The labor world. [volume] (Duluth, Minn.) 1896-current, 1919-04-12
YES, DULUTH is HONEST.

YES, DULUTH is HONEST.
The News Tribune puts The Labor
World in a false light when it
charges that we propose to bankrupt
the Duluth Street Railway company.
We do not want to do anything Of
the kind. We would save it from
bankruptcy if we could.
The company cannot be bank
rupted by merely refusdng earnings
to the water in it's stock represented
in it's so-called common stock ,"
says the morning paper, and it adds,
1T can only be bankrupted by re-
fusing earnings sufficient to pay in
terest on it's bonded debt and divi-
dends on its preferred stock, which
together no more than eQuals-not
its present replacement value, which
is more-but the cash Investment"
This may or may not be true. We
will say that it is. The Duluth
Superior Traction company is the
owner OF the Duluth Street Railway,
company. Before us is the annual
report of the holding company which
shows the capital stock to consist
Of $3,500,O00 in common stock, and
$1,500,0O0 in preferred stock. Its
bonded Indebtedness is given as.
SS,So5,oo0 Of which s305,0O0 is held
by the company. The bonds bear
interest at five per cent. Preferred
stock should pay seven per cent.
In 1913 the net operating income
Of the company is shown to be $780,
S31.71. The interest charge is
$17S,350.39, leaving but $98,4S1.32
from the operating income for dfvi-
dends on s1,500,0O0 of preferred
stock and permitting Of nothing to
be set aside for depreciation or the
mortgage sinking fund.
The company managed. however,
in 1913 to take sufficient money
from its credit balance of 1917 and
from it's income interest on funded
and unfunded debts to pay 100000
dividend OH preferred stock and
100000 on common stock. OF
course, it cannot do this very long
for it's credit balance decreased from
$187,309.83 on January !, 1918, to
$101, 208.1S on December 81, 1918,
a loss of nearly $4,000 in the year.
The Labor World tried to make it
plain that in our opinion the Duluth
Street Railway company, unless it's
revenue increased, must either con-
tinue as an Improbable concern or
it will be forced into bankruptcy.
The holding company's report
shows beyond all question of doubt
that it's operating income alone is
not sufficient to yield a fair return
on it's preferred stock. saying nothing
about the common stock. What it
did last year to maintain it's credit
it cannot always do with a net oper-
ating income of but a .trife over
$275,000 year. 1t must have more.
Rolling stock is running down. There
will be limit even to "hay wire,'
and then the crash.
So we say there is but one of two
things to do. The city should either
buy the property and continue to
carry passengers for five cents, or
the company should be given the
right to charge six cents. The COM
pany cannot continue at the present
rate and long survive. No extension
can be made. 1t cannot borrow
more money, for it is now carrying
$305,O0O in bonds which it can
not sell, and judging from the ex-
perience of other traction companies
there is little prospect for the Du-
1uth company to sell it's bonds, not
at least until it shows better earn
ipgs.
The NewsTribune reminds us that
Duluth is honest" If, it's editor will!
re-read our editorial of last week
in the light of the explanation given
above, he must admit that The La
Dor World Is also honest. We fav-.
ored the municipal ownership of, the
street railway property because we
believed that it was the most hon
orable and the most decent way to
solve, the street railway problem. A
majority of the people voted other
wisel and now it is up to the city to
Ind r. 1' another honorable way to- solve