The sun., 1919-11-05

return to the railroads 10 returned to
use Of this fund, the facilities purchased
herewith not to be capitalized for rate
making. This would institute substan-
tial saving to the shippers. who, through
rates TO eustaiD transportation as q
whole would now secure adequate faciii-
ties. They would thus divide with the
owners the BENEFITS OF one-half Of all
earnings over a reasonable return on the
value of property In the aggregate de-
voted to their service, while the owners
after this fair return allowed on such
aggregate value would have the other
half as incentive and as a fund held as
reserve under certain requirements OF
expenditure.
Rates Adjusted to Value. Not ON
so-Called "watered securftios."
The adjustment Of rates to yield this
Initial percentage return on the aggre-
gate Of railroad property Of all the car
riers, grouped in each Of the said rate
districts, does not mean that each in
diyidual carrier will receive as much as
6 per cent. Each Individual carrier re-
ceives only what its relative position and
efficiency in management entities 1t to
receive. To illustrate, the 100 railroads
tho majority, twice as many railroads
as the minority-have Gas OF the test
period) invested in railroad property,
devoted to the public use, $s,766, 6,932.810.
In the adjustment of rates for all OF the
railroads the average net return 10 these
10s, taken as a whole. would not be as
much as per cent, but would be t.61
per cent. on the total investment in them
for handling the same volume OF traffic
as the average Of the test period.
Some railroads among the 162 systems
would get only 2 per cent on their In
dividual investment others more. and
so on UP until 8 per cent. Is reached,
when the division takes place. Incen-
tive Is thus preserved because roads
earning less than 6 per cent. will strive
to earn up to 6 per cent. and those
earning over 6 per cent. Will strive
to mako their excess an great as pos
sible, for in so doing their share be-
comes greater.
Those not earning up. to 9 per cent
would get more than before. all the 9TH
ers can maintain their dividends Of the
past and substantial surpluees. The
percentage return Is not calculated on
outstanding security issues-stocks and
bonds-but Is computed on the invest
ment In or value Of railroad property.
The Intsrstate Commerce Commission.
but only for the purpose Of adjusting
rates to yield the return. Is authorized.
pcnding actual or permanent valuations.
to take the value Of the properties OF
the railroads when grouped in the rate
territories mentioned, based on their
property investment accounts, taking
into consideration the circumstances un-
der which the investment was made,
together with the other elements that
should be considered in arriving. at a
fair aggregate grouped value Of the va
rious groups of railroads. So all this
talk about paying on so-called "watered
securities" is untrue.
Excess Earnings the Result of In
hersnt Inequality in Tramo
Territory.
The railroads are now paid a def
mite rental by the Government under the
Federal Control Act The average of
the earnings of the three years men,
toned, the so-called test period" was
taken as a fair basis upon which to
compete the rental. Those carriers that
will produce excess earnings, after fur
nishing theif proportion OF the excess,
which goes into the national fund,
would receive more in the aggregate
under this plan than now paid them
Act The roads which would not con-
tribute to the fund would receive s2s.-
Ill, $50 more The latter sum represents
what would accrue from rates made to
enable the 100 railroads to live, pro-
ducing to them, as already shown, an
average Of but 4,61 per cent. on the
total investment in or value OF the
property OF all Of them as their share
of the result OF rates to yield the .
per cent. on the aggregate. Under what
process of reasoning the ffty-three
railroads (the number will actually be
less) can feel they are entitled to re-
ceive and hold on to earnings thus
made UP Is difficult to see These ex-
cess earnings result from rates made
necessary because of the inherent in
equality in traffic conditions in the ter
ritory traversed by the various rail-
roads.
The talk about taking earnings from
the strong roads and giving them to
the weak" or from the rich" roads
and giving to the poor" as some term
it, is pure fiction. and not in accordance
with the facts. The discussion Of
| deficiency and "inetficiency" In con-
nection with these conditions Is equally
faIlacious. 1t has also been said that
| II Is "confscation" to take excess earn
| ings with which to- create a national
| fund in the interest Of the public and
| the shippers, not from money that be-
longs to any railroad, but which re-
suits from the proceeds of rates that
are essential to the preservation of
the transportation system Of the -coun-
try, as a whole, and required to pre-
serve what former Senator Root terms
| "the great bulk of the roads"
Such statements evidence the efforts
of a few operating heads of several
railroads, and are calculated to destroy
the constructive effort now being made
by the Senate Committee. through Sec
ton of the Cummins BILL to save the
| railroads to private ownership. 1t would
be Just as immoral for the representa-
| tiyes Of these so-called "strong" or
"rich" roads, as they term them, to
expect TO hold on to this money, as
their assertion that It is immoral to
take money from one road and give Y
to another, when they must know tina,
such is not done, for 1t has never been
suggested or even considered by this
association, and is not provided in any
part of the Cummins bill.
| Stockholders CircuiarfEed.
| Conditions are so serious and the need
of definite constructive legislation 81
great that it Is unfortunate withou
| fully considering the fatality OF the re
suit that there should be any effort
| made to bring about the defeat of Sec
ton OF the Cummins bill, which. by tho
| vote of fourteen members OF the Senate
committee for to one against, embodies
the basis for such legislation. Circulars
are being sent to stockholders Of som'
| of the railroads and to members of Con
| gress that are misleading and do no