MICHIGAN ROADS AND FORESTS. 



13 



DANGERS TO PUBLIC FINANCE. 



(From the Michigan Investor.) 

 The Constitutional Convention has definitely 

 defeated the proposal for a public utilities 

 commission for Michigan. This proposal 

 emanated from those who, believing that cer- 

 tain public utilities in Michigan are of greater 

 scope than they used to be, that their activities 

 are no longer confined to the area of a single 

 municipality, and that, consequently, their rela- 

 tions to the public shall be determined by the 

 state rather than by municipal bodies, sug- 

 gested that the Legislature should be author- 

 ized to establish a public service commission 

 which would have charge of all these utilities, 

 regulating their rates and the quality of their 

 service. 



In its first stage this proposal was manda- 

 tory, and provided for the appointment of a 

 commission whose members should be paid a 

 salary equivalent to that paid judges of the 

 Supreme Court. By way 'of compromise, the 

 mandatory feaiure of the proposal was strick- 

 en out and a permissory form of statement 

 substituted. The opponents of the measure, 

 who are largely those who professed to believe 

 that its operation would result in an invasion 

 of the home rule principle, seem to have been 

 in the majority, and even the permissory form 

 of the proposal was rejected." 



It is not quite clear that, even under the 

 present constitution, the Legislature might not 

 erect a public service rnmmission, and give 

 it the powers which it was proposed should be 

 given it by constitutional enactment. So that, 

 even were the revised constitution to be 

 passed, or the present one continued in force, 

 it is still possible for the Legislature to auth- 

 orize such a commission. 



With the rejection of the public service com- 

 mission proposal, it is possible to forecast 

 definitely what the new constitution will con- 

 tain with reference to invested capital in this 

 state. Its most striking and radical change 

 from the present instrument is the provision 

 for municipal home rule, which permits cities 

 and villages to frame their own charters, sub- 

 ject to the limitations of certain general laws 

 to be passed by the Legislature. Of course, 

 the amount of power which shall be deposited 

 with cities and villages, under this provision 

 depends very largely upon the general laws 

 which shall be framed by the Legislature in 

 the event of the adoption of the constitution. 

 But, having gone so far as to concede the 

 right to frame and amend municipal charters, 

 it is not likely that the people, as represented 

 by the Legislature, will be in the mood to 

 limit seriously the use of the power conveyed. 

 Under such an organization of cities and 

 villages, debt-making, subject to a general leg- 

 islative limitation, will remain in the hands of 

 the people, without legislative sanction being 

 necessary for the specific cases. 



Coupling this amendment with the provision 

 for municipal ownership of public utilities, it 

 becomes possible to understand the extent to 

 which the people, swayed by the force of rea- 

 sons of temporary importance, may break into 

 long time debt-making, by which we mean the 

 i-Miance of certificates of indebtedness whose 

 term will long survive the temporary neces- 

 sity for their making and the undertaking 

 which is purchased with their proceeds. The 

 municipal ownership provision limits the char- 

 acter of the security which shall be offered for 

 debentures issued for public service enterprises 

 to the property of the enterprise itself. It is 

 true that, as the provision now s,taads, where 

 the debt of the municipality is Iffss^than one 

 per cent of the assessed valuation, the differ- 

 ence between the actual debt and the limit of 

 one per cent may be based upon the faith and 

 credit of the municipality itself; but. as a 

 matter of fact, there is no city or village in 

 Michigan capable of undertaking: any serious 

 public enterprise which is not already in debt 

 to an extent greater than one prr cent of its 

 ssed valuation. Therefore, it is fair to as- 

 sume that in all the cases possible under the 

 operation of such a section, the debt issued to 

 provide funds for the public undertakings will 



have to be secured by the property of the 

 undertaking itself. 



We couple the home rule provision with the 

 municipal ownership provision to- show how it 

 will be readily possible for communities to be 

 "worked"' by persons ambitious to exploit 

 their ideas, by others desiring to hold jobs 

 in the proposed public undertaking, and by 

 those who have materials and supplies to sell, 

 which enter into the making up of such enter- 

 prises. So far from being a safeguard, the 

 provision that the debt shall be secured by 

 the undertaking itself is rather an incentive to 

 going into debt. The average citizen is ex- 

 ceedingly apt to be carried away by the state- 

 ment that whether the utility is a profitable 

 one or not, the municipality itself will not be 

 a loser, but that the bondholders take the 

 chance of loss themselves when they invest 

 in the undertaking and in the event of its 

 failure will be able to take it over under their 

 mortgage, together with a franchise liberally 

 framed and permitting of its operation. 



But the fact remains that such securities as 

 it is proposed to organize and float will par- 

 take very much of the character of confederate 

 currency. They will have the semblance of 

 security without possessing its true basis. Let 

 us imagine the form of bond which would be 

 issued for such purposes. Its designer would 

 certainly make exceedingly prominent the 

 name of the city for whose utility it is being 

 issued. It would contain the usual provisions 

 as to a declaration of debt. It would bear the 

 seal of the municipality and, undoubtedly, the 

 signatures of municipal officers. At some 

 place in the body of its text would be con- 

 tained the statement that it is not secured by 

 the faith and credit of the municipality whose 

 name and the signatures of whose public 

 officers it bears. 



