The Next Step in Municipal Reform

THE first step in municipal reform, if step it may be called, is the effort to establish the merit system in the civil service. If achievement in this field is yet but tentative, we have finally reached clearness of vision and unity of purpose. The attempt to take this step has disclosed what must needs be the next. It now appears, as never before, that the spoils domain extends far beyond the civil service. Indeed, it is at last clear that boss control of the civil service is but a means to the general employment of the public authority for private ends. The political bosses, with their retainers quartered on the public service, exercise the vast powers of government in the service of private interests.

Special privilege in the modern city usually takes the impersonal form of the public service corporation. It is now clear that this conscienceless creation is at once the main cause of municipal misrule and the chief obstacle to municipal reform. The reform movement everywhere beats against this barrier, — as yet almost in vain. The question of the hour in municipal politics is whether the public service corporation shall be controlled or destroyed. The further progress of reform requires the one or the other. Because of its presence and its power, the reform movement has thus far gained but standing room for the real contest for good government which is yet to come.

The public service corporation is a combination of private citizens organized to perform services of a public character. It is a creation of law, and only the public need can justify its existence. Whether a given public service shall be performed by the municipality or by a public service corporation is solely a question of public expediency. It is to be remembered, also, that the tendency of the modern city is to enlarge its functions. It has already “ taken over ” the public enterprises of general utility without profitearning possibilities, and some having such possibilities. It still, as a rule, commits to the public service corporation those public enterprises which require large capital and numerous employees, and render special or unequal services to individual users who pay rates. Thus, transportation, gas, electricity, and the telephone are intrusted to public service corporations. With the multiplication and growth of cities, and the enormous increase in the demand for public utilities, the tendency to the municipalization of public enterprises has but checked the rapid development of these corporations. They have from year to year multiplied in number and gained in power. They to-day overshadow the government of every American city.

We have mistakenly relied on competition to regulate the public service corporation. We have granted licenses, commonly called franchises, with reckless prodigality to all comers, assuming that competition among them would secure an adequate service at just rates. This reliance on competition, in a field to which it is not adapted, has resulted in wasteful duplication of plants and the corruption of municipal government.

Public enterprises, whether conducted by the municipality or committed to the public service corporation, exist to render public services. Streets are public highways. They exist for the people’s use. Nothing should be placed in them unless required to facilitate their use by or for the people. Only the general need of water, gas, electricity, and transportation justifies the placing of pipes and wires and tracks in the streets. The public need is the sole test and measure of such occupation. To look upon the streets as a source of private gain or even municipal revenue, except as incidents of their public use, is to disregard their public character. Adequate service at the lowest practicable rates, not gain or revenue, is the test. The question is, not how much the public service corporation may gain, but what can be saved to the people by its employment.

The test of public convenience limits the means to be employed to the requirements of the people. Enough pipes and wires and tracks to supply the required services is the limit. No more should be permitted in the streets. More than enough encumbers the streets, causes inconvenience, results in waste. By no possibility can the duplication of street railways or telephone plants, for example, meet the test of public convenience. Neither can duplication, with its waste of capital and increased expense of operation, permanently result in the lowest rates to users. The waste of duplication is fatal alike to cheapness and to profit.

We realize at last that public enterprises are natural monopolies, or that their treatment as monopolies is necessary to quality and cheapness of service. The national postal service tolerates no competition. The municipal water plant occupies the entire field to the exclusion of rivals. Everywhere municipalization leads directly to the destruction of private competition, and the substitution of public monopoly. Municipal ownership means perpetual monopoly, low interest on capital, exemption from taxation. These great advantages, other things being equal, mean better service and lower rates. The public service corporation, if employed to render public service of which quality and cheapness are the tests, should be placed as nearly as practicable in the shoes of the municipality. The blackmail exacted, the competition permitted, the taxes levied, the higher interest made necessary, the uncertainty of tenure, impair the service and increase the rates.

