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10-7-1932

City Club of Portland Bulletin vol. 13, no. 23 (1932-10-7)City Club of Portland (Portland, Or.)

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Recommended CitationCity Club of Portland (Portland, Or.), "City Club of Portland Bulletin vol. 13, no. 23 (1932-10-7)" (1932). City Club of Portland. Paper95.http://pdxscholar.library.pdx.edu/oscdl_cityclub/95

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PORTLAND CITY CLUB

BULLETIN ActiveCitizenship"

VOLUME XIII

PORTLAND, OREGON, OCTOBER 7, 1932 NUMBER 23

FRIDAY, OCTOBER 7 HOTEL BENSON; 12:10SPEAKER

L. C. NEWLANDSDirector, U. S. Chamber of Commerce

Campaign Chairman, Portland Community Chest

SUBJECT

"Relief Through Business Construction"An Outline of Measures That Have Been Adopted

Relief problems have pushed themselves forward since the beginning of the de-pression until, with another winter approaching, they now occupy a position near thecenter of the civic stage.

Mr. Newlands has recently studied at first hand the combined relief and re-construction activities of the national, state and local governments as applied in SanFrancisco, Denver, Chicago, Toronto, New York and Washington, and will discusshis observations.

AND ALSO

AN OPEN FORUMTO DISCUSS

THE SERVICE AT COST FRANCHISEREFERENDUM ON FOURTH STREET BOND ISSUE

The reports on these two measures are printed below and will be presented foraction today.

FRANCHISE OPPOSEDBY COMMITTEE

To The Board of Governors of the City Club:The proposed Service-at-Cost Street Railway

Franchise before the people of Portland on theNovember ballot is a revision of the Carey &Harlan traction plan of 1930, which was rejectedby the City Council. The Carey & Harlan planhad previously been opposed by the City Club.The present plan is in the form of an amendmentto the charter of the city. If adopted, this fran-chise will replace the present principal franchisesof the local street railway company, which expirein December, 1932.

SUMMARY AND CONCLUSIONS1. The proposed Service-at-Cost franchise is

in the form of an amendment to the city charter,and would continue for 20 years.

2. In order to permit the street car companyto render service at a profit, it proposes toeliminate certain fees now charged, such asbridge tolls, paving between the street car tracks,amounting to $150,000 per year, with whichyour committee is in agreement.

3. It also proposes to eliminate franchise feesof any kind, which your committee can notjustify.

4 In order to carry out the provisions of aservice-at-cost franchise, the amendment pro-vides that the Council employ a City Street

FOURTH STREETBOND ISSUE

To the Board of Governors of the City Club:A bond issue in the amount of $195,000 was

referred to the electors by the city council. Thepurpose of this bond issue is to provide funds forthe purchase of a 100 foot right of way along theproposed Fourth Street Arterial Highway withinthe city. The $195,000 bond issue is submittedas an amendment to the city charter and pro-vides: (a) For co-operation of the City, State,County and Civic Emergency Committee, in aworthy highway project. (b) That bonds on a6 to 25 year basis cannot be sold for more than6% interest or for less than par and accruedinterest. (c) That any excess over right of wayestimates of cost, as granted upon condemnation,may be assessed to property benefitted. (d) Thatfunds may be secured from the ReconstructionFinance Corporation and bonds reduced ac-cordingly.

This charter amendment appears to be care-fully drawn by experienced men with a view offully protecting the public interest. The entireproject is contingent on the city's provision ofa right of way within its limits, otherwise workoutside the city will be useless.

The attitude of this Committee is that tax-payers should be reluctant to increase the publicdebt for non-income producing improvements.It is of some interest to note that at the first

Continued on Page 6Continued on Page 2

Tune in KEX at 8:30 P. M. Sunday

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PORTLAND CITY CLUB BULLETIN

PORTLAND CITY CLUB

BULLETIN

REPORTS ARE AVAILABLEA limited number of all City Club reports on

election measures will be available upon applica-tion to the City Club office. This series of reportsmay be purchased at a price of $1.00 to cover thecost of printing and distribution. Any interestedperson paying one dollar will receive copies ofcompleted reports immediately, and succeedingreports will be mailed when published.

