The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1906-08-29
Railway and Engineering Review
Cuts in on Rail Controversy.
Discusses President RipIey's Sec
Ond Letter to KansaRs.
FACTS FOR KANSAS -
Says Ideas of Basis of TranspOr-
tation Charges Are Mistaken
Claims capitalization Cannot Be
Considered in Fixing Rates.
Gossip and Matters of Interest
in Railroad Circles.
FACTS FOR KANSAS"

Under the editorial heading some
More Facts for Kansas" the Railway
and Engineering Review discusses
President Ripley's second letter to
Kansas.
The. Review is a railway trade jour
nal. and the editor takes up several
arguments in regard to railway capital
ization and the basis for fixing trans
portation charges which Mr.. Rlpley
did not touch upon in his recent com
municatiOn. The Review says:
1t will be recalled that in our issue
Of August 4. we published an open let
ter from President Ripley of the AJcn-
fson Topeka & Santa F'e railway to
the Deople Of Kansas, in which he set
forth some reasons why two cent per
mile passenger rate should not be
obligatory upon the railroads OF that
state. In response to his invitation OF
criticism so many letters were received
as to make it practically impossible TO
take them up individually, and he has
therefore issued a second open letter
summarizing his answer thereto, which
letter we print in another column.
AS was to be expected, the over cap
ttalization bugbear occupies proml-
nent place in these criticisms and, as
is usual with such criticisms, the
measure used to sustain this charge Is
the value Of the stock Of the company
cause In 1895 the common stock of the
Atchison road could be bought for lit
tie or nothing and is now selling at
about par, It is argued that all the dir
ference between the prices on these
respective dates constitutes over capt.
talization. AS Mr.. Ripley points out,
large majority of the present stock
holders did not acquire their stock at
that time or at the reduced figure.
Many of them purchased way back IN
= n of 11l 70 II
excess of present quotations. In 1895
they paid an assessn ent of $40 per
share besides carrying the stock for
many years without dividend. It is
apparent therefore, that on the basis
of the cost of the stOck-as shown by
the quotations in Mr.. Ripley's letter
from one of his espondents-the
road is largely under capitalized; but
an argument based on such grounds is
of no value.
Allowing that capitalization should
rest upon any foundation other than
the wishes of owners, there are three
bases which are defensible, viz. origin
al cost, reproduction cost and earning
power. OF these either of the last two
is preferable to the first, but as a basis
for measuring revenue, neither is of
any value. Original cost is never de-
terminable; it continually increases as
long as the road exists. Reproduction
value is atisfactOry because of its
er Is even more variable The trouble
with this whole capitalization idea In
connection with railroads is that it
proceeds upon a wrong theory. The
popular notion that transportation
charges should be based upon the cost
Of performance plus a reasonable re-
turn on the investment, is all wrong.
Cost of performance can not be deter
mined in advance, and were it other
wise 1t would constitute a continually
II liz
able theory upon which transportation
rates can be formulated is tn e value of
the service; that is to say. value to the
party for whom it is performed which
is the antthesis of the cost of the ser
vice to the one performing it.
1t will readily be perceived that from
the standpoint of the value of the service
It makes very little difference what basis
Of capitalization Is employed The value
of the service in transporting a cOmmodi-
" between two given points is not affect
agency Transporting It is one million or
one hundred million dollars. so long as
What the traffic will bear properly ap-
Piled is the nearest approach to equity
vet discovered for determining transpor-
fauOn rates. This IS a very different thing
from charging all the traffic viii stand
1T brings into the consideration other in
ferests than those of the carriers The
adjustment of a rate on any c0rnn,odff1-
and between any two stations presents
fhe same questions as an ordir7ar,- e4,i@
interests of all concerned. Il can be
easily seen that under such conditions
the amount Of capitalization is of but lit
tie moment
Mr.. Ripley in his letter also refers to
the objection made by some of his CORE
epondents TO the interference of railroads
in politics. Why there is need of anv de-
Tense for such action is past comprehen-
sion. Politics is only another name for
government and certainly railroads are
as much interested and are under The
same bOunden duty to work for good gov
eminent as any other citizen TheV or
any one else are not exeusable in EMPLOY
ing fraudulent means to carry their ends
and despite all that is alleged to the con-
frary it Is not believed that in recent
years. at least, they are more culpabla in
this respect than the ordinary citizen The
live stock interest Of Kansas is a large
and important one. It does not besifafe
upon occasion to Interfere in politics.
and It would be derelict in its duty If il
did Jsually-althOugh unwiseIy-ft is
against the railroads but that only con-
Etitutes all the more reason why the rail
roads should interfere in politics in SELF
defense. So long 8 railroad EMPLOYEES