The Birmingham age-herald., 1910-09-23
Commissioner Lane Causes Sensation In the Hear
 ing on Rates
TOO MUCH BUSINESS IS
 PLEA OF ST. PAUL ROAD
Mir. Lane Asks Some Very Pointed Questions of St. Paul Attorney Which Leads to the surpris-
 ing Statement

Chicago, September 22.-Railroads must adjust their economical difficulties by some other means than by asking shippers to contribute the funds therefor is the opinion of Interstate Commissioner Franklin Lane, expressed during the hearing today of the western railroads who seek to obtain a general raise in rates over their lines.
 As railroad officers in testifying had declared that there were only two fac- tors in economically perfect railroad management-the amount of rates charged and the method of capitalization and financing-the elimination of the rate question by the commissioner aroused considerable interest among the railroad men and attorneys present. They sought to learn if the commissioner thereby im- piled that there might be readjustment of the method of financing big carrier systems. but MT. Lane ignored these ef- forts and continued to ask the witness 10 whom he had directed his startling re- marks. pointed questions on the amount and disposition of earnings of the rail- road in question, the Chicago, Milwaukee and St. Paul.
 The witness whose testimony evoked this display of the commissioners judg- ment of the merits of the railroads pres ent plea for higher rates was William Ellis, commerce counsel for the St. Paul. Ellis had testified that his company was suffering from too much business that the increase had meant an increase in the unit of cost which grew faster than the unit of income, thereby threat ening the yearly surplus of earnings above payment of dividends. cost of opp | eration and of maintenance.
 Commissioned Lane then said:
 Lane Springs SeBsation
 AS the country develops there will be
 more and more freight delivered to you and as conditions are now the rates con- stantly must be increased according to the argument of railroad officials I regard 1t as a serious menace to the western coun- | try If the rates constantly are to be in- creased. We must work out this prob lem on lines other than by the proposed method of raising the tariffs. If not there is no time when we can say the
 maximum has been reached" | This unexpected development in the | rate hearing came as a result of the in- quiry into the St. Pauls profit particu- larly from the Puget Sound extension acquired in recent years. MT. Ellis denied the commissioners suggestion that the roads optimism when 1t built the trans continental extension had turned to pessmism now 'If 1t had not been for that road" he said, i've would have had nothing from operation to add to our surplus last year That extension added about $2.5oo00o to the surplus in addition to g. .5Ss,573 from other sources. Our total surplus Is about s5o,0O0,00O.'' | He then told the commissioners that | expense cost was overtakng earnings. and would continue so long as more | traffic was handled, as might be expect | ed. Tn answer to questions put to him | Mir Ellis said that If the gross income
 next year went to s79,0O0.Oo0 from this I years figure of $64,0O0.0O0 the percentage | of profit would be less. "Do you mean to say the cost of doing the additional s15,0000o0 in business would | be equal to that sum?' was asked Profit Not So Great | "I mean the percentage of profit would not be so great" said MT. Ellis. | Attorney H. c. Lust. representing tho | Illinois Manufacturers association, asked: MT. Ellis. you say your gross income last year from other sources than op- eration was s9.000,0oO. What are those sources?"
 "Chiefiy the Puget Sound division" he answered. 'The St. Paul owns all the stock and in 1910 received s6,00OO00 in- terest on the bonds'' "What?" interrupted Commissioner Lane again. DO you mean to say tho Puget Sound branch paid all Its operat- ing expenses the first year and in addi- tion se,ooo.ooo interests on Its capitaliza- tionY'
 "Well, that was interest for year and half. However," continued Mir. Ellis, 'ft also earned a surplus of nearly | S3,0oo. .0Oo"
 How was the Puget Sound division paid for?" asked Mir Lane | By bond issue of s100.000,000 sold to
 stockholders"
 | Seven Per Cent Dividend And in addition to the surplus per
 cent dividend was paid on that issue last year?"
 Yes"
 l About s1s,Ooo.Oo0 profit all told: that is, l for the $7,000,000 or so you paid out you
 received in this space of time $,ooo, oo0?" That's not quite correct. You see | the St. Paul owns the surplus of $2,200,- | ton"
 Attorney Frank Lyon. for the com-
 mission. interrupted to ask:
 ''If that surplus were added to the
 earnings of the St. Paul it would more
 than make up for the added cost of | 1abor?"
 'It would"
 "Then I would like to call the att | tention of the commission to the ab-
 solute failure of the company to in- clude that sum in the surplus given in
 their latest report to the commission" | "Mysterious Cause'
 Now" said Commissioner Lane, re-
 suming, we come to what I am be-
 ginning to call the mysterious cause
 of the apparent increased cost of oper- ation. What Is it?"
 'I'll tell you" was the reply. Every session of Congress or legislature has decreased the earning efficiency of the | --~--~----~----------~--
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