The Birmingham age-herald., 1912-04-11
Opinion of Judge Thomas C. Jones
 In Annulling State Rate Laws
CONTINUED FROM PAGE 8,

rier. At first view it may appear sur prising, at least to ordinary observa- tion that it costs relatively much more to do the intrastate than it costs to do the interstate business in the aggregate. The explanation is that the intrastate business generally involves short hauls with many stoppages aad in less than carload lots; while the reverse is the case with the interstate business which Is generally through traffic with rull loads. few stops, and for much longer hauls. It is evident that there is more profit in full loads, long hauls and few stoppages than in the reverse. Another difference in the relative costs of the two traffic arises from the fact that the cost Is composed of two classes or ltems-those affecting distance or haul age, and those not affecting distance or non-haulage or terminal charges It IS estimated that 90 per cent of 30 mile haul Is made up of non-haulage cost but the non-haulage cost is uniform that is, 1t does not increase with tho length of the haul; it attaches alike .o intrastate and interstate shipments Let us illustrate this: A terminal charge al the point of starting, say is sl per toih or any sum- Now if we take an intra and an interstate ton starting at the same time on a journey, the intrastate ton will arrive at It's destination al, say 10 miles, and there Will stop ana incur another terminal charge, say or $1 or any other sum. The interstate ton goes its journey, say, of 200 miles and stops in another state. Now the initial terminal charge of s1 in the case of the interstate ton is distributed on zoo miles of transportation. The intra- state initial terminal charge and the final terminal charge are distributed on a transportation of only 10 miles. It is 4.,fr -ko# f.1r,H 1z .aFr cnly a small fraction of the cost per mile of terminal charges that the in- trastate ton is subjected to. Thus 1t is universally recognized that the cost of transportation relatively diminishes with the increase of distances, for 1t is well known that local traffic takes more time, more fuel, more wages, more wa ter, causes more wear and tear, and has less loads than the through traffic ana greater terminal charges per mile. It Is therefore recognized by all who have in- vestigated the subject that though the same rates are charged on the same character of business in each service, road may make profit on it's interstate business and at the same time sustain loss on its intra state commerce.
 As to the question of what per cent of the value of the property used as a common carrier the complainants are entitled to earn, an answer Is hardly pertinent in this case, as to the intra- state bushes, since 1t appears that there is in fact practically no return. But the question is important in the view taken of it by counsel for respond ents. They insist, as pointed out above, that the intrastate business is coupled with the interstate business and if the whole business yields a proper return the carrier should be satisfied though the intrastate business is done at loss, and that buyers of bonds never con- slider the income on part of the prop erty. This, however, is not a logical view. It is settled that if intrastate commerce is distinct as to rates from interstate, it must be distinct through out and that state statutes regulating rates must have reference only to the intrastate proportion of the value of the property, Smyth vs. Ames, 169 U. S. ACC.
 In reference to what is a proper re- turn on railroad property, I cannot oo better than quote from the report of the railroad securities commission recently transmitted to Congress by the Presi- dent, In dealing with the direct ques- ton it says in Sec. 30, page 36:
 We hear much about a reasonable return on capital A reasonable return is one which under honest accounting and responsible management will att tract the amount of investors money needed for the development of our rail- road facilities. More than this is an unnecessary burden Less than this means a check to railroad construction and to the development of traffic Where the investment is secure, a reasonable return is rate which approximates the rate of interest which prevails in other lines of industry. Where the future is uncertain the investor demands, and is justified in demanding a chance of added profit to compensate for his risk We cannot secure the immense amount of capital needed unless We make proe- its and risks commensurate. If rates are going to be reduced whenever div idonds exceed current rates of interest investors will seek other fields where the hazard Is less or the opportunity greater. In no event can We expect railroads to be developed merely to pay their owners such return as they could have obtained by the purchase of in- vestment securities which do not involve the hazard of construction or the risks of operation"
 The whole question. was elaborately discussed in Central uf Georgia rail- road vs. Railroad commission of Ala bama, ct all, 161 Fed 925, wherein 1t was held that railroad companies i'm Alabama were entitled to be permitted to earn a net profit of per cent per annum on the value of the property em- ployed by them in intrastate business so long as the business was done with out unjust discrimination and at just and reasonable rates.
 The Maximum Rate Act
 On the 11th of February, 1907. Acts Alabama 1907. D. 80. the legislature passed law enacting that the freight rates of railroads obtaining on Januarv l. 1907, for intrastate transportation should be fixed as the maximum ar rates to be charged. This act is one of the series enacted at that time to regulate rates in Alabama
 The proof shows that the rates it the date mentioned were unremunera- tive. and did not yield fair return to the carrier. They were fixed as to the greater part of complainants intrastate tonnage to meet a particular occasion, viz: that of enabling th- iron industries of Alabama to compete in the markets with their respective products, and the occasion having passed. the carrier might have desired to adjust rates to changed circumstances, and certainly necessary to yield a fair return for transportation there was an undoub ted right to change them. Although the rates may have been the result of the carriers voluntary act, this would not prevent them from being confiscatory when they became fixed by statutory authority. The argument of respond ents in these cases is that these rates should be increased so as to keep the statutory rates of the Eight Group Acts from being confscatory This is a con- cession that they themselves were con 1scatory under the schedule of Janu- ary l, 1907, which the proof clearly shows them to be.
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