The issuance of such a security puts a prem- 

 ium on fraud by enabling the enterprising 

 salesman to offer to none too careful investors 

 a security which will pass current, nine times 

 out of ten, as the direct obligation of the 

 municipality, whereas, as a matter of fact, it 

 is no such obligation. Anyone familiar with 

 the methods of stock and bond flotation, 

 where active salesmen have been employed to 

 sell the issues of industrial, telephone and 

 other enterprises to the last consumer, namely 

 the small investor himself, can readily see 

 with what success an active canvass for the 

 sale of such municipal issues as we have de- 

 scribed would be attended. If such paper were 

 sold to careless buyers, as much of it undoubt- 

 edly would be, the first thing we knew would 

 be that the entire field of municipal securities 

 would be discredited. The Very fact that such 

 issues were being sold would put the careful 

 buyer on his notice and, to a certain extent, 

 discredit even the issues based upon the faith 

 and credit of the municipalities. 



Taking another view of the subject, it 'is 

 notoriously easy to start public clamor for im- 

 provement. Let us assume a citv or village 

 which is being served satisfactorily by a pri- 

 vate electric lighting company, or a private 

 gas company. It requires a very small amount 

 of promotive effort on the part of a good, 

 active salesman to stir up the desire for com- 

 petition, under municipal ownership, with the 

 existing plant, and whatever question there 

 might be about the city being able to sell its 

 so-called "securities," based upon its utility 

 enterprise, to the careful buyers who scrutin- 

 ize a security carefully, there would be abso- 

 lutely no difficulty in finding scores of con- 

 tractors willing, for a sufficiently advanced 

 price, to take the pay in the bonds themselves. 

 It would be up to them, therefore, to employ 

 a smooth salesman, of the industrial "security" 

 type, to peddle them off at such a discount as 

 would make them attractive. 



These two provisions must be read in parity, 

 with the further provision providing for the 

 initiation of amendments to the constitution 

 by means of public petition. As the Investor 

 has already stated, the doctrine of the initia- 

 tive puts it within the power of a minority 

 just large enough to start trouble and not 

 big enough to effect it, to begin the discussion 



of changes which may never come about, but 

 the discussion of which cannot fail to be harm- 

 ful and disturbing. Taking the three propos- 

 als together, we do not see that they make for 

 either safety in public finance, conservatism 

 in expenditure, or the good repute of munici- 

 pal securities. If they come to be adopted 

 they are almost foredoomed to repeal later on, 

 but only after the municipalities of the state 

 have had as sorry an experience with such 

 public finance as the state itself had with its 

 internal improvements seventy years ago. 



ir 



* 



GLASS TELEGRAPH POLES. 



A stock company has been organized and 

 nas been built at Grossalmerode, a town near 

 Cassel, Germany. The glass mass of which 

 the poles are made is strengthened by inter- 

 .acing and intertwining with strong wire 

 threads. 



One of the principal advantages of thes 

 poles would be their use in tropical countrie 

 where wooden poles are soon destroyed by 

 the ravages of insects and where climatical 

 influences are ruinous to woo*. ''^TThe selling 

 price of the poles has not been fixed yet, but 

 the company is willing to accept twenty-five 

 marks ($6) for a pole of the length of seven 

 meters, about twenty-thAe f^et. The imperial 

 post department, which has control of the tele- 

 graph and telephone lines in Germany, has 

 ordered the use of these glass, poles on one 

 of their tracts. 



CLASSIFIED ADVERTISING. 

 Advertising in the classified col- 

 umns of the "State Review" 

 will be inserted at the rate of 7 

 cents per agate line. 



Help Wanted. 



BOOKKEEPER and general office work; sales- 

 man for gent's furnishing. 79 Home Bank, De- 

 troit. 



COLLECTOR Experienced collector, with best 

 of references, wanted at once; good money for 

 right man. Business Men's Credit Exchange, 

 325 Hammond Bldg., Detroit. 



YOUNG MAN, good habits and scholar, position 

 to keep cost_and material in sheet metal works. 

 W. J. Burton Co., 164 Larned st. west, Detroit. 



Business Opportunities. 



BUSINESS OPPORTUNITY Men of business 

 interested in a new field for making money will 

 find in our proposition what they are seeking. 

 We have a new plan in the Mail Order line that 

 will please those seeking a good investment 

 with large profjft. A fortune for the right 

 person. The F. H. Alden Co., 168 E. Fourth 

 St., Cincinnati, O. 



FOR SALE or will exchange for good real es- 

 tate, furniture and undertaking business in good 

 town in Gratiot county, doing good business ; 

 will inventory about $3,000. Montney & Jones, 

 49 Hodges Bldg., Detroit. 



IF YOU WANT a business that will pay several 

 thousand dollars annually, start a mail order 

 business; we furnish everything necessary; only 

 few dollars required. Catalog and particulars 

 free. Milburn-Hicks, 708 Pontiac Bldg., Chi- 

 cago. 111. 



Real Estate. 



FARM FOR SALL -On account of old age, 

 365 acres, part or all of it, about 100 acrf 

 in cultivation, well located; three miles fr 

 county seat, l</ 2 miles from smaller ' 

 with canning factory, railroad cross!' 

 corner of farm; a young orchar ' 

 good, climate fine; price reasor 

 phone in house. P. T. JACO r ', 



Tenn., R. F. D. No. 4. 



