, 1889-05-02
THE o. II. & N. LEASE,
PRESIDENT ADAMS REPORT ON
1T IN 1887.
He Declared IL "Higl.ly Adyantsgeous''
Both TO the short Line and the
Union Pacific.

| The following extract from the report o
President Adams Of the Union Pacific fol
the year 1887, will be of interest at th,
present tune, In view of the discussion o
existing railway relations in the North
west:
The lease. though defective in certain
respects which wall be provided for In
supplementary agreement already per
fected, has proved highly adv 4ntageou,
both to the Oregon Short Line and the
Union Pacific. This may not at once ap.
pear In the published reports of the com.
panies. Not impro oably the Oregon Short
Line and the Union Pacific may be called
upon to meet an apparent deficit between
the surplus revenue of the Railway Il Nav
igation Company and the rental provided
IN the lease. 1t may, therefore. on the
face OF the returns, appear that the lease
Is burden rather than AN advantage TO
the advantages and disadvantages of such
q contract 1t must be borne in
mind that the real object to be
obtained is not 30 mucn surplus
OF revenue earned by the leased lines
themselves, over and above operating ex-
penses and fixed charges, as the control of
the business Of the leased liues by the
lessee company. In the case of the Oregon
Railway Navigation Company, the Ore.
gon Short Line and Union Pacific enjoy a
haul of nearly 1900 miles on the bulk OF all
interchanged traffic. IL this traffic were
to be diverted over another and compet-
ing line, the profit earned on. it during
this most exceptional haul would be en-
tirely lost to your company. While di.
rect.d over the tracks owned by your com.
pany, 1t IL, because of the distance it is
carried and the regularity with which the
business can be conducted. traffic of the
most profitable description. A close ex.
animation of the returns of the Oregon
Short Line and of the Union Pacific will
demonstrate this fact.
The foregoing proposition is one which
few persons ut all familiar with matters
connected with the operation of railroads
would deny. Nevertheless your directors
call attention to it, for the reason that
during the recent Investigation by the
United States commissioners there was no
feature Of the Union Pacific system which
was me q questioned, or which had to be
80 lab0. iously demonstrated. BY portion
OF the commission at least, the ground was
openly taken that no branch or leased line
can, save under most exceptional circum-
stan ces, be considered otherwise than q
burden on the mother or lessee line, un.
less its returns show that it earns profit
over all operating expenses and fixed
charges over the business done over its
own iron. Your attention has ready
been called to the fact that in he Case Of
the Oregon Railway Il Navigation Com
pany the bulk OF interchanged traffic, both
passenger and freight, is hauled l400
miles over the tracks Of the lessee compan.
panies. Yet the value of the traffic thus Sc
cured to the Oregon Snort Line and Union
Pacific nowhere appears a. separate
item in the returns. The same il true,
though in a less degree, of all the branches
ano connecting lines owned and operated
a. part of the Uunion Pacific system. An
examination OF the several returns of these
lines herewith submitted, will show that q
number of them failed during the past
year TO earn their operating expenses and
fixed charges, reporting an apparent de.
| fcit. Yet, with the possible exception of
the Denver. South Park d Pacific, there
| was probably no one of them the traffic OF
| which over the main lines of yonr company
did not return to it profit In excess, and
often largely so, of any deficit which had
TO be met. The value of tins branch line
traffic to the main line. irrespective of all
branch line earnings, has in the case OF the
Union Pacific been recently estimated by
the com ptroller, as the result of careful in
vestigation, at not less than $5, 10000 a
year.
| In view OF pOt6lOIt iekdi questiOn Ms W
| the power of the Union Paciuc t. guaran-
tee the fulfillment of the terms Of the lease
of the Oregon Railway Il Navigation
Company by the Oregon Short Line Of
January l, 1887. provision was especially
made in the lease for the joint manage.
ment of the two properties; and Thomas
J. Potter was agreed upon as the joint
manager for period of three. years from
that date. Mr.. Potter accepted the posi-.
( tion, and assumed charge of the two prop.
critics as vice. e.president Of each upon the
18th of May, 1857. Both companies i'm.
mediately felt the advantage of his skill.
full, intelligent and energetic handling,
and with thorough comprehension of all
the business conditions involved. The
traffic returns of the succeeding six months
justified the selection to the fullest extent.