The record-union., 1893-02-08

the level plains of the other territory
named. But it has been shown that labor
ana materials here are much greater than
IN the East. Again, the uso of capital
has always demanded and still re-
cures higher interest here These
condltlons combined, greatly increase
the actual necessary cash cost of railway
construction in this State compared with
the State of Kansas and its neighbors. On
these points, which are paramount be-
cause they are necessary to consider be-
1ore railroads can be constructed here, Mr.
Leeds has offered no evidence. He has in
no case shown what were the profits oi
the roads here, or whether the gross earn
lngs afforded a fair return upon the actual
cash investment.
Fourth-IheSe three propositions being
Pro0en, should be quite sufficient, and de-
nto1tStrdtes the necessity for some reduc-
tl0n: This is Mr.. Leeds conclusion.
With full confidence 1 rest the judgment
OF the proof of his proposition. and the
demonstration he would draw from them,
on the honesty, the justice and the
patriotism OF this committee and the Leg
lsIature of this State.
CAPITALIZATION.
As to the capitalization of the Southern
Paclflc lines, Mr.. Leeds has furnished
your committee with the following in
formation:
The earnings of the roads within the
state OF California, including the entire
system of the Southern Pacific Company.
were S9,O2l per mile; that covers /, ,49S
miles OF road; that the interest on bonded
uept pad by the Pacific system on some
OF that was SS,675,5S AZ. / have since
learned that the capitalization on that
3,4So miles of road was, for funded debt,
Sl4f, 494 800, or 81, ,305 per mile the capital
sLock OF the same, Sl65, ,3l1 300, or 81, ,255 81
per mile; and an aggregate capitalization
Tor the two, SIS, 800 30 per mile"
Again, in referring to these figures he
states: That represents 3,49S miles of
railroad for which you are expected to
put up the necessary money to pay the
Interest on capitalization amounting to
5O9,Soo, 800, or SSS, 900 average per mile'
ana IN another reference to the subject
he says: Il believe that the bonded in
QebtedneSs of these roads is very much
IN excess of the cost OF construction"
Mr.. Leeds confusion of facts, errors of
figures and false conclusions in these state
ments are fairly characteristic of the popu-
lar mlslnformation and prejudice which
exist on this subject. He confuses his
remarks regarding the roads in Califor-
ma, the entire system, the lines covering
the |, ,49S miles of road, and the interest on
bonded debt paid on some of that: so
that to understand his statements one
must refer to the source from which he
has derived them and try to locate the
ngures. From such reference to the
annual report of the Southern Pacific
Company for 1891. find that the interest
on bonded debt stated as being ''paid by
the Pacific system on some of thai" I"
So,6I5,5SI Is, covers not only some but all
the Pacific system lines in the States and
territories OF oregon, California Nevada,
Utah, Arizona and New Mexico. The
3,49S miles of road includes the lines
OnpratpH hU tho Snnfharn So
pany in California, Nevada and Utah.
The capital stock named covers these last
named lines, and in addition thereto the
242.5l miles of the Atlantic and Pacific
Railroad between Mojave and The
Needles. The bonded debt named is ap-
parently intended to cover the same lines
as the capital stock, but by an error it
overstates the amount to the extent of
Sl2, 7S6,OOO. Through the error of divid-
ing the amount of capital stock by the
wrong mileage, the rate of capital stock
per mile is in error. Correcting the
errors, both in the wrong mileage and the
wrong amounts for the bonded debt il
should be reduced from S4I ,305 to S35. .2O9
per mile of road. But aside from the
errors OF his figures, Mr.. Leeds state
ment that you are expected to put up the
money 10 pay the interest ON capitaliZa-
ton amounting to $3.50 per mile" is
not true in fact, and conveys a grossly
CA1OhSOhS ISSSAOu LIS sum III not
IN error as to the amount would represent
the issue of both bonds and capital stock
on all lines operated by the Southern Pa
cltic Company in California, and the Cen
Jral Pacihc lines also in Nevada and Utah.
y one OF these California companies have
ever paid dividend on their stock. This
stock, amounting to S97, 81 800, has there
fore no more relation to the past or pres
ent earnings of the roads than if not
share OF 1t had ever been issued The
only dividend paid by the Pacific system
is two per cent. for the Genital Pacific line
The much greater portion of the earnings
OF this road are from through traffic, the
rates on which are fixed by competition.
and so are entirely unaffected whether
dividends are paid or not. During the
past seven years the dividends paid for
this road have only been earned in one.
Operated on its own merits the dividends
could not have been made; they were
paid from the guaranteed rental under
the lease to the Southern Pacific Com
pany.
As to the bonded debt of these roads.
Mr.. Leeds believes that lit is yery much
IN excess of the cost of construction.n
This is but an extreme expression of a
common belief which Mr.. Leeds found
upon his advent here, and adopted on
hearsay evidence, as he has testified in
the Shively case. But like some other
forms of faith, investigation will show
that its foundation is not on fact. There
seems also to be quite common belief
abroad. that the bonded debt of the
Southern Pacific Company's lines is in
creasing from year to year, so as to make G
the interest charge on them an increasing
tax to be collected from the traffic carried.
The following statement showing the
original and the present bonded debt OF
each OF the lines comprising the Pacific
system of the Southern Paciiic Company
Will throw some light upon this subject: