The Brandon news. (Brandon, Miss.) 1892-1961, 1923-02-08
SAYS INCREASED
EXPENSES CAUSE
OF HIGH RATES
President c. H. Markham, of the
Illinois Central Railway System,
Writes Letter to Editor on Cost of
Operating Expenses.

Central system. in an open letter re-
plying to a criticism of the railroads
made by Dante NJ. Pierce. of Des
Moines in Mr.. Pierce'S farm journal,
The Iowa Homestead.
''As a result Of rate reductions put
into effect during the past year"
Mr. Markham continues, 1.-The aver
age railway freight rate is now only
- per cent higher than ii was in
1913. before the war came along to
upset the economic balance. Note
how this small increase in the aver
age freight rate compares with in
creased operating expenses:
The largest single item of rail
way operating expenses is the wage
bill. The average annual cOmpenSa-
ton of all railway employees in 1922,
allowing for the wage reduction put
into effect during the year was
about S1.62S. as compared with
$761 in 1913. an increase of ia per
cent The total amount of wages
paid by railroads in 1922 was about
50, 635, 900 900, as compared with
of 81 per cent.
The second largest item of rail
way expenses. is the coal bin. In
September, 1922. according to the
United States Department of Com
merce. the average price for bitumi-
nous coal at the mines was 80 per
cent greater than in 1913.
Another important item in the
cost of providing transportation
service is taxes. In 1913, the rail
roads paid taxes amounting to S11S,-
$50, 800. while in 1922 their tax bill
has mounted TO about 100000. 600.
an increase of. 1913 per cent"
Two of the contentious of Mr..
Pierce to which Mr.. Markham took
exception were that the tentative
value of railway property as de-
termined by the Interstate Commits
sion for rate making purposes is eX-
cessive and that dividends are guar
anteed by the Transportation Act
Mr.. Markham pOintedly denies the
statement that the Interstate Com
merce Commission is required to fix
rates upon the basis of a guaranty
to the railroad of dividends upon i'll
flated Valuations Both of these
assertions of Mr.. Pierce are unwar-
lanted and misleading. Mr.. Markham
says.
Mr.. Pierce declared that the
Transportation Act saddles upon
this country the payment of enor-
nous freight bills in order that all
of the watered stocks and bonds
which have ever been flOated by the
railroads of this United States shall
be brought to par value" Mr. Mark
ham reveals the fallacy of this con
tention by showing that the par
value of all railway stocks and bonds
in the hands OF the pup
lie as of December 81, 1919, tine
date of which, the tentative valua-
ton applied) was only Sl6,oo2'
000. 900 or more than = ID Dlilloh
dollars less than the tentative valua-
ton fixed by the Commission. MI.
Pierce'S claim that the Commission
accepted with very little alteration
the claims of the roads themselves
as to their property values is refuted
nv the fact that the roads claimed
property investment of $40, O50.OOO,-
900.
The assertion that railway dlyl-
dends are guaranteed is shown to
be misleading by the actual results
obtained under rates established by
the Interstate Commerce Commits
sion.
1T is true Mr. Markham says,
that the Interstate Commerce Cons
mission is directed by the TranSpOr-
tatiOn Act TO fix rates upon Il basis
OF their estimated power TO earn for
the railroads a fair and reasonable
net operating income. Beginning
September /. 1920. this return was
taken as per cent upon tentative
valuation: in 1922 it was placed at
, 81 per cent. But the average net
by the railroads as Il whole from
September l, 1920, TO September 1,
1922. inclusive, was at the annual
rate of only approximately BAT per
cent upon their tentative valuation.
The railroads fell short of the So
called guaranty in this 2-year pc
riod by about $500, 900, 600. There is
no provision whatever whereby this
sum can be made up to them. The
fallacy, therefore, of calling the
rate making provision of the Trans
portation Act guaranty to the
railroads should be apparent to any
fair minded person.
In pointing out what a small por-
ton of railway revenues goes TO
make up the return upon tentative
valuation, Mr.. Markham states that
during the first ten months of 1872
the average dollar taken in by the
railroads was distributed rs follows:
1913 cents to pay operating expenses,
SO cents 10 pay taxes, IL cents TO
pay rents on equipment and joint Ia
cilitieS. and 13.4 cents for net opera
ting income. OF which 1T3 cents was
required to fix charges (rents of
leased lines and interest on indebted
ness. leaving 81 cents available for
dividends.
Reducing the tentative valuation
base. Mr.. Markham goes on to show.
could have no effect on operating
expenses. taxes or rentals of equip
ment and joint facilities. The only
item 10 be affected would be net
operating income If the valuation
were reduced by One-third, or to
about $4,000, 100000 (Which, it APP
pears, would satisfy most radical
railway critics., that would reduce
net operating income by a third of
1874 cents, or about IL cents. This
would mean that all dividend pos
sibilities would be wiped out entirely
and the railroads would be unable
TO pay all their fixed charges. In
other words, such a saving of 4 IL
cents on the dollar to the individual
who pays rates would throw the
railroads into bankruptcy.
1T should be plain" says Mr..
Markham. ito the person who really