The record-union., 1896-01-18
TO RAILROADS.
II Grows Out Of Conflicts Between In.
diVidualS.
The Mistaken Idea Abroad About Who
Will Pay the Debt to the
Government.
CFrom the San Francisco Post.)

(From the San Francisco Post)
Whenever the question of the exten-
sion of the time for the payment of the
debts due by the Pacific railroads to
the Government is discussed there is
somebody to say that the shippers
must pay the debt; that the roads have
no other resources than their earnings
by freights and fares: and that there
fore the shippers will have to pay an
increased amount in order to meet this
increased obligation.
1t will perhaps be a surprise to our
readers to be informed that this is not
true. The shippers are already charged
a rate sufficient to pay the interest on
the first-mortgage bonds and interest
on nearly all of the second-mortgage
bonds at ? or per cent.
The Thurman funding bill was passed
in 1878 Under its requirements, the
Central Pacific Railroad Company had
to pay about 100000 per year to the
Government in discharge of the second
mortgage. If the shipper has to pay
this, it is legitimate to inquire Did the
rates go up by reason of the Thurman
Funding Act?" The answer is not far
to seek. Rates decreased steadily from
1873 to the present tine
The reason for this is that the rates
of transportation are not based upon the
amount of bonded Indebtedness of a
railroad. The Central Pacific Railroad
Company cannot obtain more than it is
now charging. There are limitations
placed upon its power to charge more
by the competition of other lines
There are railroads in the United States
which have retired their bonded indebt-
edness completely. The rates charged
for service by these roads is the same as
upon the roads whereon there rests
bonded Indebtedness. The fact is that
rates of railroad transportation are cons
trolled very largely by the value of the
service they perform in carrying goods
and commodities, as we'll as passengers.
There is a limitation found in the value
ot the article at the point where the
freight originates, and the value in its
hnal market. If a rate is made which
makes it improbable to move the
freight, the freight will not move, and
&c matter how great the bonded indebt-
ecness might be, the railroad COM
panies could not charge a rate incen-
slstent with the movement of the
freight. If they charge rate so high
that but little freight moves, they lose
money in that direction. They must
make the rate which will produce the
maximum movement, because a large
volume of business carried at a low rate
is more profitable than small volume
carried at a high rate.
The story, therefore, that the rates
on the Pacific railroads must be raised
to meet the requirements of annual
payments under an extension bill is
simply not true. Nor do we believe that
under Government ownership the rates
would be less. The principal demand
made upon the revenues of a railroad
is the cost of operating. This is borne
out by the annual statements of any
railroad. Whens the Southern Pacific
Company earns $46,000000 per annum
that simply puts forth the fact that it
cost S40,0O0,OO0 for operating and fixed
expenses. But the operating expenses
amount to S40,000,000 Under Govern
ment management the operating ex-
penseS of the Pacific railroads
would be increased in a. far
greater degree on account of the
interest to be paid by reason of a
bonded Indebtedness. But the Govern
ment would have to have interest on
itc money, and it would have to charge
rate that would enable it to pay back
to its treasury the sums of money it
has invested, or it must forego entirely
the collection of either interest or prin-
cipal. This it will not do. 1t is obvious,
therefore, that under Government man
agement the rates of transportation by
the Pacific railroads would not be less,
but would probably be more than they
are now, and chiefly because it would
cost more for the Government to oper-
ate it than it would cost any private
corporation.
The assertion that an extension of
the time for the payment of the debt
viii occasion an increase of rates is
simply measure of hostility to rail
roads; that hostility grows out of con-
f1icts between the railroads themselves
and individuals whose interests they
antagonize. 1t is almost wholly per-
sonal in it's origin, and the fuel which
feeds it's fires is personal hostility.