privately operated structures, it may be said that the average cost in neither case was excessive. There are, however, numerous instances of exorbitant charges and excessive earnings by the operators of toll structures. One structure, which can not be named because the information was obtained in confidence from the owner, was built in 1911 at a cost of $25,000. Its gross income-only 8 per cent of the investment in the first year of operation-increased with increase in the traffic to a maximum of $46,311, or 185 per cent of the original cost in 1924. For the 15-year period from 1912 to 1926, inclusive, this bridge earned an average annual gross income equal to nearly 75 per cent of its original cost. In 1925 a new toll bridge was opened a thousand feet downstream and the earnings of the first bridge fell off from the 1924 peak of $46,311 to about $500 in 1926. The Williamsport Bridge carries United States Route 11 over the Potomac River near Williamsport, Md. It is owned by the Washington & Berkeley Bridge Co. Data furnished by the Maryland Public Service Commission show that the original cost of this bridge in 1907 was $87,000. The common stock of the company is $100,000. The total income earned in 1926 was $56,273.31, and the net operating income after deduction of all operating expenses was $41,678.22. In that year the company paid a dividend of $32,000, or 32 per cent on par value of the common stock. The Columbia River Interstate Bridge is a combination highway and street-railway bridge over the Columbia River on United States Route 99 at Portland, Oreg. It is a publicly operated bridge owned by the Columbia River Interstate Bridge Commission. It was built in 1917 at a cost of $1,683,556, and information from the auditor of the commission shows that its total operating income in 1926 was $533,291, of which approximately $40,000 was from street-railway traffic and the balance from the highway traffic. This publicly operated bridge earned a net operating income in 1926 of about $480,000, or 29 per cent of the original cost. At this rate of earning the entire cost of the bridge would be paid by the traffic in four years. A glaring instance of overcapitalization is furnished by the Gandy Bridge, a privately owned toll structure over Tampa Bay between Tampa and St. Petersburg, Fla. According to the 1926 report of the Florida Railroad Commission, which by special statute has regulatory control of the bridge, the organization expenses of this bridge are listed at $2,704,136, which is 125 per cent of the tangible property value of $2,138,554. Of the total investment of $4,866,558, as reported, but little over 40 per cent is represented by tangible property. The outstanding bonds representing $2,934,500 exceed the cost of the tangible property and in addition there is outstanding $2,000,000 worth of stock. On the basis of the capitalization the gross income of $743,868 in 1926 was only 15 per cent; but it was 34 per cent of the cost of the tangible property. TOLL BRIDGES MOST NUMEROUS ON MAIN ROADS Since the necessity for the construction of bridges and the possibilities of profit from the collection of tolls are greatest on the most heavily traveled roads, it is not surprising that a majority of the toll bridges in operation, under construction, and proposed for construc tion are on the Federal-aid highway system. This system of 187,000 miles includes the principal interstate and intercounty highways. Mile for mile it carries a heavier traffic than either the State highway systems as a whole or the great mileage of local and county roads. Two hundred and seventeen of the bridges in operation, under construction, and proposed on October 31, 1927, are on or will be on this limited system. On the more extensive, and slightly less traveled State highway systems the existing and contemplated bridges number 60; and on the nearly two and three quarter million miles of local road there are existing or proposed only 147 toll structures. The connection between toll-bridge construction and highway improvement is clearly shown by the increased rate of bridge completion since 1922, at about which time the results of the enlarged program of public-road improvement first began to make themselves felt. A toll bridge established on an important line of travel over a large stream can depend upon a heavy traffic from a wide area brought to it by roads improved at the public expense. Such locations are eagerly sought by private interests who ask only where the traffic is heaviest and are willing to pay for the information. If the present activity continues unabated a few years longer and Congress continues to authorize private building and the States and other subdivisions of government continue to grant franchises to private interests, the free use of the roads which Federal and State funds have created will be seriously obstructed, and travelers upon these main public highways will be required for years to come to pay tribute to private capitalists. The bureau has reliable information that private interests, in their eagerness to obtain exclusive rights for the construction of toll bridges at commanding locations, have sought by various means to obstruct the construction of free or publicly operated toll bridges at such locations. They have sought to enjoin the construction of public bridges in the courts; and they have attempted and in some cases have succeeded in blocking legislation authorizing the construction of free or public bridges. PUBLIC FINANCING OF MAJOR BRIDGES It is asserted by those interested in the construction of private toll bridges that there is urgent need for numerous bridges over large streams, which are not being built by public agencies and which can not be so built for lack of revenue sufficient for the purpose. The toll bridge interests argue, therefore, that since these bridges are needed, private initiative performs a laudable public service in building them. It should be borne in mind that whether the bridges. are built by private initiative or by public agencies it is the public that ultimately pays for them. The only difference is that when they are built by the public agencies the public is asked to pay only the cost of construction, whereas