Thus it appears that the public service corporation cannot, under present conditions, render good service at just rates. But this is by no means the worst. The public service corporation, possessed of franchises of enormous value which it has obtained as favors, is a constant menace to public order. It always wants new grants for extensions and renewals. The greater its success, the more is it subject to attack by actual or sham competitors. The larger its revenues, the greater are its means of offense and defense. The extent of its wants and of its possessions is the measure of its influence with those having power to satisfy and conserve them. Its every success adds to its needs, and to its power to control the municipal administration.

Democracy assumes that those possessed of the elective franchise shall be equally disinterested, and alike devoted to the common weal. Municipal administration is difficult enough at best. The creation within the body of the voters of powerful groups, having special and related interests in conflict with the general welfare, adds enormously to its difficulties. Yet just this is what the employment of the uncontrolled public service corporation involves. In every American city, its able and highly paid agents, in secret alliance with the political bosses of both parties, wage sham contests with public officials temporarily invested with power by its allies. It would be impossible to devise a more effective means with which to pervert representative government.

The public service corporation always knows just what it wants. Its management is persistently directed to achieve its end. It neither hesitates nor wavers in pursuit of that end. The vision of the political bosses is alike clear. The needs of “ the organization,” the wants of “ the boys,” the “ rake-off ” and sense of power for themselves, fill to the brim the cup of their ambition. Their persistence is comparable only to a force of nature. The city itself presents a striking contrast to these definite and persistent forces. It is without clear purpose. Sufficient unto each successive day is its own evil. Transient officials, nominal representatives of the people, but in fact the puppets of party bosses, come and go. There is neither a definite municipal programme nor persistence in pursuit of any public policy. The city lives from hand to mouth. It is the prey of special interests, the victim of “ politics.”

The people, in their unequal and losing contest with artificial groups of citizens having special interests, have at many points given unnecessary odds to special privilege. This is notably true of their treatment of municipal franchises as contracts whose obligation may not be impaired. By this means, every grant to a public service corporation, however obtained and to whatever extent prejudicial to public interests, at once becomes a vested right. No vote by a city council refusing a grant to the corporation concludes anything. Every vote in its favor fixes its rights for a term of years. Its defeats are but temporary checks ; its victories are permanent conquests. Thus, in most American cities, while the refusal of a grant to a public service corporation settles nothing, every majority in its favor, though secured by bribery, creates a contract, perhaps continuing for generations, whose obligation may not be impaired. It is by this means that outrageous public wrongs become invulnerable “ vested rights.” This is a gross perversion of a constitutional doctrine which should be invoked only to protect real contracts based on adequate consideration. The power of any legislative body to limit the legislative discretion of its successors ought not to be tolerated by a self-governing people. Resort to it to protect gifts of enormous value, however induced, to public service corporations is a gross abuse. If wholly abandoned, no legitimate interest would suffer. In fact, without it our almost superstitious regard for vested rights would still protect many ill-gotten grants.

The public service corporation does not always, or even generally, employ direct bribery to gain its ends. This is but a last ditch into which it is sometimes driven by the present conditions of its life. To the extent that it obtains gifts from the municipality it is a predatory beast of prey. Gifts of the people’s rights can be obtained only from their agents by improper means. It matters little whether such means take the form of “ campaign contributions ” to party bosses, corrupt services at the primaries and the polls, or direct bribery of public servants. Whatever the means by which the public administration is corrupted and diverted, those who employ them, and those who thereby profit, strike at the very foundations of public order. It is hollow mockery for them to invoke the doctrine of vested rights. No one who profits from public corruption, who subtracts anything from the rights of the whole people without just return, should be heard to talk of rights. It is quite time to emphasize the wide distinction between vested private rights and revocable public grants.

The uncontrolled public service corporation is mainly chargeable with the failures of our municipal governments. We have recklessly multiplied these artificial bodies. We have thus created powerful groups, having adverse special interests, within the whole body of voters, who should possess equal rights. We have turned these artificial creations loose to prey upon the community practically without let or hindrance. We have left their regulation and control to a competition that was impossible or easily neutralized. We have given them the motive to corrupt the public administration, and placed within their grasp the means to that end. The results are a widespread invasion of public rights, inestimable pecuniary loss to the people, the corruption of public administration, the general contagion due to the lowering of moral standards and the multiplication of tainted private fortunes.