Tell your friends who are not City Clubmembers that they may take advantage of thisopportunity to get reliable information onelection measures. Act immediately because thesupply is limited

Published Weekly by

THE CITY CLUB OF PORTLAND

Office of the Club 606 Oregon Building

Telephone ATwater 6593

Subscription Price $1 00 per year SERVICE AT COST FRANCHISEContinued from Page 1

Entered as Second Class Matter. October 29, 1920, at thepostoffice at Portland, Oregon, under act of March 3, 1879. Railway Director to act as an adviser of the

Council in traction matters. The franchise pro-vides no maximum salary, although it is agreedthat the expense of such office shall be borneby the City.

5. The proposed franchise describes themachinery for setting up a Board of Arbitrationto decide matters on which the Council and thecompany cannot agree, which is satisfactory.

6. The crux of the franchise is the question oforiginal value. This is set at $8,662,553, clearlya compromise valuation.

Your committee finds the valuation unaccept-able for the following reasons:

(a) It includes much obsolete equipment andpaving between the tracks which is worn out,and which, under the terms of the proposedfranchise, must be replaced by the City.

(b) This valuation is higher than the companycan secure adequate returns upon, at the presenttime, when the rates charged are higher thanthose in the proposed franchise. The only hopeof the company's operating profitably on thisvaluation would be by curtailing service, elim-inating unprofitable lines, or other reductions,or by raising the fare at the first opportunity.

(c) This valuation becomes the purchase priceshould the city find it necessary to take over thesystem to insure adequate mass transportationservice.

7. The methods of accounting for depreciationand building up a Reserve for Renewals are notin keeping with good business practices.

8. The proposed franchise allows the companyto make no additions to its equipment andtrackage during the last eight years of its life,which virtually leaves the city without controlof service during that time.

9. The legal phases of the franchise seem tobe inconsistent with the Oregon laws. This fran-chise would permit the city government to de-termine the fare structure of the franchise com-pany, whereas, by the Oregon laws, the ultimateauthority is in the State Public Utility Com-missioner and in the electorate of the municipal-ity affected.

High Points of the Proposed FranchiseIt is designated as a "Service-at-Cost" fran-

chise, because of provisions purporting to gaugethe rate of fare upon the cost of producing theservice, which cost includes a profit to thecompany proportioned upon the fares charged.

The high points of the proposed plan may beset out as follows: A twenty-year period fromthe time this franchise takes effect is createdfor its operation. However, the City Council isauthorized to enact an ordinance, subject to a

City Club dues are $1 00 per month, payable semi-annually on May 1st, and November 1st. There is noinitiation fee.

The regular Friday luncheon meetings are held in theCrystal Room of the Benson Hotel.

CITY CLUB PURPOSE

"To inform its members and the community inpublic matters and to arouse them to a realizationof the obligations of citizenship."

THE CITY CLUB BOARD of GOVERNORS

RICHARD W. MONTAGUE PresidentWILLIAM C. MCCULLOCH First Vice-PresidentM. D. WELLS Second Vice-PresidentTHORNTON T. MUNGER SecretaryR. E. KooN Treasurer

CHARLES MCKINLEYLLOYD J. WENTWORTHSTUART R. STRONGW. S. U'REN

A. MCKINNONILLIS K. CLARK

RUSSELL W. BARTHELL Executive Secretary

APPLICATIONS FOR MEMBERSHIPThe following applications for member-

ship, having been approved by the Boardof Governors, are hereby recommended tothe Club.

If no objections are filed with the Boardof Governors or the Executive Secretaryprior to October 21, 1932, these applicantswill, under the Constitution, stand elected.

GEORGE J. BEGGSPartner, Norris Beggs & Base,1111 Wilcox BuildingRecommended by W. C. McCulloch

J. V. B. CoxPlant Superintendent and Service

EngineerPaper Makers Chemical CorporationP. 0. Box 3939Recommended by F. W. Paris and

