Omaha daily bee., 1914-04-03
Mr.. REA MAKES FINAL PLEA
Head Of Pennsylvania Reviews the
Railroad Situation.
ALL LINES ARE IN BAD PLIGHT
Says MArEin Between Gross Revenue
ana OPERATING Expenses is De-
creasinE - Money Needed
for improvements.

creasinE - Money Needed
for improvements.
SHINGToN, April 2.-President Rea
Of the Pennsylvania system was the last
witness to be heard today before the In
terstate Commerce commission, on behalf
OF the eastern railroads asking for an in
crease in freight rates. Oral testimony
for the roads was concluded with his
statement.
Chairman Harlan and Commissioners
Clerk and Meyer were on the bench. Or.
Dumba. Austria Hungarian ambassador,
and his guest. Prince Munster OF Derne-
burg. were interested auditors.
T. Wallis, general superintendent of
motive power of the Pennsylvania, in
terrogated by Clifford Thorne, explained
that steel cars and heavier locomotives
had induced an increase IN repair cost,
while higher wages materially had added
to that item Of expense.
]. S. Rodgers. general superintendent
OF the Pennsylvania testified that the
charges 20 operating expenses on the
Pennsylvania system, east Of Pittsburgh,
were S24, s55,e24 In 1910, and s2s. al. .2l0 in
1918, an increase of 1873 per cent" He said
that expenses for maintainence OF way
during 1913 were much greater than ever
before and probably would remain at the
present high level because of large in
creases in wages; the policy of regulatory
bodies increased demands of the travel
ing 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
III An afv,0 hli1h1nE
various safety devices and systems;
STRENGTHENING lines and similar works. He
indicated, also. the higher cost Of rails,
ties and materials used in ballasting the
road beds. He dwelt particularly on the
cost Of safety appliances, demanded both
by law and public sentiment.
Need More Net Income.
President Rea said 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 income. He said:
Unless the gap between receipts and
expenditures can be widened. we must
begin TO retrench and retrenchment 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 rim counter
to our tradition and practice Of half
century, and we are sure that It would
not be in the public interests, and we do
not believe the public desires it,.
Now we have as much public support
as can possibly be given to plan almost
national in It's scope and effect, and we
fOv
moderate freight rate increase is In ac-
cord with the best public interest"
While he did not assert that the ad-
vance was necessary to the mainte-
nance Of the Pennsylvania railroad COM
pany's dividends In the immediate fu-'
ture," Mr.. Res. declared that amy gem
eral idea that the Pennsylvania's posi-
tion was SO strong as, not TO need any
additional revenue is not correct.F He
added that the Pennsylvania had earned
only 4.A per cent during the fiscal year
of 1914
Look into Future Developments.
Discussing the desirability Of the me-
cessity to, provide for future traffic de-
mands, Mr.. Rea said;
we also know that 1t is unwise and
impossible. to limit new facilities to ac-
tual and Immediate necessities.
Necessarily that involves a large ex-
penditure Of money that only gradually
becomes productive We know that judg-
ing from our past experience, many mill
lions could be advantageously expended
on the system in the next few years.
We have confronting us a program of
expenditures, which we believe to be es-
sential some of them mainly for the
benefit of the public but all of them
necessary to properly accommodate the
present and future traffic.
''It is unwise. as well as unnecessary,
to commit ourselves to any large fixed
program Of expenditures, except to say
that without assurance of adequate earn
ings they cannot proceed, and a reason
able portion of the cost of these future
enlargements and improvements ought,
in our Judgment. to be provided from
surplus earnings
Conclusions of Mr.. Rea.
Mr.. Reas conclusions, which he indi-
Gated applied concretely to the Pennsyl-
vania and generally 70 all other roads,
we're these:
1.-The margin of surplus Is steadily
diminishing and the company Is not re-
ceIving any return either on the add
tionai capital invested, OF 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
nents been paid for out OF the capital,
the margin would now have reached the
vanishing point
s-If surplus steadily decreases, i'm
provements, II made at all, Will more and
more need to be made out OF new capital.
I-But n the margin of safety decreases.
new capital will only be raised with
greater difficulty and on more onerous
terms. .
%Indeed, 1t is questionable whether, IL
new capital Is to continue 10 earn no in
come, the directors Will be justified In
Attempting to raise more than a modicum
Of what they believe necessary, as the ef
feet must be 10 reduce the percentage
return on the SHAREHOLDER capital al
ready invested.
Fifteen Years Compa rIsOn.