New-York tribune., 1921-06-12

the roads, 1T has significance.
In the three-year test period, 1914,
1915 and 1915, on which the govern
ment rental Of the railroads was based
during the period Of government opera
ton, the total operating revenues in
January averaged $26O,O00,0O and in
February $246,000,000. In September
they were $296, 100000 and in October
$305,000,000. October was the high fig
ure and February was the low figure
for the twelve months.
Expenses should be divided between
transportaton and maintenance. Trans
portation expenses vary directly with
the volume of business carried, al
though they follow a downward trend
somewhat slowly. A large increase in
business can only be handled by put
ting on additional engines, engine
crews and trainmen, and by burning
more coal. The increase in expenses
therefore is exactly coordinate with the
increase in revenue, but when sharp
falling off in business takes place it is
not possible to lay up engines imme-
dietely and to decrease engine mileage
in exact proportion to the decrease in
traffic. What happens is that more
light mileage is run and it takes an
appreciable period of time varying
from q matter of weeks to a matter of
q month or more to bring expenses
down to correspond with the drop in
revenue. Thus in the test period,
transportation expenses in January
IL Al,
900, in September $o1 100000 and in
October sos, 100000 Transportation
expenses are also considerably affected
by the weather on a road like the
Denver & Rio Grande and the Northern
Pacific. Snow in the winter months
adds appreciably to the cost of opera
ton. In the test period the high fig
ure for transportation expenses was in
March when $102, 100000 was spent on
this account and the low figure was in
July when $88,5o00 was spent.
Maintenance Expenses
Maintenance expenditure should have
little to do with the volume of bust
ness, or, if it varies at all, should vary
in inverse ratio to the volume of traffic.
Al a matter of fact, however, it does
vary to some extent directly with the
gross earnings. When earnings fall off
cuts are made in maintenance charges,
and when earnings are large deferred
maintenance is likely to be taken up.
Every railroad officer from the di-
vision engineer to the president knows
that this practice is uneconomical but
practical railroading."
Maintenance of equipment varies as
the mileage run by the cars and loco
motives, but there is so wide a varia-
tlon In the time which q car or loco
motive can be run before being sent
to the shop that ID is only incidentally
that the volume of business that the
road is doing in any given month
affects the amount spent for main
tenance Of equipment. For this rea-
son it is particularly important to
analyZe the expenses of the railroads
as they are reported from month to
month to try to determine if possible
what policy they are pursuing toward
maintenance expenses. 1t is perfectly
possible to make a difference between
the ratio of total operating expenses
to total revenues of fifteen points in
the extreme policy one way or the
other of maintenance charges. OF
course, this is true only over short
period of time, but at the present it
is of vital Importance. If, for instance
a road which in May, 1920, earned
just enough to pay operating expenses
should show May, 1921, ratio of ex-
penses to revenues of IS, this might
be the result OF additional business
without proportionate increase in
transportation expenses, the same
business or less handled with create,
economy in transportation expenses
or it might be the result of an arbi-
two, lo,, +
work done. If it is the latter, it is
temporary. In general the roads were
undermaintained during the twenty
six months of government operation
railroad executives contend, and while
during the so-called guaranty period
which was the six months March l tC
August 81, some of this deferred main
tenance was taken up, the financial
difficulties of the roads since last Au-
gust have precluded, with most OF
them, anything but a hand to-moutt
policy of maintenance. They have nc
fat to live on now.
q. S. Operation
Prior to government operation most
of the roads made an annual appro-
priation for maintenance OF way anc
structures and charged a fairly uni
form amount each month for TINS Item
regardless of whether the actual work
was done in that month or in pre-.
ceding or succeeding month. This was
satisfactory way of accounting anC
permitted the investor to make fairly
accurate estimate month by month as
to what any particular road was doing
in the way of economy of operation
and profit from operation. When Direc-
tor General McAdoo took over the
roads he continued this policy, but ir
1919, with the falling off of traffic due
to the armistice, and with the lack OF
enthusiasm for unnecessary government
expenditures that was generally mani
tested by the constituents of Congress
men, the Railroad Administration
changed its rules of accounting and
began to report only such maintenance
charges as pertained to actual work
done. 1t then reduced the amount OF
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