Free City Railroads:
Disadvantages and Deficiencies
of the Existing System

Henry George, Jr.

[Reprinted from The Standard, Vol.1, No.1, 8 January, 1887]

Opposed to Public Interests - Great Reforms Possible - More and Better Roads Without Taxing Labor or Capital - The Cost of the Existing Roads - Inflated Values. The great population of New York and its peculiar distribution, owing to the shape of the Island of Manhattan, make the means of quick and easy communication an essential to public comfort, not to say development. New York has outgrown its railroad facilities. Not only are there not enough roads, but those that exist are not operated so as to develop their fullest utility. One has but to ride on elevated or surface cars at night or morning, when the great mass of workers are coming from or going to their daily toil, and witness the crowding and hustling for seats - and oft-times standing room - to become convinced of the inadequacy of transit facilities. A stranger is at once struck with the impediments to travel. There are no railroads where roads should clearly be, and those roads that do operate are slow, and, for a large part of the day, crowded and uncomfortable. For the residents of Harlem the elevated roads were at first speedy and commodious, but owing to the increase of traffic this has ceased to be so. A large part of the population of the city is at a positive disadvantage in crossing town and is compelled to take long, roundabout ways. Plainly, the means of transit are insufficient to meet the requirements of the population.

But that this insufficiency comes from no lack of inducement to build more roads is clear, because of the notoriously high dividends which the monopoly of a line of travel in New York city will pay on the actual capital invested. The fault must be sought elsewhere.

When a proposition is made to build a railroad through a populous district and application is made for a charter and for right of way there at once springs up strong opposition. Vested interests brook no competition, and the various corporations holding contiguous franchises are not only at cross purposes themselves but are strongly opposed to any scheme which will in any way deprive them of gain. A powerful lobby fights the new enterprise in the legislature, and land-owners along the proposed line are wheedled or bulldozed into protesting against the innovation. Much capital is thus expended unproductively at the outset, and before the cars get running more is wasted.

On Fourteenth street, for instance, there are a double set of tracks, whereas, a single set would be sufficient for all requirements. The Twenty-third street railroad, running from river to river, is no more of a convenience than one on Fourteenth street would be, which, notwithstanding the fact that the obstacle of the track already exists throughout almost the entire length of the street, is prevented because the ownership of the through franchise is divided up between different companies that cannot agree on a plan of operation. May be a more conspicuous example of this misuse of opportunity is furnished by the Broadway railroad. The cars, instead of running to the Battery, which, as the tracks are laid and the streets are clear for traffic, they might so, stop at Bowling Green, whence wayfarers, in order to complete their journey to South ferry, must take a stage. This inconvenience results from a collision of interests vested in the railroad and the stage line.

The people are not only called upon to suffer these discomforts, but are actually made to pay for so doing. The expense of impeding improvement is collected through the tolls, making in a year on each individual using the roads a very appreciable charge.

In addition to these is a still greater and grosser method of imposition, termed "watering stock." In order to hide their exorbitant profits these corporations, instead of paying very high interest on capital actually required to build and equip their roads, declare a smaller dividend on a much larger amount of capital, in this way evading the law decreeing that dividends shall not exceed beyond ten per cent. According to the report of the railroad commissioners, made from sworn reports of the railroad companies, the cost of constructing and equipping all the surface roads in New York city approximates sixty millions of dollars. But that this is a gross exaggeration of the value of the actual, tangible property, is manifest, and Mr. Tom L. Johnson, a well known railroad contractor in Cleveland, is quite prepared to build similar roads for twenty millions. It is impossible to ascertain the real figures from the published reports of the various companies, but some interesting peculiarities may be pointed out. Dividing the profits by the number of horses used by the line (for, all things else being equal, one horse does about as much work as another), and a surprising result is obtained. Of fourteen of the most important surface railroads in New York city that which proportionately appears to be the most profitable is the Forty-second street and Grand street company, which shows a profit of $288.14 per horse, though it is tenth in comparison of the amount of its track, and eleventh in the number of its horses. Next in order comes the Fourth Avenue company, showing $183.61 profit for each horse. The third is the Third avenue, with $176 per horse; the fourth, Christopher and Tenth street, §153.65; fifth Central Park, North and East river, $144.96; sixth, Sixth avenue, $142.43; and so on, until the twelfth in order is found to be the Broadway and Seventh avenue road, with its sixteen miles of track, most of which is through the commercial center of the metropolis, and 2,286 horses, which presents the comparatively small amount of $79.38 per horse. The Central Crosstown ostensibly makes a profit of $132.27 on each horse, and the Dry Dock, East Broadway and Battery, $109.69 ; the Second avenue, $96.04; Twenty-third street, $94.65; Eighth avenue, $86.98, and the Ninth avenue, $74.52. Thus it would appear that the Broadway road is only a little more profitable than the Ninth avenue, in spite of the well rooted popular belief to the contrary; and the incident may serve to show how absurd it is to attempt to regulate by law the profits of such a monopoly as a street railroad.

