Baltimore Transit Co. v. Public Service Commission of Md.

• Decision Date: 24 March 1955
• Docket Number: No. 106,106
• Citation: 206 Md. 533,112 A.2d 687
• Parties: The BALTIMORE TRANSIT COMPANY v. The PUBLIC SERVICE COMMISSION OF MARYLAND. Joseph ALLEN, People's Counsel, and Mayor & City Council of Baltimore, v. The PUBLIC SERVICE COMMISSION OF MARYLAND and The Baltimore Transit Company. COUNTY COMMISSIONERS OF BALTIMORE COUNTY v. The PUBLIC SERVICE COMMISSION OF MARYLAND and The Baltimore Transit Company.
• Court: Maryland Court of Appeals

Page 533

206 Md. 533

112 A.2d 687

The BALTIMORE TRANSIT COMPANY v. The PUBLIC SERVICE COMMISSION OF MARYLAND.

Joseph ALLEN, People's Counsel, and Mayor & City Council of Baltimore, v. The PUBLIC SERVICE COMMISSION OF MARYLAND and The Baltimore

Transit Company.

COUNTY COMMISSIONERS OF BALTIMORE COUNTY v. The PUBLIC SERVICE COMMISSION OF MARYLAND and The Baltimore

Transit Company.

No. 106.

Court of Appeals of Maryland.

March 24, 1955.

Rehearing Denied May 13, 1955.

Richard F. Cleveland, and Henry H. Waters, Baltimore, for Baltimore Transit Co.

Joseph Allen, Baltimore, for People's Counsel.

H. Donald Schwaab, Asst. City Sol., Baltimore (Thomas N. Biddison, City Sol., Edwin Harlan, Deputy City Sol. and Francis X. Gallagher, Asst. City Sol., Baltimore, on the brief), for M. & C. C. of Baltimore.

Walter R. Haile, Asst. County Sol., Towson (Carroll W. Royston, County Sol., Towson, and Edward Paul Swiss, Asst. County Sol., Baltimore, on the brief), for County Com'rs of Baltimore County.

Charles D. Harris, Baltimore, for Public Service Comm. of Maryland.

Before DELAPLAINE, COLLINS, HENDERSON and HAMMOND, JJ.

HAMMOND, Judge.

The Baltimore Transit Company sought permission from the Public Service Commission to increase its basic fare from 17 cents to 20 cents, the zone fare from 8 cents to 10 cents, the student fare from 8 cents to 10 cents, and the limited stop fare from 20 cents to 23 cents. After hearings which extended over sixteen months, the Commission passed its order permitting an increase in the basic fare from 17 to 18 cents, keeping the limited stop fare at 20 cents, and raising the two other fares as requested by the Company. The Company asked the Circuit Court of Baltimore to vacate the order and enjoin the Commission from enforcing its provisions. The People's Counsel and the Mayor and City Council of Baltimore, jointly, asked the court to forbid any increase in fares. Baltimore County sought the same relief as the People's Counsel and the City. The three cases were consolidated, and heard together. The court dismissed the three bills of complaint, the effect being to affirm the order of the Commission.

Appeals were entered by the transit company, the People's Counsel and the City, and Baltimore County; they will be referred to hereinafter as 'the Company', 'the People', and 'the County', respectively. The Company's contention is that the action of the Commission was unreasonable and unlawful and amounted to confiscation of its property. The People's basic position is that the Company's service was so bad that no increase in fares was required by law or should have been permitted. The County says that a basic fare of 18 cents is unwarranted and even if it were warranted, that the zone fare and the student fare should not have been raised more than 1 cent, so that the same ratio would be maintanied between the base fare and the special fares as has previously existed. On behalf of the Public Service Commission, the appellee, it is argued by its general counsel that the rate base it used was fair and the return it allowed thereon reasonable under the evidence in the case in which the increase in fares was sought and a companion case, the so-called service case, the record of which was incorporated in the fare case. It says that the evidence and the experience of the Company combine to show that the fare it allowed will provide a reasonable return in relation both to rate base it determined to be fair and the quality of the service the Company renders, making due allowance for the difficulties under which street railways necessarily now operate, and the diligence and skill of the management, or lack of it, in meeting these difficulties. It suggests earnestly that all of the appellants should await further results under the new fares, both as to return to the Company and service to the public.

