339. ARGUMENTS FOR MUNICIPAL OWNERSHIP.—Those favoring municipal ownership, as opposed to regulation, declare that the conditions affecting rates change so rapidly that no public service commission can fix rates fairly or promptly. Public ownership would save the cost of regulation, in many cases a considerable item. It is maintained that regulation is inevitably a failure, and that in view of the social importance of public utilities, ownership is a logical and necessary step.
Important social gains are claimed for municipal ownership. It is said that where the plan has been tried, it has promoted civic interest and has enlisted a higher type of public official. If all utilities were municipally owned, state legislatures and city councils would no longer be subjected to the danger of corruption by private corporations seeking franchises. If utilities were owned by the municipality, it is claimed, service and social welfare rather than profits would become the ideal. The public plant could afford to offer lower rates, because it would not be under the necessity of earning high profits. Finally, service could be extended into outlying or sparsely settled districts which are now neglected by privately owned companies because of the high expense and small profits that would result from such extension.
340. ARGUMENTS AGAINST MUNICIPAL OWNDERSHIP.—Other students of the problem believe that public regulation of utilities is preferable to municipal ownership. Those holding this view maintain that on the whole regulation has proved satisfactory, and that ownership is therefore unnecessary.
Rather than improving the public service by enlisting a higher type of public official, it is maintained, municipal ownership would increase political corruption by enlarging the number of positions which would become the spoils of the political party in power. The periodic political changes resulting from frequent elections in cities would demoralize the administration of the utilities. Under our present system of government, municipal ownership means a lack of centralized control, a factor which would lessen administrative responsibility and encourage inefficiency.
The opponents of municipal ownership also contend that the inefficiency resulting from this form of control would increase the cost of management. This increased cost would in turn necessitate higher rates. Moreover, municipal ownership might increase enormously the indebtedness of the municipality, since either private plants would have to be purchased, or new plants erected at public expense.
341. EXTENT OF MUNICIPAL OWNERSHIP.—Some cities have tried municipal ownership and have abandoned the scheme as unworkable. In some instances this failure has been due to the inherent difficulties of the case, in other instances the inefficiency of the city administration has prevented success. In still other cities ownership of various utilities has proved markedly successful.
Most American cities now own their own waterworks, and about one third of them own their own gas or electric light plants. A few cities own either a part or the whole of their street railways. Municipal ownership of public utilities is still in its infancy, but the movement is growing.
342. CONDITIONS OF MUNICIPAL OWNERSHIP.—Past experience indicates several mistakes to be avoided in any future consideration of the problem of municipal ownership.
The terms upon which the city purchases a utility ought not to be so severe as to discourage the future development of new utilities by private enterprise.
Public ownership is practicable only when the utility has passed the experimental stage, for governmental agencies cannot effectively carry on the experiments, nor assume the risks, so essential to the development of a new enterprise.