Harrisburg telegraph. [volume] (Harrisburg, Pa.) 1879-1948, 1914-04-02

Pennsylvania, teStified that charges
TO operating expenses on the Pennsyl-
yania system east of Pittsburgh were
s24,S55.624 in 1910 and $29.411, ,210
in 1913, an increase of 1873 per cent.
He said that expenses for maintenance
of way during 1913 were much greater
than ever before and probably would
remain at the present high level be-
cause of large increases in wages;
the policy of regulatory bodies, in
creased demands of the travelling and
shipping public, the necessity for a
higher standard of track structure and
roadbed on account of heavier equip
ment and traffic. and the policy of
eliminating grade crossings, establish
ing various safety devices and sys-
TENS, Strengthening lines and similar
works. He indicated. also. the higher
cost of rails. ties and materials used in
deepening roadbeds. He dwelt par
pliances, demanded both by law and
public sentiment.
Retrenchment Necessary
President Rea said emphatically, in
a carefully prepared statement, that
not only the Pennsylvania. but all
American railroads, were confronted
with the necessity of retrenchment.
which might prove serious unless they
were permitted to increase their net
incomes. Said he:
Unless the gap between receipts
and expenditures can be widened, We
must begin to retrench, and retrench-
ment must begin on betterments and
improvements not directly necessary
to the movement of trains. We should
be very reluctant to do this as 1t
would be to run counter to our ira
ditions and practices of half CEN
tury. and We are sure that 1t would
not be in the public interest. and we
do not believe the public desires it.
Public Lends Support
Now we have as much public sup
port as can possibly be given to a plea
almost national in it's scope and effect
and we firmly believe our application
for very moderate freight rate in
crease is in accord with the best pub
lie interest"
While he did not assert that the ad-
vance was necessary to the MAIN
tenance of the Pennsylvania Railroad
Company's dividends in the immediate
future" Mr.. Rea declared that "any
general idea that the Pennsylvania's
position was so strong so as not to
need any additional revenue is not
correct" He added that the Penn
sylvania had earned only asa per
cent. during the fiscal year of 1913.
Program OF expenditures
Discussing the necessity to provide
for future traffic demands. Mr.. Rea
said:
I'VE also know that it is unwise and
impossible to limit new facilities to
actual and immediate necessities.
Necessarily that involves q large
expenditure of money that only grad
| ually becomes productive. We know
that judging from our past expert
ence many millions could be advan-
| tageously expended on the system in
| the next few years. We have con-
| fronting us. a program of expenditures
which we believe to be essential, some
of them mainly for the benefit of the
| public, but all of them necessary to
| properly accommodate the present and
future traffic.
1T is unwise as we'll as unnecessary
to commit ourselves to any large fixed
| program of expenditures except to say
| that without assurance of adequate
| earnings they cannot proceed and a
| reasonable portion Of the cost of these
future enlargements and improve
| ments ought in our judgment to be
| provided from surplus earnings"
Surplus Diminishing
! Mr.. Rea's conclusions, which, he
indicated. applied concretely to the
! Pennsylvania and generally to all
| other roads. were these:
81. The margin of surplus is stead
lily diminishing and the company is
not receiving any return either on the
additional capital invested or for the
value Of the service rendered and the
facilities provided for public use.
"2. Had there been no surplus in
earlier years, and had the whole of
the improvements been paid out of
capital, the margin would now have
reached the vanishing point
"S. If surplus steadily decreases,
| improvements, IL made at all, will
more and more need to be made out
of new capital.
"a. But If the margin of safety de-
creases, new capital will only be raised
with greater difficulty and on more
onorous terms.
IS. Indeed 1t Is questionable whether.
If new capital is to continue to earn
no income. the directors will be JUS
titled in attempting to raise more than
a modicum of what they believe nee
essary, as the effect must be to reduce
the percentage return on the share
holders capital already invested
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