The background of the service case and the setting in which it and the fare case were conducted are apparent from the record. The inadequacies of urban mass transportation in Baltimore, as well as elsewhere, are not new. There has been a continuous decline in the number of riders. From 1945 to 1952, the decrease was approximately 41% throughout the country. In Baltimore, it was 39%. There are said to be five chief causes of this decline which has been accompanied by a decrease in service and popularity. The operators of the transit systems says that the decrease in riders induces the decline in service. The public says that the decrease in service and efficiency induces the decline in riding and public goodwill. The first of the five factors is the tremendous increase in the number and use of automobiles. In the period referred to, automobiles in Baltimore and other cities increased about fifty per cent. Nationally and locally, the number of passengers who ride on the lines of urban transit companies has decreased in the ratio that passenger car registrations have increased. The automobiles, which take away the riders from the transit systems, block the streets and, to a considerable extent, cause the conditions which lead to slow and faulty service. The second factor is the widespread acceptance of the five day week in industry and commerce. The third is the growth of suburban areas. Decentralization of trade and suburban living has increased the use of automobiles and lessened the use of public transportation, as has the development of television. Finally, decreasing patronage and increasing costs have required numerous increases in fares and each increase adds to the otherwise caused steady decline in riders, a further decline, the size of which is in direct proportion to the change in the rate of fare.

In 1947 the Commission conducted a hearing as to the service of the Company, which brought about improvement in some particulars. In October, 1952, the Commission, on its own motion, ordered a further investigation of the service and facilities of the Company to determine whether it was complying with the mandate of the statute to furnish such as are 'safe and adequate and in all respects just and reasonable', Code 1951, art. 78, § 27. The service case consisted of extensive investigation by the general counsel of the Commission, testimony and exhibits of civic groups, large department stores, riders generally and the Company. Some months later, the application by the Company for increased fares was filed. Both the fare case and the service case terminated in opinions and orders of the Commission filed July 28, 1954, almost two years after the service case had started. In its opinion in the service case, the Commission set forth that the first report of the general counsel had shown the Company to lack a sincere desire to provide good service, that schedules were unrealistic, that there was an ever present eagerness to blame inadequacies on traffic conditions, and that the program of cutting maintenance expenses had been carried to unreasonable limits. It found that traffic conditions were responsible for much of the bunching and slowness of movement of vehicles, both fixed wheel and free wheel, that some of this could be avoided by diligent and adequate supervision, and that a new peak load formula for controlling the number of passengers allowed on a vehicle should be required. It further found: 'That with respect to the service now being rendered by the Company, while the service on an overall basis has improved since the investigation was ordered by this Commission, yet there remains considerable room for further improvement * * * there has been an improvement during the past year, nevertheless, there remains much to be accomplished. It is the plain duty of the Company to improve its service and to maintain the same at a proper standard. The Commission will insist that the Company take such steps as may be necessary to accomplish this end.' An appropriate order was entered.

In the fare case, the Commission recognized, as do the parties here, that under the Maryland statutes and decisions, a regulated utility must be allowed a reasonable return on the fair value of the property used and useful in the public service. Since the decision in Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 64 S.Ct. 281, 88 L.Ed. 333, the courts of some States have felt free to abandon the fair value test. See, for example, Utah Power & Light Co. v. Public Service Commission, 107 Utah 155, 152 P.2d 542. This Court, in Chesapeake & Potomac Telephone Co. v. Public Service Comm., 201 Md. 170, 93 A.2d 249, the latest case on the subject, reached a contrary conclusion. We decided there that the fair value test is explicit in the Maryland statutes, as the earlier decisions had made plain, so the ghost of Smyth c. Ames, 169 U.S. 466, 18 S.Ct. 418, 42 L.Ed. 819, still walks in Maryland. This being so, a finding of a fair rate base and the setting of a reasonable return thereon are requisite. Both the Company and the Commission took rather oblique approaches to these tasks, particularly the establishment of the fair value of the Company's property. It may be said that while both paid due respect to the Maryland rule, actually the philosophy of the Hope case exerted its influence in that both were interested mainly in the end result. The Company seemingly had decided as a starting point that annual net operating income of $2,000,000 was needed to maintain the corporate style to which it would like to be accustomed. To show how the 20 cent fare would produce this, it exhibited pro forma statements for years ending June 30, 1954 and January 31, 1955. These are arrived at by taking the known passenger totals, reducing them by the steady 'economic decline' from factors independent of rate of fare, estimated by one expert at 3% and by another at 4.3% a year, and again reducing them by the 'resistance factor', that is, the decline in riders which results from each one per cent increase in fare, set at from .29%...