The Washington herald., 1914-04-03
RULINGBY MAY |
in Freight CASE
|. c. c. Decision on Carriers
Plea for Advances to Be
Expedited.
REA'S STRONG APPEAL
Pennsylvania President Says if Sur
plus of Road Keeps on Diminishing
improvements Must Be Curtailed.

was said on good authority that the COM
mission has decided to expedite the main
case of the carriers petitioning for an
increase in freight rates of per cent,
and to hand down a decision at the
earliest possible date. An announcement
to this effect probably will be made to-
day. The carriers now expect decision
on this big issue by May i.
That the commission will expedite mat
ters by eliminating collateral questions,
is indicated by these developments:
The commission has postponed indefi-
nitely the argument in connection with
the spotting and switching of cars. testi-
mony upon which Is completed: il has
indefinitely postponed the taking of testi-
mony in connection with lighterage in
New York Harbor and other collateral
issues.
In addition to this commission, by fall
ure TO act, apparently has rejected the
request of Louis d. Brandeis, its counsel,
to be allowed to examine the four rail-
road presidents who have testified as to
how money obtained from present rates
was spent.
Make Formal Motion Today.
The railroads today will make a formal
motion for the closing OF the case early
next week.
vania system, formally closed the case
Of the railroads late yesterday afternoon
and his statement was regarded by many
as the strongest made by any of the rail-
road presidents. He drew the following
conclusions from the conditions confront
ing the Pennsylvania system:
The margin of surplus is steadily d.
minishing, and the company is not re-
ceiving any return either on the ad-
of the service rendered and the facilities
provided for public use.
Had there been no surplus in earlier
years and had the whole of the improve
ments been paid for out of capital the
margin would not have reached the van
ishing point.
''If surplus steadily decreases. improve
ments. if made at all. will more and
more need to be made out of new cap
ital
But il the margin Of safety decreases
new capital will only he raised with
greater difficulty and on more onerous
terms
Indeed. it is questionable whether il
new capital is TO continue to 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 per-
~
ital already invested
Here are some of the other things
President Rea told the commission:
The position Of the Pennsylvania Rail- !
road system is not so strong as 1t was. |
Must Start Retrenching.
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.
Now We have as much public support |
as can possibly be given to a plea almost |
national in its scope and effect. and we
firmly believe our application for a very
moderate freight rate increase is in ac-
cord with the best public interest. |
would not create the impression that a |
per cent rate advance is necessary to /
the maintenance o. the PENNSYLVANIA |
Railroad Company's dividends in the i'm /
mediate future, although II it cannot be |
obtained, it may be necessary for the |
company to curtail the necessary provi-
sion to preserve that high standard which !
the public has grown to expect from it.
The facts, 1 believe, will show that
the Pennsylvania Railroad is not earning
an adequate or reasonable return on the
actual money expended for its railroad
and equipment. or for the value of the
service rendered and the facilities fur
nished
''On the property investment of the en-
tire system the net operating income pro-
duced 7.49 per cent in 1903. IA per cent in
1870 and only 5.4S per cent in 1913. II
we added to the property investment the
expenditures for additions and better
ments provided out of surplus income
from 1887, the system earned only SIS
per cent on its investment in railroad
and equipment in 1903 and 47S per cent
in 1913
stock Little Above Par.
The market price of our stock today is
very little above par.
Since 1907 our large body Of stock
holders have, like everybody else had tn
face the higher cost OF living that is
with the decreased purchasing power of
the dividend. We have not been able TO
relieve them by any change in the rate
OF dividend. although II is recognized
that some Of them subscribed for the
stock at % per cent above par and
their return is but per cent Der annum
IF the railroads are TO be crippled
there is swept away very much of the
foundation for national prog
ress in the life Of every citizen. We
have no alternative but to apply for re-
lief, not that We may continue to exist
but that We may secure a firm financial
basis to perform. as we have done 10
the best Of our ability in the past. our
lear duty to the public, and to those to
whom We must look to provide new CAP
tai in the future
In conclusion President Rea said:
IF the freight revenues Of the Penn
'ylvania system in 1913 had been per
,ent greater the net operating revenue ;
would have produced a return on the
'ost Of the railroad and equipment of
-E per cent, instead Of SIS per cent.
n 1910 We felt that conditions justified
IN increase, but with improving gross
arnings and the better outlook for the
ailroads generally then existing, 1t did
lot so impress the commission, nor was
he public prepared for il. Now condi-
ions are worse; our expenditures have :
ince then been larger; our costs higher; :
10 return on many OF our lines has been :
armed, and on almost all of them the =
eturn has been inadequate. With a :
eturn of only 223 per cent earned on the =
investment in road and equip 7
nent in the ten years ending June 80 :
sl3, with a substantial decrease in net e
perating income for the three years Y
nding 1913 and the falling of in reve- I
ues without any abatement in taxes.
7ages and other items since June 30, 4
113, the outlook is far from satisfactory