The Guthrie daily leader. [volume] (Guthrie, Okla.) 1893-1996, 1910-01-15
ALLEGED
FIA[L|C|ES
SHOWN UP
s4A.-4
STATE ATTACKS RAIL
ROADS FORMULA OF
COMPUTATION
REVENUE BASIS THEORY
COMPLETELY DISCRED|TED
Gross Errors Exposed By At
toTney GensTal in Examlna.
lion Of Witness

The revenue basis used by the fall
roads in their formula of computing
the relative cost of operating inter
state and intrastate trains upon
which the railroads have relied upon
to win the Oklahoma rate case in the
Federal court was yesterday and TO-
day shown up by Attorney General
Charles West in the rate hearing now
ia progress before the corporation
commission as illogical and unfair
in the cross examination of Genera
Auditor Seelig, OF the Katy whc
was very frank in his testimony.
Attorney General West completely
discredited the revenue basis theory
and exposed its gross erIors, one al
ter another, which were admitted by
Auditor Seelig, who testified that nc
matter what rates were charged IN
Oklahoma the railroads could still
show loss to the courts under the
method used in compiling their form
ulas and affidavits of revenues and
expenses.
Concrete examples. that is to say
figures based on Santa Fe and Katy
revenues were used by the attorney
general In his cross examination
Auditor Seelig is an accountant o.
long experience and practical rail
road training and through his testi
mony it was ascertained that the rev
enue basis was illogical and absurd.
The revenue basis applied tc srelgh
traffic on the Santa Fe for the yeal
ending June 80, 1909, resulted as fol
lows:
First. the rate of strictly intrastat'
freight revenues to total freight rev
enues (including a proportion OF IN
terstate) is 14.07 per cent.
On a, straight revenue basis tn
cost of doing intrastate business
would be 4.07 per cent Of the tota
freight expenses.
If this extra cost for doing intra
state business is so per cent create
the result would be to apporlion 10
per cent of the total freight train eS
penses TO intrastate business. thereb
reducing the cost OF the intrastat
business Ssh per cent and reducing
the cost Of switching and car servic
"A per cent.
Auditor Seelig's Testimony
The testimony OF Auditor Seeii
showed that by working the revenu
basis out in accordance with Judg
Brewers reasoning in the South Ds
kota case II discloses that If the rev
enue basis is taken to ascertain tn
value of railroad property used IN u
terstate traffic, the value OF the prol
erty would decrease In an accordanc
with a decrease in rates. II the pres
ent rates prescribed 20 per cent 2
the total value to intiastate train
for Interest return, and assuming tina
the rates had been reduced. the re'
enue basis would then assign app@0!
imately five per cent of the value
the property to inirastate traffic.
The fallacy OF the revenue bas'
was clearly shown in an algebralc e
ample In the testimony by Captal
Lee, chief engineer of the Oklahom
commission. 1t appears that the Fee
eral Judges passing upon similar ca
es did not detect the g'oss errt
which exists in the revenue bas
theory. The revenue basis, II use
in the appor.ioning of operating e
penses in connection with the exll
cost theory of the roads, would ne
er show a fair interest upon the van
Of railroad property in Oklahoma, a
cording to the commissions expert
II rates were increased two or thr'
hundred per cent above what the
are at present such rates would u
show fair return upon the propert
If Judge yandeventer's formula no
used by the roads were used
Revenue Basis And Actual Expense
The revenue basis would increa
the actual expenses in about the san
proportion that the increased rat
would increase the revenues, cons
ouently any expense ascertained
such a basis is unreal and obvious
false.
The railroads are relying upon I
revenue basis which have met wi
the approval Of the Fe6eral cour
with the exception of the opinion rt
dered in the Nevada rate case, Will
is identical with the Oklahoma ca
the Southern Pacific Railway co
pany vs.. Baritone.
In the contempt case heari
arainst the Santa Fe Thursday befc
the Con,mission Statistician Peabo
of that road testified that he did J
think there was anything TO the r
crre heeis and IN his previous tel
,uony in the rate hearing ne said