Berkeley SnowHAROLD F. WENDE.L

General Manager, Lipman, Wolfe andCompany

127 Fifth StreetRecommended by . loseph Shemanski

PORTLAND CITY CLUB BULLETIN

3

popular referendum, extending the period forits operation for a term not to exceed twentyyears from the effective date of the ordinance.The company is required to expend a sum notless than $2,000,000 in the purchase of newstreet cars and motor coaches and the recon-struction of the track system within four yearsfrom the effective date of the franchise withoutmore than 25% of the whole being expended inany one year. This sum of $2,000,000 is the onlysum which the franchise absolutely requires thecompany to spend. The company is relieved, ingeneral, of all further expenses of paving betweenthe tracks, although it must make good anydamage to the paving on account of necessaryrepairs made to its tracks and also the increasedcost of the paving foundation under its tracksin excess of what the cost would be in the citywere the tracks not there. The company is alsorelieved of bridge taxes and tolls. No other con-veyances carrying passengers for hire—in fact,not even busses operated by the company—nor are private automobiles charged for theprivilege of crossing the bridges. The transfer ofthese burdens from the street car riding publicto the taxpayers will amount to an approximatesaving of $150,000 in the annual operating costsof the company.

FINANCIAL AND LEGAL ASPECTSIn studying the financial aspects, the present

condition of the street car company's businessmust be considered. As was pointed out in thereport of the City Club committee on the Carey& Harlan plan, patronage and operating revenuesof almost all systems throughout the UnitedStates are rapidly declining and these systemsare practically all in danger of becoming in-solvent. There has been a steady decline in theoperating revenues of the local traction companyfor the past ten years, and there is some dangerthat the present mass transportation systemmust find a substitute unless some measures ofrelief are adopted. Your committee believes,therefore, that a liberal attitude should be takenby the public toward any measures which wouldenable the present system to continue in opera-tion.

The traction company is now required to payfranchise fees amounting to about $30,000 peryear. The proposed franchise provides that nofranchise fees, licenses or special taxes be levied.The usual theory of levying a franchise fee isthat this fee shall be sufficient to pay for thecost of enforcing the franchise and such or-dinances as may provide for inspection of thegrantee's property and business.

Council to Appoint Railway DirectorUnder the proposed franchise the company is

required to give such service as the Councilmay require. But it is important to note thatin the event this prescribed service will preventthe company from receiving the annual rate ofreturn provided in the franchise, then the rightof the city shall be limited to prescribe onlysuch service as shall permit the rate of returnto be earned.

Upon the taking effect of this franchise, theCouncil is to appoint a City Street RailwayDirector, who is to act as an adviser of theCouncil in all matters affecting the service, thecost, and the rates of fare. If he disapprovesany proposed capital expenditure by the com-pany, the company may not proceed with suchexpenditure until its reasonableness shall havebeen determined by arbitration. So also with

the manner of accounting for any expenditures.The franchise does not set the City Director'ssalary, but it provides that all expenses in con-nection with his office, including his salary,shall be borne by the city. In other cities thecost of this service is $30,000 to $100,000annually.

Should the city, without the written consentof the company, permit competition to thetransportation given by the company, the cityshall lose control of the service and rates offare as long as such competion is permitted.

Differences to be ArbitratedArbitration shall provide for differences arising

between the company and the city, except thatthere may be no arbitration with respect to thesum fixed as the Original and Additional CapitalValues, the rate of return to the company, orwith respect to the city's rights to prescribeservice. A Board of Arbitration composed of amember appointed by each party, and a thirdmember appointed by the two, is set up, withpenalties exacted of either company or city fornot following its mandates.

The clause providing for a forfeiture of con-trol by the company to the city during the dura-tion of its failure to comply with the terms ofthe franchise is ambiguous as to whether thecity shall obtain this control within six monthsor one year. Frequently, even less than sixmonths would be desirable. It would have beena better provision to let the board fix in eachcase what would constitute a reasonable time.

Property Valued at $8,662,553The most important financial feature is that

setting the valuation of the company's propertyat $8,662,553. This is to constitute the OriginalCapital Value, which shall be used for the pur-pose of fixing the rates of fare, the return to thecompany, and the purchase price of the propertyshould the city ever desire to acquire it. Thefifteen cars already purchased would be in-cluded in the sum of $2,000,000, which, asalready mentioned, the company shall spendduring the first four years.

The valuation of $8,662,553 was arrived atas follows: Carey & Harlan estimated the re-production cost new less depreciation of thecompany's property to be $9,661,721 as of June30, 1931, and recommended that the value forthe purposes of a service-at-cost franchise shouldbe fixed at not more than $8,500,000. The com-pany, on the other hand, contended that theOriginal Capital Value should be not less than$10,000,000. It was finally agreed to acceptCarey & Harlan's figure of reproduction costnew less depreciation as the basis. As the Sell-wood car barns and the Center Street car shopsare not devoted entirely to the service of lineswithin the city limits, these properties werewithdrawn at a figure of $999,168, thus leaving$8,662,553 as the value of properties devotedentirely to service within the city limits. Thevarious items of property making up this sumwere then given a value resulting in this total.

