New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1914-04-03
REA MAKES FINAL
HIGHER RATE PLEA
Pennsylvania Head on the
Stand All Day Before
Commerce Commission.
TELLS OF CONDITION
OF EASTERN LINES
Sees Retrenchment in Better
ments Unless Relief Is
Granted at Once.

Granted at Once.
Washington, April 2.-Testimony Of the
Eastern railroads in support of their APP
plication for 3 per cent increase in
freight rates virtually was concluded be-
fore the Interstate Commerce Commits
sion to-day by Samuel Rea. president Of
the Pennsylvania system. Beginning to-
morrow. the lake-and-rall shippers will
be heard in opposition to the increase,
and II is probable that all evidence for
both sides will be completed within the
next few days.
Presidents Willard Of the Baltimore &
Ohio; Delano. of the Monon; Smith, OF
the New York Central, and Rea, of the
Pennsylvania, will be recalled for cross
examination as soon as counsel can digest
their evidence.
Mr.. Rea was on the witness stand
nearly all of to-day. His statement and
discussion of the financial condition of
the Eastern railroads related concretely
to the Pennsylvania system, but he indi-
Gated that his observa tons and conclu-
sions applied alike TO all of the lines.
Unless the gap between receipts and
expenditures can be widened," he said.
we must begin TO retrench, and re-
trenchment 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 10 run counter to our traditions and
of " a
sure that it would not be in the public
interest, and we do not believe the public
desires il.
While he did not assert that the ad-
vance was necessary to the maintenance
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
as not TO need any additional revenue
was not correct.
He added that the PENNSYLVANIA had
earned only iSi per cent during the fiscal
year of 1913
Large Fixed Programme Unwise.
ut is unwise, as well as unnecessary
said Mr.. Rea, Ito commit ourselves TO
any large fixed programme of expendi-
lures, except TO say that without assur-
ance of adequate earnings they cannot
proceed and reasonable portion OF the
cost of these future engagements and
improvements ought. in our judgment, TO
be provided from surplus earnings
Mr.. Rea's conclusions. which h. in
dicated, applied concretely TO the PENN
to a
were these:
a. The margin of surplus is steadily
diminishing. and the company is not re-
ceiving any return either on the addi-
tonal 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 improve
ments been paid for out Of capital, the
vanishing point.
20 If surplus steadily decreases, i'm
provements, If made at ALL will more and
more need to he made out of new capital.
a. But n the margin of safety de-
creases, new capital will only be raised
with greater difficulty and on more oner-
Gus terms.
90. Indeed. 1t is questionable whether,
II new capital is TO continue 10 earn no
income, the directors will be JUSTIFIED In
attempting to raise more than a modicum
of what they believe necessary, as the
effect must be TO reduce the percentage
return on the shareholders capital al
ready invested"
Comparison Of 1893 and 1918.
President Rea concluded his direct
statement with the following comparison
of the conditions Of the railroads in 1898
and 1919
I'm 1898 the company was emerging
from a period of prolonged and very Sc
we're depression, whereas in 1913 1t was at
the end of a great period of growth. IL
would he natural under ordinary circum-
stances that the owners of the property
should find themselves very much better
off in 1913 than they were i'm 1898.
"In the fifteen years between 1898 and
1918 the company had the benefit OF the
following: An advance in certain com
modify rates; the abolition OF rebates
the expenditure OF hundreds OF millions OF
CAPITAL for Improvement and enlargement
of facilities and equipment; consequent
great Improvement I'm efficiency and use
Of plant.
.'In the fifteen years 1898 TO 1913 prop
er,, investment Increased from about
s7e2 900 900 to almost 81 ,3s7 10000. or 20 per
cent. operating revenues increased from
a little less than sll5 100000 to over $751;
on 900 or 16S per cent operating revenue
ner mile of track operated increased from
sS17S to 3l5,96l, or 81 per cent-the com
many thus had during these fifteen years
all the benefits arising from remarhaoie
growth of business, both in volume ana
density. which ordinarily under the law
NJ increasing return should have mate
rally improved the position Of it's owners.
Return in 1913 5.48 Per Cent.
"Rut as a matter Of fact. the return
on property investment in 1913 was only
54s per cent. against $40 per cent IN
1898. and, Furthermore. was the srnaIlest
return i'm any OF the fifteen years OF the
period. the percentage Of net corporate
income (pus interest on funded deDt) OH
total capital obligations In 1913 was put
6sS per cent. against $50 per cent IN
1898 and with the exception OF the year
1899 1t liz the lowest Of any year in the
ffteen- year period the net corporate IN
come per cent Oh capital stock outstsnd-
ing held By the public in 1918 was only
as4 per cent. against s.53 per cent In
1898 and here also the 1913 figures are
the lowest for any year In the fifteen