Omaha daily bee., 1910-09-23
Managers Testify that Unit of Cost of
Operation Increases with Volume
of Traffic.
RAISE OF RATES WILL NEVER END
Commissioner SAYS Problem Must Be
Solved on Other Basis.
MENACE TO WESTERN COUNTRY
Constant Raise in Rates Would
Burden Newer Communities.
ANSWER OF THE SHIPPERS
TO WESTERN COUNTRY
ANSWER OF THE SHIPPERS
II II COntended that Actual Income
is Concealed by Manipulation of
Stocks ana Capitalization
of Earnings.

CHICAGO Sept 22-Rallroads must ad-
just their economical difficulties by some
other means than by asking shippers to
contribute the funds therefor, in the
opinion of Interstate Commerce Commis-
sioner franklin K. Lane, as expressed dur
ing the hearing here today.
Railroad officers and attorney sought
to learn IL the commissioner implied there
must be readjustment of the method of
financing big carrier systems, but Mr..
Lane ignored the efforts and continued to
ask the witness. to whom he had directed
his startling remarks, pointed questions
on the amount and disposition of earnings
of the railroad in question. the Chicago,
Milwaukee & st. Paul.
The witness whose testimony evoked this
display of the commissioners judgment OF
the merits of the railroads present plea
for higher rates was William NJ. Ellis,
commerce counsel for the st. Paul Ellis
had testified that his company was suffer-
| ing from too much business, that the in
crease had meant an increase in the unit
| of cost which grew faster than the unit
of income, thereby threatening the yearly
surplus of earnings above payment of
dividends and cost of operation and main
tenance.
Lanes Statement.
| Commissioner Lane said:
"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
railroad officials. l regard It as a menace
to the country If the rates constantly are
to be increased. We must work out this
problem on lines other than by the
proposed methods 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 a result of the inquiry
into the st. Pauls profits, particularly
from the public lands acquired in recent
years MIR. Ellis denied the commissioner
suggestion that the roads optimism wher
1t built the transcontinental extension hac
turned to pessimism now.
IF it had not been for that road" h,
said I'VE would have had nothing from
operation to add to our surplus last year
That extension added about $2,5OOOOO to tn,
surplus, in addition to the s25S9,573 from
other sources. Our total surplus is abou
$50,OO00OO." He then told the commissioner
that expense cost was overtaking earnings
and would continue as long as more traffi
was handled as must expected.
Percentage of Profit Less.
In answers to questions put to him MI
Ellis said that II the gross income mex
year went to $79,00O0 900 from this years fig
ures Of s64.0OO,OOO the percentage OF prof
would be less.
DO you mean to say the cost of doin
$ the additional $15,O0OOOO in business woul
. be equal to that sunni" was asked.
q II mean the percentage of profit woul
not be so great" said Mr.. Ellis.
Attorney II. C. Lust, repre-! enting tn
= Illinois manufacturers. asked:
''Mr. Ellis you say your gross incom
last year from other sources was 5000 OO'
what are those sources?"
Chiefly the Puget Sound division" h
answered.
THE ST. Paul owns all the stock, and
1910 received 100000 in the bonds" intel
D rupted Commissioner Lane again.
y DO you mean to say the Puget Soun
!. branch paid all it's operating expenses n
~ the ten years and in addition s6,OOOOOO il
lie terest on Its capitalization
is well, that was interest for a year an
IS half. However, it also earned a surpll
of nearly 100000"
How was the Puget Sound division pa
l. for?' asked Mr.. Lane
by bond issue Of $1OOOOO.OOO sold
l. stockholders"
"And in addition to the surplus a D.
cent dividend was paid on that issue la
year2"
v Yes"
IN About slSOOO,OOO profit all told; that
It on each N,OOO,OOO or so paid you received
D. this time s1.OO0OO07''
e. That's not quite correct. You see Il
p st. Paul owns the surplus of 100000
l. the Puget Sound line in addition"
Lyon Asks Questions.
Attorney Frank Lyon for the commisstC
interrupted to ask;
IF that surplus was added to the ear
= ings OF the St Paul it would more tha
- : make up for the added cost of labor?"
L 1T would"
~ Then l would like to call the attenti,
CONTINUED on Second Para1 -