The Washington times., 1907-06-28
RAILROAD RATES
ON NEW BASIS
AT BIG HEARING
Continued from First Page.)

Mr.. Adams. Nothing less than law
can determine that. The question, at
any rate. is not raised here in such
manner that 1 can be expected to an
swer It,"
Elk Parte Statements.
Theh Mr.. Adams proceeded 10 show
that the valuations which the Great
Northern and Northern Pacific have In
troduced in this case. 10 show that their
properties are not overcapitalized, are
ex parte statements whose accuracy and
relevancy II Is impossible, from the ma
ture of the case. TO judge. He declined
10 assume that these valuations had
been made or demonstrated in any such
fashion as to entitle them TO considera-
ton In the case.
This led naturally TO the conclusion
that before any valuation can be given
weight IL must be Of official standing,
made by methods that are clearly un-
derstood and by people who are not 10
be suspected of prejudice for or against
any interest; in short. the valuation by
Government authority such as Presi-
dent Roosevelt has proposed to have
made.
Methods of Hill Roads.
Mr.. Adams discussed the financial
methods OF the Hill railroads. giving a
remarkable exposition OF them, sup
ported by figures and other data from
financial publications which are COM
monty understood TO have access TO
inspired information. In the fiscal year
19O5-O6, for instance. one of the Hill
roads paid a per cent dividend. which
took about $4,000, 600 But. Analysing It's
surplus account. its expenditures for
permanent improvements charged
against operation. etc. Mr. Adams
made the remarkable showing that in
that very year the company actually
earned just about so. 600 900 net revenue
instead of the $4,000, 900 that II paid. Part
OF II went 70 surplus and part 20 perma-
nent improvements and betterments
Inc policy OF covering up surplus has
twenty years. said Mr.. Adams.
Well what becomes of the surplus
in the endg' demanded a commissioner
Sell Stock to Stockholders.
Mr. Adams. in answer. analysed tn,
capitalization of the Hill roads Mr.
HIS policy" he said. "has been to LEI
his stockholders at intervals have STOCK
/ issued. to which valuable rights at
| tached. that is, the new stock would bC
/ issued at par. no matter what outstand
/ ing stock might be worth at the time
! The difference between the par value
/ and the market value would be the valu,
| Of the rights For example IL tn,
/ stock in the market was 135. and tn
\ stockhOlder were given his pro rats
/ share OF new issue at par. he wal
/ getting gift OF IS per share. II th'
/ new stock went at par while outstanding
| shares were worth in the market 80. tn
| right was worth $50 a share: and il
j fact. these issues have been made
/ par when the stock was worth in tn
market all the way from i35 to $50. Tn
| payment OF charges on these new issue
! absorbs the surplus"
Comparison With Pennsylvania.
Mr. Adams compared the PennsyI
vania with the Great Northern financia
methods. The Pennsylvania. he said
when it wanted money sold its securi
ties for what they were actually worth
and put every dollar OF the proceed
into the treasury. for use in developin
the property. The Hill plan was to Sc
securities for less than par, to IN
| stockholders. in order to get surplus on
Of the treasury. 1t was by such method
| as these that the Hill roads have bee
I made to appear TO earn only modes
! returns, when in truth they have bee
piling up immense wealth. And the un
| reasonable rates charged TO Spokan
! and other interior points have helpe
10 make up the immense earnings.