The sun. [volume] (New York [N.Y.]) 1833-1916, 1914-05-09
CROP TO HELP SOLVE
ROCK ISLAND RIDDLE
Growing Prospect Of Prosperity
Makes McKcnna Supple
mcnt Report.
FIRST SAYS S65, 100000
Then Finds Railway Can Meet
It's Present Needs With
S31,OOO,OO0.
FIRST SAYS S65,OOO,OOO

The report Of L. w Mcllenna on the
needs OF the Chicago. Rock Island and
Pacific Railway Company was made pub.
lie yesterday. II Is In two parts. In
the nrst Mr. McKenna gives the con-
illusions as TO the needs OF the railroad.
which nc formed after his long investi-
CATION. In the second he gives the con-
clusions formed after he discussed his re-
port with President II. L. Nudge and
Chairman of the Board OF Directors
THONGS NJ Schumacher. He also says
that since writing the report prospects
Of a bumper crop have greatly bright
ened the systems outlook.
Mr.. MoKenna says in the first part
that tht road needs s65,5Si.36S.O1 for nee
esSary improvements. He divides this
amount under these heads Additions and
betterments, si1,6ss,2o?.0I; deferred
maintenance TO track aud equipment,
Se,Ss6.l5s. and new equipment. about
81. 900. 900.
In the second part Mr.. Mckenna sets
his total figure at s3i. 100000, coming
under these heads: Prospective capital
requirements until June so, 1917. s:s,-
000. 900. and 90 per cent. payment on
o1S,0o0,oo0 new equipment. $3,ooo.00o.
Engaged BY Bondholders.
Mr. McKenna. who Is vice-president OF
the Chicago, Milwaukee and st. Paul.
was engaged to investigate the needs OF
the road by the committee OF holders or
the collateral trust 4 per cent gold bonds
OF c002 Of the Chicago. Rock Island and
Pacific Railroad Company. the holding
n -
man Schumacher made report In April
that the road needed $40. 100000. and be-
cause this estimate was thought to be
TOO high Mr. McKenna was called In. The
company has defaulted on the bonds.
The second part OF Mr.. McKenna's re-
port takes account OF necessary hnanc-
ing for only three years. while the first
part considers five years.
The difference in the estimates OF the
Two parts of the report Is caused by
the saving OF $4,000, 900 in estimates by
covering three years instead of five, by
counting only the cash payment required
for new equipment. which cuts the total
down s12,000.00O. and by figuring that
Increased prosperity would take care OF
the charge under deferred maintenance.
II s65.0Oo,O00 IL applied to the road
Mr.. Mckenna says In the first part OF
his report. economies will be produced
which will put stop 10 the deteriora-
ton and place the property In such ply
steal condition as TO secure greater
proportion OF the traffic OF the country
which II serves"
saving In Use Of New Cars.
About 10000 cars should be retired
Mr.. McKenna found. but Of these. tbs
life of about 1000 could be extended
from two to five years. The present COS
for repairs averages about $40 car 6
year. If S15.000.000 IL put I'm $1,000 new
cars, the efficiency OF equipment would
be at least so per cent greater than this
cars retired. and the new cars would moi
average for repairs more than $50 a cal
each year for the next five years.
lie assumes that the improved condi
ton of the railway and its equipment
would produce an increase OF revenue o.
at least $4,000. 600 "A year. of which 81
per cent would be net earnings. Th'
investment OF this money would enabl'
the railroad company to carry on main
tenance programme from January to July
which would result in q saving or q
least 100000 n year.
Mr. McKenna advocates the construc
ton of the short line from Chicago &
Kansas City by way or Peoria. TIL
should have n most potent effect In re
ducing transportation expenses. he says
and should reduce the ratio of transporta
sfOn eND' n-ts 10 eFoSS
85 and 81 per cent. He continues:
"There IL little doubt that this I'm
provement would place the whole prop
crty In a condition of increased effcisnc
In its operations that sufficient earnin
power would be developed To restore tn
stock of the railway company to at leas
its par value. and it ~ within the posi-
bilities that it could be raised to sue
q value, say at the end OF five years, I
enable the company to take care OF som
OF Its future financing through the sal
OF common stock
Prospects Of Property Grow.
In the second part of his report NJ,
HfcKenna says that IL is apparent that IN
only safe suggestion would b. to estlmat
requirements of prospective capital on
three instead OF five year basis,
He says that the prospects Of the pros
perity have been greatly increased sine
he wrote the first part of the report an
that Il seems certain that an unusus
crop will be harvested In the territor
covered by the Rock Island lines. TIL
localized prosperity should Increase III
net income for the next fiscal year $1,000
600 He finds that the important item
IN his former estimates under the hea
OF deferred maintenance are maintenance
OF equipment, cross ties and deferred Ii
Dor and material in ordinary railroad r,
pairs. The other items do not affect III
safety of the operation OF the propert
and can he deferred The minimum
amount which should be spent on accoui
Of these three items i s3.3S0,000 an
the application Of the money previousl
paid IN dividends by the railway compar
would more than provide this amount an
81 So, 900. coo more a year IL realized b.
cause of better traffic conditions tn;
money could be applied 20 any new obi
cations assumed by the company.
IF ordinary conditions of prosperl'
continue through the fiscal year of 1916
the report says, the conditions recitc
nbove would apply in the same relate
10 that year and thus 70 per cent. of Il
deferred maintenance woud be taken \
within the first two years"
NOIIpT nAY ENnApC TuYC nav