The citizen-Republican. (Scotland, Bon Homme County, S.D.) 1???-19??, 1911-07-06
DAKOTA FARE LAW
is HELD VALID IN
MASTERS OPINION
Special Inquiry Into Passenger
Rates Results in UNFOLDING
21a Gent Fare Law.

Sioux Fails, S. D., July 1.~-John a,
Gates, appointed by Judge Garland, of
the United States court, on August 10,
1909, as special master in Chancery to
take the testimony in the case involv-
ing passenger rates in South Dakota,
and make a report and findings in re-
CARO- to the same, today completed his
work and mad public his findings.
Both a 2 cent and 2h cent rate are
involved in the case, and the substance
OF the report of the special master is
TO the effect that a 24a cent rate might
run the gauntlet of the higher courts
out that a straight Q cent passenger rate
appears to be out of the question in
South Dakota at present.
In his report Special Master Gates
takes direct issue with the recent de-
cision of Judge Sanborn in the Mime
sofa rate cases. In his decision Judge
Sanborn assigned the value and COM
mon expense on a gross earnings basis,
while Special Master Gates makes his
findings by adopting the direct ex-
penSe basis.
Only the Chicago G. Northwestern
Sallroad company is directly involved or
concerned in the case and only the
business transacted within the state of
South Dakota by the Northwestern
company. Both the freight and nassen-
Ger business was considered.
Two and One-Half Cent Fare.
Included in his report is a table
showing that at cents per mile,
the percentage of net income to valu-
alton for the year ending June 80. 1908,
which is taken as a basis. was $50; at
~ cents per mile, $50 per cent; and
at : cents per mile 3.94 per cent.
In the Minnesota rate cases Judge
Sanborn held. figuring on a gross earn
lngs basis, that the railroads were en-
Titled to z per cent. In other rate
eases it has been decided that the rail-
roads We're entitled to 6 per cent.
while in the Consolidated Gas company
ease the United States supreme court
held that the company was entitled to
, per cent. The percentage of net
Income to valuation found by Special
Master Gates, is based on the freight
and passenger business of the North
western company wholly within the
state OF South Dakota.
In view of the findings in reference
70 the z cent rate, placing the per-
centage of net income to valuation at
but S.94 per cent, it is doubtful if the
l1gher courts would decide in favor of
a 2 cent rate. but with percentage
Oh net income to valuation of $50, esti-
mating at a passenger rate of 90 cents
per mile, it is believed the courts may
sustain q ~ cent rate in South Dakota.
Master Cuts Expense Account.
The expenses assigned by the special
master to the business of the North
western company in South Dakota are
less than claimed by the railway com
pany and somewhat higher thar
claimed by the South Dakota board of
railroad commissioners.
IN ms report the special master SAYS:
Table Z Gin which, among other
thlngs the percentage Of net income
10 valuation is set forth) has been pre-
pared by the master Upon the basis OF
us of expenses to the state.
upon the complainants' basis OF appor-
tlonlns expenses between the freight
ana passenger service y and by
operating expenses between
intrastate and interstate passenger ser
wee on the gross earnings basis and
by assigning outside income, taxes and
iuatio on the gross earnings basis.
Let IT be constantly borne in mind that
the problem is not to determine what
me operating expenses were for the
year 1908 under the tariff rate of 2
cents per mile (only in so far as it is
R step in the process, but the true
problem Is to find what the expenses
YOU'D nave been. first. if the rate of
la cents per mile had been in effect.
ana, second, If the tariff rate of 2 cents
per mile had been in effect.
Under this table 7. IL annaars +he+
me net income from the freight service
under the passenger rate of 8 cents per
mlie was S102,323.76. If the passenger
raIe nad been reduced to 2 cents per.
mlle the freight net income would, as
Shown by said table 7, necessarily have
been reduced to a deficit of s44eS11
although as a matter of fact freight
earnings would not actually be in any
way affected by the reduction in the
passenger rates. The passenger earn
tnss would actually have been reduced
oy the sum of $331,367.44, but by the
use or gross earnings the net passenger.
income would only have been reduced
W me sum of $235, A SO, and the net
iIelgnt ncomes would have been re-
uuceu py the sum of S106, S21.S7.
l., Ihls not only unfairly throws a nor
lion of the loss upon the freight service
out also by the reduction in the gross
earnings per cent entails an additionsl
loss Of Slo,947.39 in the outside income
apportioned to the state.
Gross Earnings No Factor.
IT seems to the master that these
results conclusively prohibit the ,se Of
gross earnings as a factor In cases ~ -
TINS KIND. The $10,0 900, 900 examnle
SHOWN by Justice Brewer in the Ton1n-
kins case, 176 U. S. 1877, clearly indi-
caleu the same absurd results, and the
niasler therefore feels justified in fol-
Lowing Justice Brewer ii the I7omnkins
case and in declining to follow the
love case and the Minnesota rate case
una the other cases on this subtect.
u regard TO the mar of Judge
|Sanborn in the Minnesota rate case
quOteu. cases NAV in6eed
De imagined in which this basis does
not produce persuasive results the
master is of the opinion that no case
a be imagined where such absurd re-
SUITS would not appear unless the
freight earnings passenger earn
tngs We're reduced or raised in eyactlv
the same proportion. '
IN the Minnesota rate cases rne re-
huced passenger rates were in force in
the years from which the tables were
by the master in that case,
He showed by note appended to his
tablets that the freight losses, as they
would have been under the reduced
rates winch a not gone into effect
We're not considered by him in the
makeup of his tables. Consequently
the masters report in those cases did
NOT disclose the glazing absurdities that
arc shown In this report"
CONSIDERING DlSBARMENT
OF DELL RAPIDS ATTORNEYS