the private builders must also expect a profit on the investment. As an indication of the additional burden the public is required to assume to support a toll-bridge investment, the following is quoted from a report published on January 26, 1927, by the State Highway Commission of Washington, which made an investigation of the relative merits of toll and free bridges by direction of the State legislature: In the following table the cost to the traveling public of service rendered by the toll bridges, covered in this report, is compared with the cost for the same service had these bridges or ones of equivalent usefulness been constructed by the State or counties and operated as free bridges. From this table it is apparent that the cost of service on all toll bridges on the highway system of Washington is from 63 to 185 per cent higher than the cost of similar service if the bridges were free bridges. Of the total amount of tolls collected, the following approximate percentages were spent for the collection of tolls and other incidental expenses due to the fact that the bridges are operated as toll bridges rather than free bridges. Pasco-Kennewick Bridge... Metaline Falls Bridge. Nasel River Bridge.. Vancouver Bridge.. Per cent From these figures it is apparent that any toll bridge, however well designed or economically operated, entails a loss to the traveling public of from 15 to 27 per cent of the total amount of tolls collected. This loss to the public does not revert to the bridge owner as a gain because it is spent for labor and incidentals which would not be required were the bridge free. It may be admitted that, for various reasons, it is not always possible to finance the cost of free public bridges out of the available tax revenues. But the public agency always has open to it the same course that the private bridge building interests follow. It can borrow the necessary capital, and it can do it without incurring a public debt in the constitutional sense, by issuing revenue bonds to be retired from the revenue earned by the bridge itself. That is, the public can itself build a toll bridge with money borrowed on the security of the anticipated toll revenues. It can repay the debt with these revenues and free the bridge as soon as its cost is repaid. To still further simplify the problem of public financing Congress has provided, by the Oldfield amendment to the Federal highway act, for the granting of Federal aid in the construction of publicly operated toll bridges. Under this provision half the cost of construction can be paid outright by the Federal Government and the State can finance the remaining half by the collection of tolls. There is an active market for toll bridge bonds and the public can sell its bonds on terms that are usually more favorable than those available to private builders. The existing public agencies can erect and operate the bridges as efficiently and economically as the private 28535-S. Doc. 175, 70-2- -3 owners; and, if the tolls are abolished when the bridges are paid for, the public is saved the payment of the profits which are the inducement responsible for the increasing private interest in toll-bridge construction. Moreover, if the bridges are built by public agencies there is also the assurance of open competition by qualified contracting organizations and the awarding of the contract to the lowest responsible bidder, a condition that has been noticeably lacking in much of the private construction upon which the public is asked to pay dividends in the form of tolls. FRANCHISES TO PRIVATE BUILDERS SHOULD BE CAREFULLY GUARDED The fact is that there are few if any instances in which the granting of a franchise to a private toll-bridge company is desirable or sound as a public policy. If the proposed bridge is really needed-that is, if it is to be built where the traffic is sufficient to support the investment-the public can build cheaper and borrow the necessary capital on more advantageous terms than private interests. If the bridge proposed is not a sound investment, and this condition is known, the bonds or security can only be sold by the private promoters at a heavy discount. But it is an unfortunate fact that the investing public is often not apprised of the true conditions. It is deceived, by the fact that some toll bridges are notable revenue producers, into believing that all bridges possess large earning capacity. If some of the private toll bridges for which franchises have recently been granted are actually built the investing public is certain to lose heavily. Assuming that the construction of a toll structure is the only way in which the need for a bridge can be met in a reasonable time, and that the public is unable or unwilling to undertake the construction so that resort must be had to private initiative then the question of the terms of the franchise must be very carefully considered. Toll bridges are distinctly public utilities and the interests of the public must be conserved by regulation as in the case of other recognized public utilities. Such regulation is essential not only for the protection of the users of the utility but also for that other section. of the public which will invest in the undertaking; for it must be borne in mind that the promoters of toll bridges do not finance the construction with their own funds. As a first condition of the granting of a franchise the public has a right to demand that those who seek the exclusive right to operate a bridge upon a public highway shall give evidence of a sincere purpose to build the bridge for which the franchise is sought. If, after the franchise is granted, conditions develop that make it impossible for the holder to carry out his implied agreement to build, the right to dispose of the franchise should rest in the public only. It is difficult to conceive of any sound public reason for the granting of assignable franchises; and the fact that its confidence has been gravely abused in many instances should incline the public to look with suspicion upon applications for this form of franchise. The term of the franchise should also be definitely limited and suitable provision should be made for the recapture of the bridge by |