The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1899-09-06
TOM L. JOHNSON'S START
HOW THE STREET-CAR MAGNATE
BEGAN TO MAKE MONEY.
A Wise Head That Saw Fortunes I'm
Trolley Lines, and Got Them Out
for Himself and Friends.
Louisville Letter in ST. Louis Globe-Demo-

increases in the earnings of the street rail-
ways. From New York to New Orleans and
from San Francisco to Boston there is the
same story of gains over last year and all
other years. In some cases the increases
amount to over 100 per cent. The July net
earnings of the Columbus, o., railway
showed a gain of 119 per cent. For the
seven months of the year just ended the
road made net earnings sufficient to pay
per cent. upon the 100000 Of stock, and If
the remaining five months keep up at the
rate of June and July another per cent.
will be earned. Last year the Louisville
City Railway earned just $4,000 more than
in 1897, and in the seven months of this year
the receipts have exceeded those of the
same period Of last year by $4,000. which
alone is over per cent upon the common
stock. The New Orleans City Railway
gained $4,000 in July.
1t was a favorable saying of the late A.
v. Dupont. of this city. one of the earliest
and shrewdest of the operators. who made
immense sums by buying up roads and
equipping them with electric power, that
the street always were the first to feel
the effects C panic and never showed
recovery until the working classes got fully
employed. The working people are the chief
patrons of the street-car lines. When en-
ployment is plenty and wages good they
take a street car to and from their work,
even II they have to go only short dis
lance. Their families travel about the city
to shop and visit and the sights. But
when work falls off and the laboring man
has to save. his street-car fare is the first
item of retrenchment. His family stay at
home and go nowhere that they cannot
walk The jingling of the nickes In the
fare boxes becomes intermittent instead OF
a constant rattle, and street-car stocks
cease to be the favorites of local specula-
tors.
BEGAN AS OFFICE BOY.
Particular interest is taken in street rail-
ways in Louisville, for the reason that this
was the early home of Tom and Albert
Johnson, the Du Points, ]. B. Speed, III. II.
Littell and others, who early recognized the
enormous earning powers of the city lines
and were the first to avail themselves of
the opportunities for profit opened up by
the employment Of electricity instead of an
imals as motive power. Tom Johnson made
his start in the world as an office boy in
the old Central Passenger railway office.
and he was taught all he knew by A v. Du
Pont, who was his employer. Tom Johnson
has made his millions out Of franchises
since then, but the Du Points, j. b. Speed.
Hardin Littell and others here have been
associated with him in most Of his enter
priseS. All have made fortunes. Their op-
erations have been on nothing like the scale
of the big Widener-W Whitney Elkins synd-
cate of to-day, but they started earlier and
were remarkably successful. These men
laid their plans, and, buying out the old
companies. electrified" the railway lines
ILL.,; st. Louis, Mo-: New orleans. Cincin,
natl and Brooklyn. Then they put a mort
gage on them as heavy as could be foated
which were sold with the bonds. The capt.
talization was always enormously sed
above the old values of the properties, but,
as rule. they kept within what would be
the earning capacity of electric roads after
few years of development. IT was their
knowledge of the wonderful increase in traf-
made in the operating expenses by electric
ity that taught them that they could safely
risk investments in which ordinary business
men could see no profit. In due time the
bonds and stock would rise and they could
either sell out at large profits keep in
vestments acquired at very low prices, but
which were sure to become very valuable.
In almost every case they were successful
in building up fourshing lines They failed
at Springfield, ILL.,. because that city was
too small and grew too slowly, and they
failed in st. Louis. because they sold out too
early In Cincinnati they bought a franchise
that was really not In existence, and there
and also in Buffalo, Columbus and St Louis.
| they made money by the millions. When
| some Of the largest stockholders were citi-
zens of Louisville, who got par for stock
they bought around 80, and on which they
had always received good dividends. They
are large owners of Columbus railway,
which is now worth 102, and which sold as
low as AZ in 1897. The increase in the values
menSe.
EFFECT. OF CONSOLIDATION.
A. v. Du Pont, one Of the Delaware fam
| lily of powdermakers, was the real head of
| this body Of financiers after Tom johnson
had grown away from them. He was an
old bachelor, whose heart was wrapped up
In the Central Passenger Railway, one OF
| the competing lines here. The other line
was the City Railway, whose chief owner
was A. H. Davis, of Syracuse but which
| was managed by Hardin H. Littell Littell
| had worked his way up from a clerkship to
the SUPPLEMENTARY, and had put every dol
lar that he could make in the stock of his
INES peginning to buy when the 500 shares
were worth but IS, and the first mortgage
| bonds were only 49,
Davis had invested heavily in the City
Railway when the enterprise was very un-
profitable, and he continued to put money
| into 1t when 1t seemed to every one that it
was being thrown away. His road was able
| to pay Its bond interest only in monthly in
stallments, but he kept extending the lines
obtaining new and valuable franchises from
| the city for nothing, until he had about
| $4,000 invested. Finally the tide began to
| turn. The City Railway and the Central
Passenger lines were consolidated ten years
ago, the STOCKS OF eacn corporation being
bought up at about $3.50 a share. The ag-
gregate cost of the lines was $1,000 OOe
which seemed an enormous price, but 1t was
| Immediately doubled and tripled in the sale
of securities. The way in which it was done
was a good sample Of street-railway finan-
ciering.
syndicate was formed, headed by Clark
& Co., of Philadelphia, and Seligmar e. Co
of New York, that bought the old roads
With the announcement that the system
would be made an electric one, a per cent
mortgage Of $1,000, 900 was floated. This rep
resented the actual cost of the lines proba-
OF preferred and two and two-thirds of
common shares We're offered a bonus with
each bond. AT first 81 900 of preferred
stock was fioated and 600 of common
stock. The increase of capital was at least
two for one, but the promoters quickly sold
| their mortgages, clearing at least 81. 900 900
on the deal. The bonds and preferred
shares quickly found buyers in the best
class of investors and soon took rank as
from the preferred shares was used to cleo
| trify the lines, this city being one of the
first In the world to use electric motors The
speedier method of transit caused a great
increase in traffic and a decrease in operat-
| ing expenses, in addition to which the price
of electric motors and other equipment soon
fell to one-third the cost at the beginning
| The road earned its fixed charges on 5000
| 600 of bonds. the operating expenses and
| the dividends on the preferred stock from
| the start. besides handsome surplus
which has been steadily put into the prop
| erty at the rate of 100000 a year In con-
| sequence OF this the bonds are now selling
at 119. the preferred stock at 10 and tbs,
common, on which no dividends are paid at