The remedy for these evils is to be sought in the efficient control of the public service corporation ; or, this failing, in the public ownership and operation of the means for rendering public services. This implies that the public service corporation must be controlled or destroyed. Is its proper control possible ? Time alone can answer this inquiry. The difficulties of public ownership and operation are such that something short of it must be sought. The attempt should first be made to subject the public service corporation to an adequate public control. Those interested in its continued employment to render public services will, if wise, meet the people halfway in devising means for its control. Of one thing they may rest assured: existing conditions have already become intolerable. The public service corporation cannot much longer be permitted to block the growing demand for municipal reform. It must submit to proper public control, or it must go to the wall.

The reliance upon competition as a means for controlling the public service corporation should be at once and finally abandoned. Its failure is complete. This recognized, the way is cleared for some proper public concessions. To the corporation, while its employment is continued, should be granted the monopoly of its field. This will often save the cost of duplication of plant and the waste of double operation. What is of even greater moment, it will destroy the avocation of the “ sandbagger ” both in and out of the city council. The right of the corporation to just compensation for its tangible property at the expiration of its franchise, if not renewed, should also be conceded. Whether the city grants the franchise to another, or “ takes over ” the enterprise, the outgoing corporation should receive the full value of its property for continued use. Then, too, the tangible property of the corporation should be taxed precisely the same as other property is taxed. Whatever else is exacted should be by way of compensation for the public rights granted and enjoyed.

These concessions made, the corporation is in position to yield the proper demands of the public. First among these is the principle that no public grant shall be made without full compensation in some or all of its various forms. The corporation should be permitted a fair return on its actual investment, and something, if earned, for its special skill in private management. The possible earnings beyond this should go into improved service, rental for the public facilities enjoyed, and reduction of rates. Do away with grants without full compensation, and the motive for bribery disappears. Remove the possibility of excessive profits, and the desire to render inadequate service and to evade proper regulation vanishes. If assured the best value for its tangible and sole property when not permitted to continue, the corporation may safely accept short or even indefinite grants, and at all times make needed extensions and improvements. The end to be sought is adequate public service at just rates. The means to that end is the employment of the public service corporation upon terms that shall exclude the element of special privilege, and place the relation on the plane of honest dealing.

Enough has been said, without further detail, to indicate that there is still hope for the public service corporation. The pass to which, uncontrolled, it has brought municipal government in America is largely, if not wholly due to a bad system, or rather, lack of system. Under proper public control it may justify its continued existence, and render unnecessary a resort to public ownership and operation.

The further trial of the public service corporation under improved conditions is by no means our last resort. If the experiment succeeds, well and good. If it fails, the municipalization of public utilities must proceed to the final exclusion of the public service corporation. In some way municipal government must be redeemed. If decent municipal administration and the public service corporation cannot exist together, the latter must go, at whatever cost.

It is, however, widely urged that public ownership and operation cannot be thought of, because of the large additions it would make to the resources of the spoilsmen. It would be idle to deny that this is a serious objection. However, it is safe to say that the spoilsmongers now cling to their odious traffic largely as a means to intrench themselves in places of power, that they may there deal with and for the public service corporation. It is also true that, as the merit system gains ground and deprives them of patronage, they are more and more allowed to name the employees of the public service corporations. Indeed, if the employment of these corporations is to be continued under proper public control, a feature of that control is likely to be an extension of the merit system in some form to their service. A large increase in the public service is subject to grave objections. It is, however, a lesser evil than a corporate service, the entrances to which are secretly controlled by the political bosses. The political machines in New York and Chicago long since reached the state of equilibrium which Mr. Chapman has styled “ a happy family.” There is now going on in both cities a process of adoption, to add the public service corporation, with its revenues and places, to these family circles.

The domain of the spoils system now embraces the public service corporations. The reform of the civil service will no longer suffice. The reform movement must extend to these powerful corporations. An earnest effort to subject them to proper public control is of necessity the next step in municipal reform.

Edwin Burritt Smith.