Los Angeles herald., 1910-09-23
LANE SAYS ROADS
MUST MEND WAYS
Commissioner Declares Shippers
Must Not Be Taxed to
Uphold Dividends
CONSTANT RAISES MENACE
Corporation Witnesses Assert
Increased Business Means
Reduced Profits
CONSTANT RAISES MENACE
Associated Pressl

CHICAGO, Sept. 22.-Railroads must
adjust their economical difficulties by
some other means than by asking
shippers to contribute the funds there
for, in the opinion Of Interstate Com
merce Commissioner Lane, as ex-
pressed during the hearing today
Railroad officers and attorneys sought
to learn if the commissioner implied
there must be readjustment Of the
method of financing the big carrier
systems, but Mr.. Lane ignored the eff
forts 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
was w. r. 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 in
come, thereby threatening an early sur
plus of earnings above payment of div
idends and cost of operation and OF
maintenance.
Commissioner Lane then said: "As
the country develops there will be
more and more freight delivered to
you, and as conditions are now the
rates constantly must be increased ac-
cording to officials. I argue 1t is a
menace to the country if the rates con-
stantly are to be increased We must
work out this problem on lines other
than by the proposed method of rails
ing the tariffs. If not there is no time
when we can say the maximum has
been reached"
EXPENSE AND EARNINGS
This unexpected development came as
result of the inquiry into the st.
Pauls profits, particularly from the
public lands acquired in recent years.
Mr.. Ellis denied the commissioner S
suggestion that the roads optimism
when 1t built the transcontinental ex-
tension had turned to pessimism now,
"If 1t had not been for that road, -
he said, 1--WE would have had nothing
from operation to add to our surplus
last year. That extension added about
$2,500.000 to the surplus, in addition to
the $2859,S53 from other sources. Our
total surplus is about S50,O00, ,00O."
He then told the commissioners that
expense cost was overtaking earnings
and would continue to do so as long as
more traffic was hauled.
In answer to questions Mr.. Ellis sai6
if the gross income next year went tt
$79,000,000 from this years figures o.
$64, 900, 900 the percentage of prof
would be less.
"Do you mean to say the cost O.
doing the additional $15000,000 in bust
ness would be equal to that sum-" wa:
asked.
'I mean the percentage of profit
would not be so great" said Mr.. Ellis
Attorney H. c. Lust, representing the
Illinois manufacturers, said:
GROSS INCOME sWELLED
'Mr. Ellis, you say your gross in
come last year from other sources was
$9,OOO,OOO. What are those other
sources?"
Chiefly the Puget sound division" ("
he answered.
"The st. Paul owns all the stock, and
in 1910 received S6,000,000 in the bonds,'
interrupted Commissioner Lane again.
do you mean to say the Puget sound
branch paid all its operating expenses
for ten years and in addition $6,000,000
interest on its capitalization?''
''Well, that was interest for year
and a half. However, it also earned a
surplus of nearly $3,000,0O0."
How was the Puget sound division
paid for?' asked Mr.. Lane.
"By a bond issue of $1O0,O00,00o, sold
to stockholders"
Anu III duultlOH 10 Iilo surplus, IL y
per cent dividend was paid on that is
sue last year?"
Eyes"
about $1S,OOO,OO0 profit, all told; that
is, each $7,OOO,oOO or SO paid you re-
ceived in this time $1,000,000?"
"That's not quite correct. You see,
the st. Paul owns the surplus of $2,-
100000 of the Puget sound line In addi-
tion."
COST INCREASE MYSTERIOUS
Attorney Frany Lyon, for the COM
mission, interrupted to ask:
"If the surplus were added to the
earnings of the st. Paul it would more
than make up for the added cost OF
labor?"
"Ir would"
''Then 1 would like to call the atten-
ton of the commission to the absolute
failure of this company to include that
sum in the surplus given in their latest
report to the commission"
'Now," said Commissioner Lane, re-
suming, 1--WE come to what / am begin
ming to call the mysterious cause OF
the apparent increased cost of opera
ton. What is it?"
"I'll tell you," was the reply. every
session of congress has decreased the
earning efficiency of the dollar eXpend-
ed upon LABOR, Elgnt-nour Gays, SIX
teen-hour telegraphers' limitations, re-
strictions in regard to the rest hour, all
these have cut down dollars eff1cien-
cy 1 still say labor Is the big factor in
increased cost"
Previously Mr.. Ellis had admitted
his company in the last ten years had
sold several millions of dollars worth
of stock to stockholders at par when it
was quoted in the open market at from
$240 down to $3.50. and the stock had
paid Z per cent dividends.