From what has been said the evils ensuing from the private ownership of the right to carry passengers along a public highway is obvious. It is as if some "gentlemen of the road" were permitted to set up business in our midst, modifying their methods to altered circumstances.

The true and the only way to supply the best service with the greatest economy is for the public to assume ownership and control of the railroads, and make them a department of the government, conducted as the post-office and the public schools are. Such a change would at once abolish all stock watering, and no such state of affairs as one line blocking another would occur. A great improvement would be made if reform went no further. But with all the great impediments that now exist out of the way, the building of new roads would follow as a matter of course, while, if the roads were not better made they would at least be built at greatly reduced expense.

The remedy which is generally proposed is public ownership of franchises - their operation to be conducted by private enterprise. This would doubtless alleviate the difficulty, but all the evils could only be overcome by public superintendence, as well as ownership, and the abolition of all tolls. After eliminating all profit the cost of collecting the tolls would be proportionately greater that before, which might be saved by abolishing tolls and running the cars free, doing away with conductors in the case of street-cars, and ticket-sellers and collectors in the case of the elevated roads, besides the army of clerks and officials attending to this branch of the accounts. Then much would be saved when building new roads by simpler construction of buildings and in various other ways. It is estimated that cars could be run toll free at an average cost of less than a cent for each individual.

The result of improving the railroads and increasing their number would, if operated free of toll, give a tremendous stimulus to the general internal business of New York and greatly add to the comfort of its people. The problem nowadays is how to save time in getting from home to the place of toil. Rents are advancing year by year, and to get comfortable living quarters those who have not the means to pay high prices are compelled to move further and further away from the business center. In this way, unless communication can be made with proportionate speed, this part of the population is at more and more of a disadvantage. The natural result of such an improvement would be to greatly increase land values. New York with its free railroads would be a desirable place to live in, and immigration would tend to rapidly swell the population, and in this way, there being a larger number of persons desiring the land of New York, land values would mount, and soon would eat up all the advantage that the free railroads had brought. Though the railroads were free rents would have increased. Now, as this increase in land values did not result from anything the land owners had done - for the price of a vacant lot along the line would be seen to have advanced - but was due to this public improvement, the just and proper course would be to appropriate the increase in land values to pay the expense of operating the road. Nobody could object to this course on the score of injustice, because the land owner would be no worse off than before, being called upon to pay only that part of the value of his land that grew out of the public improvement. This would really be but to extend the application of the law. When a highway is improved, such as drained by a sewer, graded or paved, the land adjoining, which is thus made more desirable, is taxed for the cost of the improvement, each lot in proportion to the advantage received - those near at hand most and those removed less. This is the law, though, owing to its technicality, it is often evaded.

When an elevator is put into a building a tax is not levied upon the people who use it. The knowledge that they have no stairs to climb make more people desire the building, and they are willing to pay more for it than for a building with no elevator. There is no need, therefore, for the proprietor to charge toll, as the cost of his elevator is counterbalanced by the higher return which his building brings him.

So, too, this tax on land values would be counterbalanced by the improvement which railroads operated free of tolls would bring. The gain to the present companies having franchises is a very small part of the disadvantage which their ownership works on the community in arresting development, and the adoption of this reform would not only clear away all impediment for future progress, but would bring about great public improvements at the expense of neither labor nor capital, but solely from land values - which are made by and belong to the community at large.