Evening star., 1921-04-06
By G. GOULD LINCOLN.


Copyright, 1921, by The Washington star)
(This is the fifth of a series Of articles
On the acute railroad % ana annesr aSe1u in an
early issue.)
Railroad finances-like those OF any
.other industry-constitute the 1nd1-
Gator Of success or failure. ana the
financial situation of many or the
roads today is little short OF desper-
ate. The property value is there. Ine
railroads are vital. The people must
have them. But the roads are not
making money enough under existing
conditions to pay all their expenses,
leaving out of consideration paying
dividends. The figures obtained for
receipts and expenditures in January
of this year indicate this clearly.
Preliminary figures for the 203 class l
railroads of the country-ciass roaas
are those whose gross incomes are
s., 200, 900 a year or more-for the month
Of January show an alarming situation.
They show a deficit of $1,lel, ,soO' Wneh
the operating expenses ana taxes, rem
ais. etc. have been subtracted from OPP
Grating revenues of the roads. Nothing
is left for dividends or interest charges
In January, 1920, these same ROADS
which include practically all OF one
roads in the country, hao het
fenue Of s6o.o17.ooo. That Ire revenue e,d ,ower ~sr
made, of course, with the oio lower
rates for freight and passenger seiv.
ice but also before the more recent
increases in wages had oeen aiio"e eo
The roads, to make a return OF per
cent, as contemplated IN tne t st
income Of about sSs, 900 900 in January.
1874.
Now In Different Situation.
The roads occupy a different situa-
fion this year from that they nave 0c-
the government in January, 1918. Dur-
ing the two years and two montns
that they were under government
control and operation it was the task
Of the government to see tnat all
their bills were paid. ana tnat ~ :,
into the pockets of the security hold
ers of the roads.
Last year the roads were turned
back to the private owners. WIN
guarantee by the government tnaI
during the first six months OF prlVate
oDeration the government would see
to 1t that expenses were palo anu
also a fair return on the lnvestnem. NJ,
That guarantee carried the roaos up
to September i. 1920 Then tney
government standing back OF them to
pay their bills or interest charges:
It must be remembered that while
the TRANSPORTATION act, under Wnlcn
the roads were returned 70 tne own,
ers. provides that rates shall be nxeo
by the Interstate Commerce Commls-
sion on a basis that will give them
fair return on their money. tnat act
does not guarantee that the ROADS
shall make money or pay their bills
q. ha f,,t,v The guarantee SIOp.
ped with September !.
Exeeutives' Efforts.
The roads, therefore. in 1921 are
faced with the prospect OF making
money or going under. 1t is incon-
ceiyable that they can be continued
in private ownership and operation II
tEey do not pay expenses and also
pay interest on their securities. The
railroad executives, therefore, are
straining every nerve to cut down eA-
penses-
When, in August. 1920, the Inter
state Commerce Commission estab-
lished the new scale Of rates to be
charged by the ,railroads-an increase
over the old rates of about IS per
cent-it also tentatively fixed the
valuation Of the roads, at $1S,5O0.-
00o.000. This is somewhat below the
book value Of the roads. but, never
theless. s.1approximates that value. AS
value 10 there. Upon the operation of
the properties depends their success
or failure financially.
The outstanding capitalization OF
the railroads in round numbers Is
$50, ,000. .000, 900. Of which about $11.-
coo, 600, 900 is bonded Indebtedness and
$4,000, ,000, 600 in capital stock. The
bonds, on the average. pay Az per
cent, or S475, 100000. In past years
the capital stock has paid around
$3.50, 900, 900, or an average OF about
per cent This by no means tells the
whole story so far as the capital
stock is concerned. Some roads have
paid practically nothing on their
stock; others have paid 4. 5, 6 or
even as high as 10 per cent.
Omeia1 figures place the net oper-
ating income of the roads for the
year 1920 at about s62.000.000. Now.
without the government guarantee,
covering the first two months under
government operation, and the next
six months under the operation Of the
transportation act. it is easy to see
what would have happened to the
roads. And the railroad managers
are afraid that is just what Is going
to happen to the roads in 1921. un-
less expenditures can be cut tremen-
dously and business increased. with
out delay.
Claims Against GOvefnment.
The roads are claiming from the
government about $500. .000. 900 under
the government guarantee for the