Your committee finds itself faced with thenecessity of arriving at some conclusion as tothe propriety of accepting this figure of $8,662,-553. Attention, therefore, has been given (1) tothe valuation claimed for these properties byvarious experts and (2) to the effect of thisvaluation upon operation under this franchise.The following is a summary of valuations madeby various investigators within the past fouryears:

4 PORTLAND CITY CLUB BULLETIN

Valuation by Company's engineer, as of June 30, 1930 ..... ....... ................Commission's engineers show 1916 valuations plus additions to December 31, 1928.... ..Testimony of Company's engineers before Federal Court placed value at June 30, 1931..Estimate of John Beeler, Company's expert witness.Carey & Harlan estimate for the City at June 30, 1930.... ..

.$19,445,991.. 14,858,644

. .. 14,680,424o Twelve Million

.. 10,805,294• • • • • • • •

Testimony of Carey & Harlan before Federal Court of actual value entire property June 30, 1931—not over. 8,000,000Conclusion of Commissioner Thomas—no value other than salvage of not to exceed ... .. 3,000,000City of Portland, intervenor in recent 7c fare case before Oliver Coshow, special master appointed by the 1,985,287

Federal Court—Conversion Value

After the city and the traction company hadagreed upon $8,662,553 as the value of the com-pany's property devoted entirely to city lines,Carey & Harlan Company was employed towork out a -breakdown - of this valuation,giving each item of property a definite value.This breakdown has been compiled and is onfile at the City Hall. Your committee has ex-amined it but has made no effort to determinethe correctness of the value given to any of theitems listed. A number of the items listed, whilerepresenting a past investment by the utility,represents no future benefit to the system. Thepavement between the tracks which will bemaintained and replaced in the future by thecity, is included in this valuation at a figure of$1,706,192.74. This item includes much pave-ment which should have been replaced yearsago. On November 13. 1930. City EngineerLaurgaard called the attention of the CityCouncil to the tracks and pavement on a num-ber of streets which were "rough and in adangerous condition and should be reconstructedimmediately." The breakdown value given tothe pavement alone on a few of these streets islisted below:Washington Street-2d to 23d ........ . . $23,504.95Glisan Street-3d to 16th.... .......... 18,669.82Hawthorne Avenue—East Ilth to East 50th. 69,106.28Fifth Street—Jefferson to Irving .. . 9,309 91Belmont Street—East 29th to East 36th... .. 8,667.63

Altogether, there were seventeen stretchesof track and pavement listed by the city en-gineer's office. The public would probably becalled upon to replace a number of these pave-ments soon.

Obsolete Equipment Included in ValuationThe breakdown lists 490 passenger cars, al-

though only from 300 to 375 are ever used. Thepeak load at present is carried by 325 cars. Thefifteen new cars are not listed, but will be con-sidered as constituting Additional Capital Valueshould this franchise become effective. The aver-age age of the cars included in this inventory is23 years. It is significant that the appraisal ofthe Public Service Commission as of December31, 1912, placed the life of these cars at 20 years,and the United States Commissioner of InternalRevenue allows a useful life of only 18 years.Recent investigation has allowed an increase to26 years. All but 24 of the cars now in serviceare over 20 years old. Many cars which willnever again be used are included at a nominalvalue, and many which are obsolete and to bereplaced during the four-year rehabilitationperiod are also included. The inclusion of theseitems in the inventory mitigates against thevalidity of this valuation. Under good businesspractices, the value of equipment and facilitiesshould be written off as these become obsolete.

In considering the validity of the figure, $8,-662,553, it should be borne in mind that thisvalue is, under the franchise, to be the purchasevaluation of the company's properties, shouldthe city ever find it necessary to take over thesystem in order to provide adequate mass trans-portation. Also, all additional investments in

street car equipment or tracks are to be addedto this valuation and credited to the account ofAdditional Capital Value. Subtractions from thatvalue may only be made through payment out-right from the Reserve for Renewals fund aswill be hereafter explained.

