It would lead too far afield into details of mainly local interest to reproduce here the carefully worded conditions under which the bonds above noted were to be issued. In this as in many similar cases the documents are drawn up with the greatest care and a profusion of detail.
For example, the mortgage which was given by the Milwaukee Electric Railway and Light Company to secure their general and refunding mortgages 5 per cent gold bonds, due December 1, 1951, devotes twelve pages to a definition of the conditions under which escrow bonds can be issued by the trustee, including a description of the documents and guarantees which the company must furnish to the trustee with refer ence to the property involved, and an exact definition of the manner in which the net earnings of the com pany shall be calculated.
4. Commercial commercial analysis of a public utility business is similar to the analysis of municipal bonds already described in the chapter on Public Bonds of Domestic Origin.
A city of large size is safer than a small place. Growth is important, since the earnings of public utili ties generally increase faster than the increase of population. A high average of prosperity is a favor able circumstance. The negro population of south ern cities should be disregarded to a large extent in making estimates of probable patronage. It makes a difference which branch of public utility service a company renders. The safest and most profitable services are gas and electric light and power. If a company renders more than one service it is desirable to know the proportion of revenue derived from each source. It is very satisfactory when the report of a company gives information which permits the prog ress of each service to be traced thru a series of years.
The American Power and Light Company, in its report for 1915, states the sources of gross earnings as f ollows: In addition, this company gives data which permits the progress of each line of business to be followed : Such information is likewise given for each con stituent company, as well as data on the length of the distributive systems and the annual production of gas and current. This, together with separate balance sheets and income accounts and a consolidated bal ance sheet and income account, serves to show how a brief report can be made thoroly satisfactory.
5. Earnings in the population of cities does not decrease in periods of depression, and as the services of public utilities are necessities or quasi-necessities, it follows that the incomes and earn ings of these companies are little affected in bard times. A tabulation of net earnings for a few com panies is here given showing the bad year 1908 in comparison with the good years 1907 and 1909.
As would be expected in so stable an industry, the risk of receivership is small. Statistics show that the average amount of securities of gas and electric light companies in the hands of receivers from 1882 to 1911 inclusive was 0.37 of 1 per cent of the total amount outstanding. For national banks it was 0.32 of 1 per cent, while for railways it was 1.67 per cent and for industrials 2.07 per cent. In September, 1916, it was estimated that one-tenth of the mileage of steam railroads in the United States was in receiverships, while there were practically no electric light and power or gas companies in receivers' hands.