Evening star. [volume] (Washington, D.C.) 1854-1972, 1874-12-14
The Msr Of the Roads.

The threatened war among the railroads 10
row formally declared. The "Ssrstoga CON-
biEation" pennsylvania road, Erie and New
York CENTRALLY having failed to bring the Bsltl-
more and Ohio road into their project TO raise
freight prices, have now gone on the other tack,
and propose to cripple the latter road, or bring
1t to terms by reducing prices. They open the
campaign by declaring = general reduction of
I've cents per cwt. upon fOurth-class freights
embracing -four, grain and bulk meats. The
Baltimore and Ohio company would seem to be
fighting sgsinst heavy OddJ, asthe Grand Trunk
railroad, heretofore 81 Ally OF thu Baltimore and
Ohio road, has joined the combination; but the
Baltimore road came out so successfully last
summer in its tarOst-cutting fight with the
Pennsylvania road that 1t will probably 90 into
this contest with good deal of confidence. In
estimating the ability OF the Baltimore and Ohio
road to maintain the war; it il necessary TO count
mp its resources and standing. The ability OF
the Baltimore and Ohio company to make and
maintain low rates is not overestinated,
although in comparing its financial condition
with that Of other roads erroneous views are apt
TO be entertained In 1873 thsexhibit OF the net
earnings OF the rival roads, as compared to in
debtedness upon which retlrn must be male,
either in the form Of iEteres: or dividends, was
as fellows:
Dsbi. Net ssrniags.
NtW 1OE NChlA n t4t II y SbbbB >ID,t 81
Erie ................ 126 455, O52 10 547S'627 81
PennsylvaIis...... III, 2g0. 2J9T3 1892, 40 p
Baltimore & Ohio. IS 57S,O52 50 $685. %
This comparison places the Baltimore AMI
Ohio road in q very favorable light, but it Is in
certain sense fslsc'Ous. What is meant by
this assertion will be shown by inquiry into the
nature OF the "suTPlus fund" concerning which
there seem. to be 50 much misspprehension.
This surplus, when the report tor 1873 was
made, amounted to S29. O3j, 13l.lS. and had been
created by investing the undivided earnings of
the road In improvements If rOai-bsd, increase
OF rolling stock, constructing new works, and
securing valuable connections. Under the pol
icy Of other roads these investments are repre-
sented by stock dividends, on which interest
must be paid, and which therefore go to swell
the capital account, or are, in other words, the
"water," concerning which there is such pOpu-
lar complaint. The report for 1874, which was
submitted on the 18th inst, shows that this sur
plus fund now amounts to 32,1A,1GO15. IL
this indebtedness was in such a shape that re.
turns would have TO be made upon 1t in the
comparison for 1873 made above, the report of
the Baltimore and Ohio road, instead of show
ing $500 l4S 90 net earnings to $50 S OBJ 80
of debt, would have made the following exhibit.
Debt. -SG5 GIL les IS Net earnings IS OI6,I
"a showing not 40 good ~ eitner the Pennsyl-
vanis er the New York Central could make. Az
it is, however, the Baltimore and Ohio enters
into competition for the Chicago trade with a
fund of So IA 100 Is, on which it has not ONLY
70 earn 10 dividends, bat which, invested in
permanent Improvements, affords means, over
and shove the nominal capital Of SIC I'll $40,
with which to pay the interest upon the funded
debt and the capital stock The policy has been
subjected 20 criticism as being unfair to the
stockholder, the argument being that all the
earnings Of the road belong to the stockholders,
and If any portion Of these earnings is invested
in the road, certificate OF the indebtedness,
should be Issued; such, for instance, as stock
dividend. The stOcf nolders of the Baltimore
and Ohio have been, however, satisfied With q
semi-snnual dividend Of i've per cent, finding
their interest in the surplus fund TO be repre-
sented by the large premium their stock COM
msnds il the market, and the financial aiyan-
tsges conferred upon the road