Reserve For Renewals InadequateThe proposed franchise provides that 6% of

the gross revenues are to be credited to theReserve for Renewals Account against whichthe cost of renewals shall be charged. It shouldbe particularly noted, however, that as soon asthe credit balances in this Reserve for RenewalsAccount exceed 6% of the capital value, thecharge for making further additions to the re-serve drops to 3% of the gross revenue. When-ever any of the property is sold or abandoned,the capital value is to receive credit for theoriginal value assigned to the item and anyexcess or deficit resulting from the sale orabandonment shall be carried to the Reservefor Renewals. There is, however, this restriction.If the deficit carried to the Reserve for Renewalsshall reduce the reserve below 3% of the capitalvalue, a new account called the Suspense Re-newal Account is charged with any amountswhich have reduced the reserve below 3%. Thiswould tend automatically to keep a balance inthe Reserve for Renewals Account equal to from3% to 6% of the capital value. It is also pro-vided that the amount which may be in thisSuspense Renewal Account will be included indetermining the capital value for purposes ofrate making. There does not appear to be anyprovision in the franchise whereby the city maycompel the traction company to write off anyequipment that may become obsolete. Were thecompany itself to decide to write off a consider-able amount of the old equipment, it would berestrained by the provision that any writing offwhich reduces the Reserve for Renewals below3% of the capital value must be charged to theSuspense Renewal Account, and it would, there-fore, still remain on the books as part of thecapital value. In other words, the value of theobsolete tracks, pavement and equipment in-cluded in the proposed franchise cannot be re-moved from the rate base or the purchase priceuntil such time as it has been paid for out of theReserve for Renewals, and such payment wouldbe seriously limited by the small amount whichmay be credited to the Reserve for Renewals.

Valuation Is FrozenIt is recognized in all modern accounting

practice that buildings, machinery, equipmentand all articles of like nature depreciate in value,not only because of the wear and tear, but alsobecause of obsolescence; and a provision for thisdepreciation should be made by a charge againstoperations and a credit to a reserve for deprecia-tion, based upon the estimated life of usefulness,so that at the end of the useful life the reservefor depreciation will be equal to the originalinvestment and there will be no loss to be takenat the time the article is disposed of or aban-doned. The provision for a Reserve for Renewals

PORTLAND CITY CLUB BULLETIN 5bears some resemblance to the establishedcustom, but as pointed out, the reserve can atno time be greater than 6% of the original valueor original investment. Briefly, it would appearthat the voters are asked to pass upon a valueof $8,662,553 and to adopt a franchise that, ineffect, freezes that amount both for the purposeof rate making and also as a basis for the pur-chase of properties for the life of the franchise.There seems to be no recognition of the pos-sibility that within ten years from the adoptionof this franchise these properties may not beworth fifty per cent of the proposed value andthat, nevertheless, the city would be bound byits decision if the franchise were adopted.

All the revenue received by the company fromits operations is to be credited to the GrossOperating Revenue Account, from which shallbe deducted (I) the operating cost, and (2) theReserve for Renewals already mentioned, and(3) a monthly accrual for taxes.

All remaining amounts are to be placedmonthly to the credit of the Capital ReturnFund. The company may withdraw for suchpurposes as it may desire out of the CapitalReturn Fund, or if such fund is insufficient, thenout of the Balancing Fund, which will be ex-plained below, in monthly withdrawals com-puted each month on the then aggregate capitalvalue, and any balance in the Suspense RenewalAccount, an amount which will constitute anannual return in per cent of the then capitalvalue dependent upon the average rate of fare,as set out in the following schedule:

Annual Return Annual Returnon Original on Additional

Average Rate of Fare Capital Value Capital ValueWhen 9c or over. .. 5 % 6%%When 7,34 cents, or over and

less than 9 cents . .... 6 % 7 %When 6 cents or over and

less than 7% cents..... 63.% 7g%When less than 6 cents . . 6X% 734%

At the end of each calendar month any excessremaining in the Capital Return Fund shall beturned into a Balancing Fund. This is to becreated by the company setting up on its booksan initial sum in the amount of $300,000, fromwhich shall be deducted any deficit in theCapital Return Fund. This Balancing Fund isto be used to regulate the rates of fare to becharged. So long as it shall not exceed $500,000,then the existing fare structure shall not bereduced. But if it shall exceed $500,000, thenthe fare structure shall be reduced and chargedas the company and the Council may agree, andwhenever the Balancing Fund is reduced toless than $200,000, then the rates of fare shallbe changed and increased as the company andCouncil may agree, provided that if the companyand Council cannot agree, then there shall bearbitration. If at any time either the Co. , ncil orthe company shall be of the opinion that thefare structure should be either increased or de-creased, such party may give written notice tothe other of its opinion and if such change isassented to by the other party, then such changein the fare structure so assented to shall bemade; otherwise, the procedure under the Bal-ancing Fund shall control.

