New-York tribune., 1919-06-29
Prouty Draws
Plan to Assure
Roads, Future
Saws Return of Lines With.
out Safeguards Would
Result i'm Financial Dis
aster to Many of Them
New York Tribune
W0shin1ton Bureau

Washington Bnreau
WASHINGTON, June 28.-"To turn
the 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"
Judge Carl A. Prouty declared in a
Esch, of the Senate and House Inter-
state Commerce committees, made pub
lie to-day.
The views of Mr.. Prouty not only as
the director of the division of public
service of the railroad administration,
but as former member Of the Inter-
state Commerce Commission and for
mer head of the commission to ascer-
tain the physical valuation of the rail-
road properties, are regarded by men,
bers of Congress about to legislate on
the railroads as of great interest.
The letter follows in part:
ITO turn these railroads back to
their owners without providing some
means by which adequate revenues
will be provided would mean financial
disaster to many, perhaps to most, of
the carriers. This would be both
wrong and foolish.
Must Have Sufficient Revenue
"The revenue situation of the rail-
roads before they were taken over by
the government was not satisfactory.
This was due not so much to made
quacy of revenue upon the whole, as to
tho manner in which that revenue was
distributed between different carriers
and to the uncertainty which sur
rounded the whole railroad situation.
"The problem is to devise some
method by which under private owner
ship rates shall be established which
will yield to the carriers a sufficient
revenue without imposing upon the
public an unjust burden. AS contri-
button to the general discussion the
| following suggestions are made:
Rates to be fixed by the Inter-
state Commerce Commission. Such
rates to be absolute, with no right
upon the part of the carrier to vary
up or down.
Estate rates to be fixed by the In
terstate Commerce Commission in
collaboration with the State Commits
sion, or perhaps by the State Commits
sion, with the right of appeal to the
Interstate Commerce Commission.
"The Interstate Commerce Commits
sion shall have power to fax divisions
and also to approve agreements for
the routing of traffic and the division
of earnings from competitive traffic, .
Right to Initiate Useless
"The right to initiate rates, super
vised as it is by the Interstate Com
nerce 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 Sc
cured by an application to the COM
mission for change in the rates.
"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 carriers which participate in
that service.
Carriers should be permitted to -
ter. into arrangement for the routing
and division of traffic, or for the d.
vision of the earnings from compcti-
tive traffic. Such arrangements should
only be permitted with the approval
OF the commission and upon conditions
fixed by it.
Earnings Should Be Assured
"The carrier should be allowed to
pay to the owners of its securities, saw,
FER cent upon its rate making value
as determined by the commission. This
probably would enable the carrier in
the Immediate future whose property
was represented half by bonds and
half by stock to pay dividend upon
its stock of at least per cent.
What remains over and above this
in any year should be used for three
purposes.
"(a) A certain amount should be
invested in the property itself, but
upon condition that the amount of
| this investment shall not be made
the basis Of claim for additional
rates.
"(b) In some way a guarantee must
be provided for the payment of fut-
ure interest and dividends. Rates
cannot properly be varied every time
the business increases or declines,
with corresponding effect upon net
returns. This guarantee fund should
be held in the form of some quick
asset.
"(c) Any balance remaining should
be divided between the railway and
the public, the public taking more as
! the amount increases.
Guarantee During Transition
assuming that this scheme might
be a workable one if the roads were
once more in the possession of their
owners, what steps should be taken to
restore them and put in effect this
plan?
"G) Government operation should
continue as it is until January /.
"(2) December 81, 1919, existing
contracts should terminate and the
properties be. returned to the opera
tion of their owners The govern
mcnt should guarantee for one year
return equal to Is per cent of the
contract compensation, and the car
rier should be required to pay rs
per cent Of any excess which it NAV
make over the contract compensa-
tion.
"(3) The government should ,re-
tain for one year, from January !,