The Evening statesman. [volume] (Walla Walla, Wash.) 1903-1910, 1907-02-23
RAILROAD FINANCE.

| VI lIluStI dliOIl VI lIlodSIh ain oe'o
financial management the Southern
railway may be taken as an EXAM
pie The railroads have nearly all
been paying good dividends in the
past few years. They have been
handing back to their stockholders sat-
isfactory returns and this upon capt.
talization not representing, in some
cases, more than the half part of
money actually put in. but rather value
inflated at one time and since sup
posed to have been equalled by en-
hancement of actual value of proper
| ty. The Southern railway was made
up of number of railroads put into
one. AS obligations We're assumed
by the Southern, old issues of stock
were either cancelled by the absorbing
company or their issues exchanged for
issues of Southern railway stock, and
capitalization in the gross was swelled
enormously. In the days shortly after
the organization of the big company
| it was spoken of by conservatives as
waterlogged.
But the country went into great
prosperity Even though the capitali-
cation in the gross was millions in ex-
cess of what the roads embracing the
Southern railway system might have
been duplicated for, all property adj
vanced and this difference was offset
| in part, says the Minneapolis Journal,
Inv fhn riC hn
country. Moreover earning power
| makes a most effective measurement
| of value. and so, when the Southern
| railway began to pay its stockholders
a dividend of one per cent on the pre-
ferred stock, it was taken to show that
earning power equal to capitalization
had at last been attained to the extent
that the preference issues were COW
| cred, and there seemed even pOssibil-
| ity that the common stock would some
| day have a value on a dividend basis,
and so everything was lovely.
| When by gradual increases the divi-
dend rate on the preferred was adj
vanced to five per cent a year every
| one connected with the property felt
good, and there seemed no doubt that
stability at that rate was assured for
| an indefinite time.
But recently there was a change.
Mr.. Spencer, the president, was killed
in an accident on his own road. Mr..
Finley has taken hold, and one of his
first official acts was the issuing of a
statement showing that the road is in
bad condition; that it needs an i'm
mense sum of money to keep itself up
in efficiency and an enormous sum if it
is to build up with the country; and
it is expected that, the time being ur =
favorable for the sale of a large block
of new securities, millions will be Dor
rowed on short time notes.
This is all right from the financial
standpoint. 1t makes financial activ-
ity. But to the student of conditions
relative to the railroads and the rights
of the people to expect fair service
this is interesting. In the past few
years the Southern railway paid its
stockholders, on its inflated capital,
$2S,60O,000 in dividends It is a natur-
al question whether the management
did not know all the time that more
money was needed to keep the road up,
and that in proportion to the stinting
and the holding down of expenditure
J from earnings for betterments, require
ments in the final count would run th>
: heavier. And if this $2S,60o,0O0 In
steadstead of being paid OUT in divi-
| dends had been put back into the prop