The initial fare schedule to take effect uponthe adoption of this franchise and to remain ineffect until January 1, 1933, is as follows:

Weekly Pass—$1.25 each;School Tickets-4c each, when purchased in books of 25;Tokens or Tickets-7 1/7c each, when purchased in quan-

tities of 14 for $1.00;Tokens or Tickets-8 I/3c each,Cwhen purchased in quan-

tities of 3 for 25 cents;Single Cash Fare—I0 cents.

When this franchise was written, it was to besubmitted to the people in May and if adoptedwould have taken effect about June 1st of thisyear. The new fare schedule would thus haveremained in effect for seven months withoutchange. If the proposed franchise is adopted inNovember, there is no guarantee that the newfare schedule will remain in effect after January1, 1933. Nor is there any guarantee or greatpossibility that fares can be kept lower than theyare at present. The only guarantee is that thefare shall not exceed ten cents.

Proposed Franchise Requires Increased FareThe proposed franchise provides that after

the operating expenses of the street railway com-pany have been paid, there shall be set aside asum for Reserve for Renewals and return oninvestment. On the basis of the 1931 business,had this franchise been in effect, the followingamounts would have been set aside:

Reserve for Renewals-6% of operatingrevenue ........ ......$234,085.15

Return on Investment-6N% of originalcapital value .

Total ....... .............................$777,151.10

During 1931, actual operating revenue of thecompany exceeded operating expenses by $395,-338. Had the proposed franchise been in effect,the company would have been relieved of ap-proximately $150,000 expenses by the removalof franchise fees, bridge tolls and paving charges.Adding this to the operating income gives afigure of $545,338 available in 1931 to pay theReserve for Renewals and the Return on In-vestment. A deficit would thus have beencreated of $231,812.82 to be charged to theBalancing Fund. Despite economies introducedrecently, the operating revenues of the companyhave exceeded expenses only $119,358 duringthe first six months of 1932. Some $75,000 mighthave been added to this amount had the pro-posed franchise been in effect, but the require-ments of the proposed franchise had it been inoperation during this period would have been$271,582 for return on original capital valuealone, and $104,712 for Reserve for Renewals—thus a deficit of $181,937 would have beencharged to the Balancing Fund during thisperiod. It is important to bear in mind that ahigher rate of fare than that contemplated inthe franchise has been in effect during 1931 andthus far in 1932. A large percentage of the riderswho now pay a ten cent fare would pay only7 1-7 cents. The new fare of the company wouldremain in effect until January 1, 1933, or aboutsix weeks, thus adding to the deficit. By theterms of the franchise this reduced fare wouldnecessitate higher percentage of return upon theoriginal capital value further adding to thefinancial difficulties of the proposed plan. Underthis proposed franchise, however, deficits are tobe met by increased fare, and yet the presentfare which creates a deficit is considered toproduce the highest possible revenue. If thepublic is willing to pay more for street car ser-vice than it does now, the financial requirements

6 PORTLAND CITY CLUB BULLETIN

of this franchise may ultimately be realized,otherwise they will not. Therein lies the basisof another objection to the inclusion of theoriginal capital value at the figure $8,662,553.

The company is given sole control over allexpenditures for betterments and improvementsduring the last eight years of the grant. Thismight mean that the company would make nocapital expenditure during this time and thus,in effect, considerably impair its service.

Legal Phases Are AmbiguousAs already stated, the franchise purports to

give the city Council authority to change thefares in keeping with the cost of operation. TheOregon statutes provide, however, that newrates must be filed with the Public Utility Com-missioner of the state 90 days before they gointo effect, and if he objects, the new rates arevoid, unless ratified by the voters of the affectedmunicipality. Not only shall no rate schedulego for more than five years without the Com-missioner's approval or a popular vote, but ifthe rate schedule is to be changed within fiveyears, he must approve or his veto must beoverridden by the electorate. The city cannotdeprive him of this qualified power. The resultof all this is that the so-called automatic Bal-ancing Fund provision is, in reality, by reasonof the statute, subject to the interference ofboth the Commissioner qualifiedly and of thepublic absolutely.

