New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1914-12-19
THE, RAILROAD RATE
DECISION IN FULL
Reasons Which Led the Interstate Commerce
Commission to Grant the Increases
Refused in a Previous Report.
NET OPERATING INCOME TOO SMALL
Relief Extended to Official Classification territory
RaiILake-and-Rail Lake-and-Rai and Ka-
and-Ia AXE Traffic Excepted


inelastic. and that a fall in gross reve-
nue. leaves an increasingly narrow
margin of net revenue
The situation is different when an
attempt is made to estimate the de-
/ cline in the rate Of return. The prop
[ erty investment accounts, as now
/ standing on the books Of the carriers
cannot be accepted as accurately rep
resenting the fair value of their prop
erty devoted to serving the pubic
objection was raised TO the increas-
! ing amounts charged in recent years 10
additions and betterments, particular
ly because the carriers in presenting a
financial review of their operations for
a series of years failed 10 indicate
separately the relative effect upon
their accounts of outlay for addltlons
and betterments, as compared WIN al
lowances for depreciation, IT Deihg
contended that this caused an unWar
ranted diminution in the resulting net
income from operation.
The fact, nevertheless, remains that
IL the increase in depreciation and pct
/ terment accounts in the last flscal year
over the average of similar allowances
for the five-year period were added 10
their net operating income for the last
| fiscal year the results Of operation
would still fall below fair return
upon the amounts carried upon the
/ books as investment in property.
While there has been recently an en-
larged expenditure for maintenance OF
equipment, it is clear that 1t has not
been sufficient to restrict to proper
/ limits the number of cars and locomo-
tives needing repairs. The carriers IN
| the past have not known how large an
expenditure to figure upon for the
maintenance of the newer type OF steel
freight cars, and appear now to have
| discovered that such expenditure must
be greater than was anticipated.
The like may be said as to the re-
cent enlargement Of expenditure upon
roadway. We cannot view with favor
any attempt to obtain an increase IN
net revenue through unduly restricted
expenditures upon maintenance.
To whatever extent recent increased
provision for depreciation or expendl-
/ ture for maintenance may initiate
against q fair comparison Of suppos-
edly comparable statistical items for
various years, we cannot say on this
record that such charges as at present
returned by the carriers are excessive,
/ viewed either from the standpoint of
/ proper accounting or of safety of
| operation.
| The testimony shows that while
/ some maintenance is being deferred
other maintenance deferred during the
/ last fiscal year is now being made, and
| that the expenditure therefor during
| the months of July and August meas
ured up to the level of recent years
/ The testimony also shows that trans
portation expense is being reduced
through the laying off of employees and
! cancellation of train service.
Consequences of the War.
II was urged on behalf of the car
riers and the investment bankers who
appeared at the hearing that the war
! in Europe has created condition
which renders the dimunition of the
/ carriers net income a menace to the
prosperity of the country; that the war
/ has placed an added strain upon the
/ credit of carriers; that rates of inter
/ est will rise; that a large volume OF
railroad securities is held abroad; that
/ the denial of the increase in freight
rates would, in view of the diminished
net income, be followed by a dumping
/ of foreign securities upon the Ameri-
| can markets; that our markets would
/ not be able TO absorb these securities
/ at least, without great fall in prices
| that disaster would result not only to
/ our railroads but TO insurance, banking
and industrial concerns, and that for
/ these and other reasons, extending far
| beyond the direct needs of the carriers
/ themselves, we should now allow the
proposed increase in rates.
| With some of these considerations
we have, as a commission, nothing to
do. Our powers and functions are
those. and only those, conferred by
| Congress, as was said in Advances in
Rates, Western Case, 20 |. c. c., 307, at
page 81:
1--WE must not regard too seriously
| however, the effort of railroad counsel
to establish this commission in loco
PARENTS toward the railroads. We
must be conscious in our consideration
of these rate questions of their effect
upon the policy Of the railroads and
ultimately upon the welfare of the
I state. This country cannot afford
/ 10 have poor railroads, insufficiently
! equipped, Enthusiastically built. care
/ lessly operated. We need the best OF
| service. Our railroad management
/ should be the most progressive. II
I should have wide latitude for expert
ment. 1t should have such encourage
ment SIS would attract the Imagination
of both the engineer and the investor
/ Nevertheless, it is likewise TO be re.
/ membered that the government has not
undertaken to become the directing
mind in railroad management. We are
not the managers of the railroads, anC
no matter what the revenue they may
receive there can be no control placed
/ by us upon its expenditure, no i'm.
provements directed, no economies en-
/ forced"
The conflict in Europe will doubtless
/ create an unusual demand upon the
worlds loan fund of free capital, anC
may be expected to check the flow OF
Z foreign investment funds TO American
railroads. II appears that our rail
roads represent the bulk of European
I investment in this country. The rate
/ Of interest-the hire of capital-has
risen during the last decade and may
rise still further. II is computed thai
| in the years 1915, 1916 and 1917 the
carriers in official classification terri
/ tory must arrange for the payment oil
refunding of securities aggregatinl
more than 100000, 900. True, the rep
reservations Of the carriers in the 1915
cases. that without the increases ther
/ sought their credit must totally van
] ish. proved strangely at variance with
/ their subsequent experience in the Dor
/ rowing Of many hundreds Of millions
I But we do not doubt that the financial
problems Of the carriers have beer
made much more acute by reason oil
/ the war, and if we are to set rates that
will afford reasonable remuneration q
the carriers we must give consideration
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