The labor journal. [volume] (Everett, Wash.) 1909-1976, 1921-07-15
WATERED STOCK
IN RAILROADS

| The Interstate Commerce Commits
sion, proceeding under the valua-
ton act of 1913, is completing and
announcing its appraisal of the
| physical properties of a number of
the less important carriers. Its
| Investigations in majority of
cases prove the charge that the
socalled property investment &C
counts" are swollen with fictitious
claims.
Eighteen roads which have been
valued, the commissions engineers
| find, could have been reproduced
new, even at the relatively high
costs of labor and materials pre-
vailing in 1917, for just half what
the carriers claim they are worth,
if a proper depreciation charge is
| included in the calculation.
While the books of these 10 roads
show as an investment in road and
equipment the sum of $104, 1874 ,031 82,
the engineers declare that only
$50, S54, $4,000 would be required to
outfit their entire properties with
new equipment. This includes land
at its market value when the APP
praisals were made, in 1917.
Get Increased Increment
Included in these valuations is the
uneained increment, which does not
belong there. 1t is contended by
many competent authorities that
land used for railroad purposes can
not claim the natural increase of
values enjoyed by property that is
not limited to specific use.
These Is companies have been
chosen at random from different
parts of the country. None of
them has ever been selected as an
instance of corrupt financial man
agement. They are so small that
extraordinary management would
be difficult to conceal. Likewise
they are too small to attract the
attention of large financial inter.
ests that have looted and wrecked
other roads, notably the Frisco, the
Santa Fe, the Rock Island and the
New York, New Haven & Hartford
They can be considered typical OF
American railroads.
The most fragrant overcapitaliza
ton is revealed in the accounts OF
the New Orleans, Texas and Mexico
Railroad, which claims to have in.
vested $35,171,019 in road anC
equipment.
The commission reports that this
property can be replaced new fol
not more than $8,594019, with the
necessary depreciation allowance
The actual value Of the road is
therefore, less than one-third of the
claimed value, upon which the pub
lie is compelled to pay exhorbtant
freight charges that dividends may
be guaranteed under the Cummins
Esch act.
The Chesapeake Beach Railway
running into the city of Washing
ton, is shown to be very largely
junk. The books of the carriers
claim an investment in road anC
equipment of $2,567 ,231.80, while
the commission belives it could be
reproduced new for 724,510.
The Mississippi Eastern Railroad
insignificant in size, is a glarinq
example of the worthlessness of the
railroads accounting systems. This
road claims an investment of $75 ZOO
| 1t can be rebuilt, according to the
| SOlIllilloSlOily IOl PL,tOU, VI ulOIt
than 5000 per cent less than the
sum on which the owners claim
| dividends.
Big Value Placed On Junk
An even more striking example
of stock watering is furnished by
the Central of Arkansas Railroad
which claims an investment of
100000, while its physical property,
including lands, could be reproduced
new for $3,172. This railroad has
practically disintegrated, yet it is
included in the $19,800, 100000 valu-
alton placed upon American rail-
roads as a basis for ate-making.
Not all railroads show such a
high percentage of fictitious valu-
alton, but great majority actually
represent but a fraction of the sum
alleged to have been invested in
them.
1t has been stated that shippers
are paying interest charges on the
cars and equipment and tracks that
were used to transport troops dur
ing the Mexican and Civil Wars.
Rails that have disappeared in rust
and cars that have returned to
their natural elements are included