It seems to your committee that this fran-chise, which is also a contract, wants for mutu-ality in a vital aspect in that the city lacks thepower to guarantee the company a certain rateof return for the entire duration of the proposedfranchise, which guarantee is declared by Para-graph 40 to be one of the two main purposes.The inevitable conclusion is that the entirefranchise would seem to be impotent and voidin that the city Council cannot assume rightswhich. by law, belong to the State PublicUtility Commissioner and to the electorate.

RECOMMENDAT IONSThe above facts seem so irrefutable that your

committee recommends:1. That the City Club oppose the Charter

amendment involving the service-at-cost fran-chise as proposed.

2. We further recommend that the street carcompany and the Council submit a new fran-chise which will correct the objections to thisfranchise in these important features:

(a) The original capital valuation should con-tain only equipment, machinery, trackage, etc.,as have future usefulness to the company inrendering the type of service needed in the Cityof Portland;

(b) The franchise should provide a methodof writing off depreciation and creating a reservefor renewals that will take care of the constantdepreciation and obsolescence of equipmentwithout the necessity of raising additional cap-ital for the replacement of outworn equipment.

(c) That the legal obstacles of this franchisebe avoided, if at all possible.

Respectfully submitted,A. L. ANDRUS,EDWARD L. CLARK,L. E. KURT ICI IANOFF,GEORGE W. FRI EDE, Chairman.

Accepted by the Board of Governors and orderedprinted and submitted to the membership of the CityClub for consideration and action on October 7, 1932

FOURTH STREET BOND ISSUEContinued from Page 1

meeting of the Committee every member of theCommittee doubted that the bond issue shouldbe supported; after investigation, the Committeewas unanimous in its approval of the bond issue.The reasons which led the Committee to its con-clusion may be summed up briefly as follows:

Many Reasons For Approval1. This $195,000 bond issue will, through the

co-operation of four different agencies, makeavailable about $1,800,000 for constructing thisnew highway entrance from the South.

2. The road is needed to serve a great territorybetween the River and the present West SidePacific Liighway, which is not now adequatelyserved.

3. The work will be close to Portland andeasily accessible to the homes of thousands ofour unemployed. They live largely on the eastside of the river. It is an all Portland project.

4. Four public agencies after much efforthave now substantially agreed upon this work.It should therefore be done now, as such co-operation may be impossible later.

5. Trucks are not now permitted on Ter-williger Boulevard, and we need an arterialhighway from the south on a good grade forheavy vehicles.

6. The right of way and grade will benefitfuture generations and bonds for such purposeare justified.

7. Such trunk highway will not compete withor detract from building the proposed low grade,short, Tualatin Tunnel with entrance in Mar-quam Gulch.

8. It will relieve the State Highway Com-mission for a number of years in building theTigard-Canyon Road connection.

9. It cannot be assessed to a local improve-ment district, because of the steep sidehilllocation, and inaccessibility of entrance exceptat the termini. It serves State, County and Cityneeds and is properly a co-operative under-taking.

10. The project will permit expenditure of theUnemployment Relief Funds to the amount ofabout $800,000, far more efficiently than thesefunds can be expended if this construction ispostponed.

11. Purchase of rights of way by an assess-ment district would cause eighteen months of

adelay and would prevent the application ofrelief funds. It would also be inequitable becausethe improvement will benefit the city generallyfar more than it will benefit any district withinthe city.

RECOMMENDATIONSYour Committee, after interviewing all

representative citizens, and organizations knownto be interested in this development project,unanimously recommend the voting by the Cityof Portland of the $195,000 bond issue for thepurchase of right of way for the Fourth StreetArterial Highway, within the City limits.

Respectfully submitted,C. E. LOLLINGER,R. R. TINKHAM,F. A. KENNY,JOHN R. MONTAGUE,JOHN H. LEWIS, Chairman.

Approved by F. R Schanck, chairman of the CityPlanning Section.

Accepted by the Board of Governors and orderedPrinted and submitted to the membership of the CityClub for consideration and action on October 7, 1932.