services-services for which no charge is made to users on the basis of service used, such as public schools-are the cause of debts for which taxpayers' property is directly liable. All classes of public improvement for rendering industrial services-services for which a charge is made to users on the basis of service used-are the cause of debts for which taxpayers' property is indirectly liable. If all of the latter class of indebtedness is incurred. under conditions that prohibit it from becoming a charge upon taxpayers' property under any conditions, so much of the debt limit margin as has heretofore been absorbed for the purpose of acquiring industrial public service utilities will be freed from this incumbrance and can be used for the greater development of improvements for purely social services. This will be a gain for the general welfare, and a gain for taxpayers.

There is but one sound way in which this advantage can be gained. It is by making all debts incurred for acquiring the ownership and operation of public service utilities a users' debt, instead of a taxpayers' debt. When this is done, constitutional provisions or statutory requirements devised for the protection of taxpayers by placing a limit on municipal indebtedness will have no effect upon the indebtedness incurred. Users' debts cannot be included in statements of taxpayers' debts made for the purpose of determining the debt-incurring capacity of any municipality.

We regret that Controller Coler has not seen his way clear-we think he will yet do so-to accept this principle as the true one, to be applied in all cases of debts incurred for users' benefits, for the purpose of rendering industrial public service. Had he done so he would have had no occasion to talk about securing changes in the state constitution, or, worse still, to suggest a commission as a means of evading the law, as he does in the article by him published in our issue of August 25, 1900, under the title of "A Plan for Acquiring Public Service Utilities Without Mortgaging Taxpayers' Property."

Evasion by commission is not a new device, and is unworthy of indorsement by so able a financier and thinker as Controller Coler. It was the basis of the street railroad deal that Governor Pingree of Michigan undertook to consummate last year, which was declared unconstitutional by the Supreme Court of that state. It is brought forward again by those who are seeking to promote a municipal telephone system in Detroit, reference to which will be found in our editorial, "Detroit Held by the Throat Again." It has been proposed in many waterworks, electric lighting and similar schemes. Those who are more intent upon carrying out their theories for socializing all public service utilities than they are to secure the enactment of correct laws or to promote respect for law by respecting the law, are ready to use commissions for the purpose of evading the law. This is bad policy, be

cause it is wrong to evade laws, and because the object sought can be gained in a better way.

PUBLIC SERVICE REGULATION IN MASSACHUSETTS.

Through its Gas and Electric Lighting Commission Massachusetts has instituted and exercised the best system of regulation for public service industries to be found in this country. The defects in this system of regulation are in the legislation giving it direction and power, not in the ability and devotion to the public welfare with which the duties of the commission have been performed.

The policy of the state is wise in providing that publicly owned and operated industries shall not compete with private enterprise. It requires the public to buy the property of the private corporation whenever the public decides to own and operate the industry for private account. But it does not, with equal wisdom, prevent private companies from competing with each other. This defect has been used as an opening through which competing corporations have duplicated service plants and affected consolidations in the usual way, with an unnecessary investment and an excessive capitalization as a final result.

The law gives the commission authority to fix a reasonable price for services rendered by private corporations, but does not define any standard by means of which a reasonable price may be determined. All

corporations and all municipal works are required to keep accounts and make reports in the form required by the commission. One step of improvement should be made here. The law should define what factors shall be included as elements in all statements of cost. These factors should be identical for municipal and for private plants. The commission should be permitted no discretion as to what elements constitute cost, but it should be their duty to see that all items of cost are properly charged. Having legally defined cost, the law should require all public services sold by municipalities to private users to be sold at not less than cost. The cost for private corporations being determined in the same way as for municipal plants, the price should be determined at cost, plus a reasonable profit. A reasonable profit may be measured at twice the rate of interest paid on its bonded debt by the municipality in which the service is rendered.

If private management is more efficient than public management, private cost, plus a reasonable profit, will not exceed cost under public management. When this result is demonstrated there will be no reason for wanting municipal ownership.

INEFFICIENT PUBLIC MANAGEMENT.

The inflexibility of legal requirements for the management of public service industries is a very heavy handicap on public as compared with private management. Many times public officers are blamed for not obtaining better results when the real fault lies in some act of the Legislature or town council which prevents them from managing their departments in the most effective way. The following report of a waterworks muddle comes from Glenville, Ohio:

Waterworks matters in Glenville are in a worse muddle than ever before. An ordinance was introduced in the village council to abolish the board of waterworks trustees and to transfer their duties to the water committee of the village council. The ordinance was approved by the majority of the members of the council.

The plan was thwarted, however, by Village Solicitor Clyde M. White, who gave the council a legal opinion to the effect that the waterworks board could not be abolished. The law says that there must be a board of waterworks trustees in places where there is a waterworks system. The question was raised as to whether a system of pipes, such as Glenville has, constitutes a waterworks system, or whether there must be a pumping station. Solicitor White held that Glenville had a waterworks system and that the waterworks trustees could not be ousted from office.