Ottumwa tri-weekly courier. [volume] (Ottumwa, Iowa) 1903-1916, 1907-01-15

tween the earnings of the passenger
and freight traffic. / do not concede,
however, that the proposal for two
| cent passenger fares is to be tested
wholly by any such criterion. l pre-
! fer to look at the earnings of the
roelroads in Iowa as a whole, and if
they are found to be more than they
should be it is not very material to
inquire whether a two-cent passenger
rate will or will not be. in and of
itself. profitable. The chief business
of railroads in this state is the trans
portation of freight, and it clearly
fore you last winter that they regard
passenger traffic as incidental, and
| do not attempt to make it the source
Of any considerable net earning.
The gross earnings of all the rail-
roads upon business done in Iowa for
the year 1905, not including inter-
urban railways, was S62, 1872, 800. In
ascertainlng these earnings Iowa is
given mileage proportion upon all
interstate traffic. 1t is not safe to &C
cept the report Of any particular rail-
way company respecting the amount
expended for maintenance and oper-
alton, inasmuch as the variety in the
methods of bookkeeping destroys the
value Of any one report. 1t is fair,
| however, to resort to averages, and
according to the computations made
by the interstate commerce commits
sion the average percentage of gross
earnings for maintenance and opera
| ton throughout the United States is
| a little less than 6S per cent. If we
assume SO per cent as the fair pro-
portion (and 1 am of the opinion that
the assumption will do the railway
companies no injustice) the net earn
| ings of our railroads upon business
done in Iowa for the year 1905 were
500, O93 1924. This sum will pay
6 per cent interest upon 1894 S92 3O4
| 1t will pay per cent interest upon
$287, $50 SAG. The last assessment
in the state at $249, 34S, $50. The ex-
ecutive council, however, chose to
apply the same proportion of value
as it believed had been applied to
farm property, namely, about four
f1fths. Increasing the value by the adj
dition of one fifth, the result is an
actual value of S299, 21S, 536. 1t will
be remembered, however, that in
reaching this value the executive
council was largely influenced by the
gross and net earnings, and in less
degree by the amount which had been
expended in the construction of the
| properties. 1t is manifest that when
you come to determine whether the
net earnings are too great you can
| not take as a basis a valuation found
ed upon such earnings, but must
adopt some other method. If il be as
serted that it is unfair to take the
| gross and net earnings of single
year, it may be of interest to inquire
what these earnings have been dur
ing the last five years.
In 1901 the gross earnings were
$50, O79. 943. 90; in 1902, $50, 1855, :
305.00; in 1903, $5S, 466, $40. 90; in
1904, s57, 3ss, s4s. 90 and in 1905,
as before stated. $50 1872, 3O7 90. The
average gross earnings for these five
years are $5s. 240, 34S 90. Using the
percentage for ascertaining net earn
ings heretofore mentioned, the result
is $18, 636, Oil. SO for the average net
earnings per year during the last five
! years. This sum will pay per cent
Interest upon 1910, SIS, 1s9. 90. It
will pay 7 per cent interest upon
S266 PAL SOL 90. These rates of in
terest are sufficiently liberal when you
take into consideration the fact that
practically one-half the capitaliza-
ton of railway properties is repre-
sented in bonds, the average interest
upon which is about 4 per cent.
The ascertainment of the sum upon
which the earnings of railway COM
panies should make reasonable re-
turn is not easy. If you accept the
basis presented by the actual invest
ment you can approximate the prop
er capitalization very quickly. l have
heard it stated by the representatives
of railway companies before the ex-
ecutive council, over and over again,
that the average actual cost of the
railroads in Iowa did not exceed $40, :
900 90 per mile. There are now 8, =
S27 main track miles in the state
which, tested by this theory of value
are worth $196, $40, 900. 90. The net
earnings of 1905 as you will observe,
were sufficient to pay more than 10
per cent upon such a valuation. The
years would pay 9 4S-100, per cent
upon this valuation. If you take the
cost Of reproduction as the proper
test, an average of $25, 900 per mile
Is about right. Upon this basis, the
railroads are worth $245, 675 900. 90.
You can compute in a moment the
percentage of interest which the net
earnings would pay upon this sum.
It will not be overlooked, of course,
that any considerable reduction in
earnings would, in all probability,
result. in reduction in the value
of the property for taxation.
submit these suggestions to you
to be reviewed by your mature judg-
ment, and to be used for the pur-
pose Of beginning an inquiry as to
the justice or Injustice Of any action
that you may take that will lessen
the income Of the railway companies
whether from the passenger or the
freight service. 1t is subject which
invokes high sense of responsibility
and 1t demands for its consideration
all the obligations OF an official oath :.
know that you will examine 1t, and
act upon 1t without fear, favor, pref
udice or oppression. For my own part
l am deeply convinced that a reduc-
ton in the passenger rate is fully
, warranted, and I therefore earnestly
. recommend the substitution Of a two
cent rate for the existing e-cent
rate.
| Freight Rates
What l have already said is suf-
fcient in SO far as the income of the