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•^J- Railroad Income Still Unsatisfactory -0: 



A recent pamphlet of the Eailway Business Association demon- 

 strates that the income from the railway systems of the country is 

 still below that of 1910. According to the pamphlet the railroads 

 are stiU short of income and short of facilities. The pamphlet is 

 made up of two sections, one being devoted to income and the other 

 to facilities. 



Speaking of income, the report says that the current monthly 

 reports of railiray revenue and expense, if studied in the light of 

 1910 expenses, will afford business bodies important guidance in 

 adopting an attitude toward the proposed advances in eastern freight 

 rates. 



The Interstate Commerce Commission expressed the hope two years 

 ago that the roads would increase their income without any advance 

 in rates, and accordingly denied the advance. Since then complete 

 statistics have been published for 1910, 1911 and 1912, which show 

 that operating revenue was 1.4 per cent larger in 1911 than in 1910, 

 and 2 per cent larger in 1912 than in 1911. Yet the corporate in- 

 come available for improvements, and similar outlays was 20 per cent 

 less in 1911 than in 1910, and 15 per cent less in 1912 than in 1910. 



The railroads attribute this decrease in net income to rail operating 

 expenses, taxes and the debit which arises from balancing non-operat- 

 ing receipts against non-operating expenses, chiefly interest. 



One of the strongest reasons advanced by those publishing the re- 

 port for the insufficiency of the railway income in the past years is 

 the fact that the bond-buying public is turning away from railroad 

 securities to securities of other corporations because the latter can 

 raise their selling prices at liberty, while railroads' rates are fixed 

 by law. This is proven by the fact that new capital issues of steam 

 railroads listed on the New York Stock Exchange were, in 1912, 

 the smallest in ten years, while new issues by other corporations were 

 the largest of the decade. 



The report comments on natural impressions formed by the general 

 public based on the decrease for the fiscal year of 1913. It says that 

 some business men have asked whether the earnings of 1913 did 

 not meet the situation and render an advance in rates unnecessary. 



The bulletin points out that an inexperienced observer jumping 

 at conclusions may find, or think he has found, that operating income 

 for the eleven months of 1913 as compiled, which operating income 

 is figured at revenue less operating expense, less taxes, and amounting 

 to $3,396 per mile of line, is substantially greater than one or another 

 figure for eleven months of any previous year. From this fact the 

 same observer might predict that as a result of the operations of 1913 

 the railway system has realized the income prophesied two years ago. 

 The bulletin contends, however, that as a matter of fact these pre- 

 liminary returns will not bear any such interpretation, for operating 

 income has still to be cut down by large deductions not yet reported, 

 and estimates computed upon actual deductions used in obtaining 

 final figures in previous years tend to show that net corporate in- 

 come in 1913 did not rise to the level of 1910. 



In order to show the entire unsafeness of endeavoring to predict 

 preliminary deductions based merely on gross operating revenues, 

 the report outlines the various deductions which would have to be 

 alloAved for. The computer starts with a gross operating income 

 of $3,396 per mile for eleven months among the roads included in 

 the report. These roads are those having $1,000,000 or more operat- 

 ing revenue, which are the most prosperous of all the roads. When 

 the poorer lines are averaged in for the ultimate statistics this amount 

 is greatly pulled down. For instance, in 1911 the larger roads re- 

 ported average operating income per mile as $3,058 .for eleven 

 months. The ultimate figure for all the roads proved to be $163 less. 



Nobody knows how many miles of line will be included in the 

 ultimate statistics for 1913. The average annual increase in mileage 

 operated from 1908 to 1912 was 2.09 per cent. If this happened to be 

 the precise rate of increase in 1913 the mileage operated would be 

 255.611.13. If the mileage omitted from the income account should 

 be in the same proportion to the total mileage operated as in 1910, 



or 1.6 per cent, the mileage to be considered would be 251,521.36. 

 Operating income at $3,216 per mile would be $808,892,693.76, or an 

 increase of 5.5 per cent over 1910. 



Sums deducted from revenue after payment of operating expenses 

 are considered. Of this the biggest item is interest on funded debt. 

 For instance, new investment is made each year in each plant. 

 Nobody knows exactly how many miles of track there are, nor does 

 anybody know the aggregate tractive power of locomotives in 1913. 

 The enlargement of freight car capacity is another unknown factor. 

 This investment in track of rolling stock, together with investment in 

 steel passenger cars substituted for wood, safety devices installed, 

 grade crossing ^eliminated, roadbed and bridges rebuilt, grades and 

 curves corrected, terminals improved and extended, have together 

 created new charges against income, a large part of which is obli- 

 gatory interest on funded debt. According to the bulletin it will 

 take two years or so to determine exactly the increase in fixed charges. 



Thus the report goes on to say that the prophesied increase of 

 income, if recorded past averages for new mileage, new cars, and 

 increased locomotive tracting power hold good, has increased in 1913 

 to a loss in 1912 of 2.47 per cent. This occurs with an estimated 

 increase of 33,901 miles of track over 1910, 293,331,000 more pounds 

 of locomotive tractive power; 14,175,000 more tons of freight car 

 capacity, and an increase of 7,900,000,000 tons of freight per mile. 



The pamphlet points out the growing sentiment among big busi- 

 ness men regarding the relations of railroad prosperity with the 

 prosperity of laisiness in general, and this is the reason for the 

 publication of tliis summaiy in H^vkdwood Eecord. It says that 

 prominent business organizations in St. Louis, Cincinnati, Philadel- 

 phia, Pittsburgh, Baltimore and other large cities have decided to 

 eitlier favor or not to oppose higher freight rates whereunder the 

 eastern roads may provide better service. The report contains the 

 plea that shippers consider that the resources of a railroad during 

 the period of years are the average of the poor years and of good 

 years together, and asks that action should be based upon the known 

 past and not upon the half revealed present. It draws the word 

 picture of the national calamity' that might result in the midst of 

 busy times brought about by congestion of terminals, throwing into 

 idleness with their employes factories which could neither obtain raw 

 material nor deliver finished product. 



The section of the pamphlet treating of facilities tells what the 

 shippers of the raUroads are doing to minimize the necessity for 

 further facilities, but emphasizes the fact that they can not possibly 

 do enough. It says that with a net car surplus on August 1, 1913, 

 of 58,455 and a decrease from that date to autumn low supply equal 

 to the annual average decrease from August 1, 1908, to 1912, or 

 150,400 cars, the autumn net shortage in 1913 would be 91,945 as 

 compared with 87,000, the previous record of 1907. _This shortage 

 would be aggravated by a severe winter into a great national 

 calamitous congestion. 



It is urged that all endeavor to do their utmost with the present 

 transportation facilities, which are inadequate to take care of the 

 peak of the load. 



Commerce Court Abolished 



The long drawn out controversy regarding the Commerce Court 

 has at last been concluded by the vote of the House of Repre- 

 sentatives, which passed the urgent efficiency bill with the right 

 of abolishing that court, and the Bartlett amendment which re- 

 moves the offices of the judges of the Commerce Court. 



While it has been entirely evident that this would be the final 

 culmination of the controversy, it is beyond question one of the 

 biggest blunders made by any congress. It was frankly predicted 

 by one representative who advocated the continuance of the court 

 that the Democratic congress would be forced in two years to put 

 into effect a similar body whether it carried the same title or not. 



