The sun., 1919-04-22
U. S. CONTROL HITS
LEHIGH VALLEY R. R.
Loomis Asserts Road Will Lose
100000 in Every Year of
Federal Ownership.
NET INCOME DECREASES
Administration Pays Nothing
on Compensation Granted
to Company.

to Company.
+. E. Loomis, president Of the Lehigh
Valley Railroad Company. reports that
his company faces an annual loss OF
5000, 900 for every year OF Federal con-
troll by. reason OF what he calls 'inade-
quate annual compensation" that the
Railroad Administration during 1918
paid nothing on s11,321.233 compensa-
ton granted TO the company and that a
lot OF equipment which he says Is "un-
necessary" was saddied on the company.
These observations are chronicled In his
annual report TO the stockholders issued
to-day.
On the subject of compensation the
remarks OF Mr.. Loomis were as follows:
None OF the compensation for 1918 was
paid during the year. The Administra-
ton loaned TO the company $4,000, 900,
for which the company was obliged to
deposit as collateral $500, 900 Of It's
general consolidated bonds.
During the negotiation of the con-
tract the Governments attention was
called TO the fact that the compensa-
ton allowed did not equitably reflect
within 100000 per annum the true
compensation the company should be
paid, for the following reasons:
Because Of abnormal expense in
Cured by the company during the chosen
test period as a result OF the Black
Tom explosion in 1916, when tho COM
pany was the Innocent victim OF an
event wholly related to the war.
For amounts set UP in reserve ac-
counts for maintenance Of way and
structures for the first six months OF
1917. OF which only 43 per cent. was
actually expended. In other words,
operating expenses were charged 81 per
cent. more than was expended and which
should have been properly credited
For additions and betterments to the
road and new equipment, from which
no benefits were reflected in the operat-
ing results of the test period, the Gov
eminent having the benefit OF these ex-
penditures during the period OF Federal
control and for which no compensa ton
Is allowed the company.
These claims were considered by the
Administration, but rejected with the
statement that the standard return is
found to be entirely adequate As a
result the company Is saddled with a
similar loss every year their property
remains under Federal control"
Forced to Sell Bonds.
One effect OF the failure OF the Ad-
ministration to pay compensation TO the
Lehigh Valley was the sale during last
September Of SIS. 900. 900 collateral trust
bonds secured by 324,O00,oo0 bonds in
the company's treasury. on that point
the report says: "Under normal condi-
lions IL would not have been necessary
to issue the bonds. but not receiving any
rental from the Administration and be-
ing unable to market long term securi-
ties In the company's treasury on eQuita-
BILE terms. this was the only recourse"
Describing the equipment muddle Mr..
Loomis said in the annual report in part
During the year the Administration
notified this company that there had
been allocated TO II 1900 new cars, con-
sisting OF 900 box cars. 1900 coal cars
500 low side gondolas and 500 drop bot
tom gondolas, costing approximately So
6+7.600. for which this company was ex-
pected to pay. Your board promptly
protested against such action and the
Administ ration cancelled it's ALLEGATION o!
1000 box cars. but insisted that ;he
company take the $500 coal and gondola
cars. A further protest was made and
the Administration was notified that the
company would not accept the equip
ment
This companys freight equipment
consists of 42,9sS cars, 9s per cent OF
which are steel or steel underframe, and
In excellent condition. 1t has a larger
equipment for It's gross business and per
mile OF road with one exception as 70
per mile of road than any railroad in
Eastern territory. During 1917. when II
did the largest business in its history as
to revenue and tonnage, its freight car
hire showed a substantial credit balance
In other words. there was no shortage OF
cars at the mines on its line and all loca
requirements were filled with fewer cars
than II actually owned. No additional
equipment was asked for in the 1915
budget made up by the Administrator
officials, as none was required. Para.
graph + OF Section $ Of its contract pro
vides that the Director General shall not
acquire any equipment at the expense oil
on the credit of the company in excess
Of what in his judgment is nece ssary to
provide for the traffic requirements OF
the road Your board claims that thiE
Judgment must be based on facts and
not on theories and the facts clearly
show that the company is fully equipped
and has a large excess over the amount
necessary to handle It's traffic,
Revenue Trantc Diverted.
THE many consultations, combina.
tons and pooling of facilities and equip
ment Inaugurated by tHe auTn1TTsTfS t10T
have resulted in the diversion to other
routes Of revenue bearing traffic which
your company enjoyed. Similarly the
discontinuance OF the solicitation OF
trafflc has left your railroad without
representation in important business pro-
ducing centres, where II previously had
built up good will OF great value. II Is
impossible 10 foresee the effect OF these
changes on the trafic and earnings OF
your company after roads are return ed
to private owners, Wage increases. in.
GLIDING back pay. granted by the admin
istration to Lehigh Valley employees IN
the transportation. maintenance OF way
and equipment departments. amounted
To $l2,51l,S23, Of 60 per cent. for the
year.
Your companys ownership OF the
Iehigh Valley Coal Company and other
anthracite properties produced an in
come OF $2,3e0.472.s4, being S7S9.1sl.7S
less than for 1917. The prospects OF
1919 are not encouraging. due to mild
winter and decreased demand for coal or
account OF cessation of many war &C
tivities
AT the close OF the year the capita
stock OF your company was held by 49,
5S7 stockholders, of which b.23l were
women. or 3s1 per cent. This Is an In,
crease Of 1860 stockholders over a year
ago"
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