The sun. [volume] (New York [N.Y.]) 1916-1920, 1919-06-29
PROUTY OFFERS
PLAN TO SOLVE
RAIL PROBLEM
Return of Roads at End of
Year and Further Guar
antees Asked.
WOULD ADD 1. G. G. POWER
Scheme to Give Commission
Full Control of Rates
and Routing.
speciaI Despntch 10 Tnn sus.

Special Despdtch 10 THn sus.
WASHINGTON, June 2s.-A comprehen-
sive plan for insuring the railroads
against financial disaster on their re-
turn to private control has been formu-
lated and submitted to Senator Cummins
(1a), chairman of the Senate Interstate
Commerce Committee; Representative
Esch (Wis.), chairman of the corre-
spending House committee; Director
General Hines and others, It became
known to-day. The plan is the work of
c. A. Prouty, director OF the division of
public service OF the Railroad Admins
tration and lately member of the In
terstate Commerce Commission. Judge
Prouty's communication follows:
ITO turn these railroads back to their
owners without providing some means
by which adequate revenues will be pro-
vided would mean financial disaster to
many, perhaps to most OF the carriers.
This would be both wrong and foolish.
Railroad securities are widely distrib-
uted among the general public. Industry
and commerce cannot permanently thrive
and develop unless the condition Of our
railroads is fairly prosperous.
1.-THE revenue situation of the railroads
before they were taken over by the Gov
eminent was not satisfactory. This was
due not so much to inadequacy OF rev.
snue upon the whole as to the manner
In which that revenue was distributed
between different carriers and to the
uncertainty which surrounded the whole
railroad situation. Railroad earnings
for the test period. SO called-that Is
for the fiscal years 1915, 1916 and 1917
were the best OF any three consecutive
years in the recent history of our rail-
ways Those earnings probably amounted
to a fair return upon the property de-
voted to the public service, and yet the
credit of our railroads as a whole was
steadily declining.
Rate Making Problem.
The problem is to devise some method
by which under private ownership rates
shall be established which will yield to
the carriers a sufficient revenue without
imposing upon the public an unjust bur-
den. Moreover, that plan must be such
as can be adapted to the present ex-
igency. AS q contribution to the gen.
eral discussion the following suggestions
are made:
Rates to be fixed by the Interstate
Commerce Commission. Such rates to
be absolute with no right upon the part
Of the carrier to vary up or down.
State rates to BIO fixed by the Inter-
state Commerce Commission in collabor-
alton with the State Commission or per-
haps by the State Commission with the
right of appeal TO the Interstate Com
merce Commission.
The Interstate Commerce Commission
shall have power to fix divisions and
also to approve agreements for the rout-
ing of traffic and the division of earn
ings from competitive tariffs, but not
until after full hearing upon notice to
all interested parties, including the gen.
eral public.
The right to initiate rates, supervised
ms it Is by the Interstate Commerce
Commission, has been for the last five
years of no advantage to the carrier
No advance In rates has been made
which could not have been secured by
an application to the commission for q
change in the rate.
The right to reduce the rate without
leave of the commission has not bene-
fted the public but has In the main
proved sort OF vicious discrimination
and DISCRIMINATION.
nobmake the railway rates of this coun-
&ry and it could not with Its present
organization. With a proper organiza-
tion 1t could make and publish those
rates at a 1.-THE of the expense under
which the carriers now rest in that
behalf.
While the interstate rate presents
many difficulties in the solution, they
are not at all insuperable. If some plan
OF actual cooperation can be put into
effect they will disappear.
The commission should have power to
fix the divisions of a joint rate when
the carriers themselves do not agree,
thereby justly distributing the charge
for the entire service among those car
'riers which participate in that service.
In many cases competition might well
be restrained with advantage to the
carrier and without detriment to the
public. To this end carriers should be
permitted to enter into arrangements for
the routing and division Of traffic or for
the division Of the earnings from COM
petltive traffic. Such arrangements
should only be permitted with the APP
prevail of the commission and on condl-
tions fixed by it
Basis for Rates.
The railroads Of this country should
be self-supporting. To this end Congress
should instruct the Interstate Commerce
Commission to establish such reasonable
rates AS will yield fair return upon
the value for rate making purposes
which 1t establishes
The amount OF this return ought moi
to be prescribed. In the nature OF
things 1t cannot be tho same upon the
value of all carriers. To establish rates
which would yield given return-say
per cent. upon the value of the most
unfortunate carrier-would exact from
the public too high transportation
charges, while on the other hand to
maintain rates so low as to yield only
an adequate return on the value of the
most fortunate carrier would he ex-
tremely unjust to Its less favored com.
petitors. The rates should produce an
adequate return on the average value
affected by them.
Tho value on which this return should
be allowed is that value which the COM
mission Ia now fixing under the yalua.
tion act OF 1913. For the last Ave years
the commission has under the require
ments Of this act been collecting the
necessary information from which these
values are to be determined and has
substantially completed that branch OF
its work.
Net Income From Operation.
Congress should provide that no car.
r1er shall pay to its security holders out
of its operating income In any year more
than certain percentage on the rate