The sun., 1919-10-23

teltDatiOn ara insure tnat nereatter tno
charge that railway capitalization IL ex-
tensvely watered may be put at rest"
Under these voluntary consultations
the capitalization must be equal TO the
aggregate value Of properties consoli-
dated, as fixed by the Interstate Com
merce Commission under the railway
valuation legislation now In force. Thus
when II is complete the total OF all
securities will exactly equal the value
of all the properties as thus determined.
The same rules will apply in making the
compulsory consultations which are pro-
vided for after the expiration of the
seven year period II not all the roads
have before that been included in the
voluntary cancellations,
Full Authority for U. 9.
mo consolidation may be carried out
unless the owning company is Federally
Incorporated. giving the United States
full authority over Il. When the period
OF seven years has expired and the time
comes for the compulsory consolidation
the railway transportation board will
have power TO secure the Incorporation of
comparing required to complete the
scheme 6f consolidation. Back Of all
this Is the power OF condemnation of
either the railway properties or their
security.
sMeantime. pending the completion OF
this scheme, In order to protect the pub
lie and also the weaker roads, the Inter-
state Commerce Commission Is required
TO divide the country into rate making
districts. A new power Of transporta-
tion regulation enters here. The COM
mission Is required to see that the rates
prescribed for each rate district shall be,
as nearly as possible, only sufficient to
produce q net operating income for all
the roads in that district of u per cent.
annually on the value of the property as
determined by the Interstate Commerce
Commissions valuation. 1t Is recognized
that there will be difficulties in ascer-
tanning this valuation. but the commits
sion is required to make the best possi-
BILE approximation.
This plan of valuation and limited
earnings has not at all pleased the more
profitable roads. which insist that the
return is too low and 1t has likewise
displeased some important shipp ng In
terests, which insist that the authorized
return will be too high. The Commission
Is authorized In its discretion to Increase
the fixed return to per cent. but the
addition half per cent Is to be used
for mon productive" improvements In
the properties for example, a road hav-
ing a depot that represents $4,000 in
vestment, desiring to replace IL with one
costing $4,000, will be allowed to pay
the additional $4,000 from this fund,
but amounts taken from this fund are
not to be capitalized now or in the fu-
ture..
Difficult Feature Solved.
Now comes tho feature which the
committee found most difficult. A
schedule of rates which will produce an
average OF 8 " per cent. on all the roads
will enable the more prosperous com
panies to cam, anywhere from 6 to per-
haps Is per cent. while less fortunate
ones will earn much less than 81 per
cent. So the bill fixes a maximum, II a
company gets an operating income above
s per cent, one-half of the excess be-
tween and per cent. shall be placed
In COMPANY reserve fund and the other
half will go to- the railway transporta-
tion board as q general railroad contin-
gent fund. tEi
Above per cent. the company will
place one-fourth OF the excess in its re-
serve fund and threefourths will go to
the general railroad contingent fund.
When the reserve funh has accumulated
70 an AMOUNT equal 70 per cent. of the
must cease, and one-thirdi Of the operat-
ing income aSovese per cent. shall there
after be retained by the company, and
two-thirds paid into the general railway
contingent fund.
a The company reserve fund may be
drawn upon to pay dividends or interest
when the companyss income falls below
9 per cent, thus insuring steady credit
The general railway contingent fund
will be used for the general advance OF
railway interests, such a provision Of
a. avxA
the like, II may also be used to buy
equipment which may be rented to
weaker roads. $or It may be loaned In
cash to them
Provision for Earnings.
at is also provided. as to the maxi
mum and minimum earning provisions.
that at the end OF hve years from the
establishment of the new system and
each Ave years thereafter the Interstate
Commerce Commission shall review the
situation, and II the 8 u and per cent
allowances are found too high or too
low. In view OF the general conditions
prevailing. II shall have power TO in
crease or reduce the percentage.
The issue of all securities Is put
under absolute Federal authority to
prevent watering them and also to pro-
too much regulation State commissions
or other authorities will hereafter have
absolutely no control over capitalization
of railways, which becomes an exclusive,
Federal function. This control OF trans
portation will be exercised by the rail-
way transportation board. The aim has
been to relieve the Interstate Commerce
Commission Of some of the Emanifold
duties heretofore imposed on it Ac-
oordingly the following functions and
powers now exercised by the Interstate
Commerce Commission are also trans
ferred to the board:
Administration of the Car Service act
Of 1917.
THE legislation relating to construc-
ton, maintenance and operation of
switch connections and side tracks.
Administration OF the safety ap-
pliance and other acts to promote the
safety OF both travellers and railway
employees.
Administration OF the legislation re-
lating to the hours Of service OF railway
en- ployees.
Administration of the legislation re-
lating to the transportation of explo-
sives and other dangerous articles.
Administration Of the legislation for
establishment OF block signal systems
The powers OF the Interstate Com
merce Commission are greatly enlarged
as to dealing with the division Of Joint
rates among two or more companies, in
order to enable the short lines to earn.
living returns. The committee became
convinced that the short lines have not
been getting a fair division, that they
have been completely in the power Of the
long lines. and that they must be treated