Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-05-23
Washington Ticker
Nv the Associated Press

BY the Associated Press.
Existing levels Of railroad freight
! rates in the United States will never be
varied as much as per cent by any
| Anal determination Of the long contro-
versy between the carriers and the
Interstate Commerce Commission over
railroad valuation. When the Supreme
Court this week awarded one round In
the contest to the rail lines by upsetting
the commissions valuations in the
O'Fallon case, number Of notable peo-
pie, including President Hoover, Gen.
Atterbury of the Pennsylvania and
Daniel Willard of the Baltimore & Ohio,
were quick to say that the findings had
little or nothing to do with rates, and
today DR.. Julius H. Parmalee, chief of
the Bureau Of Railway Economics, ex-
planned statistically some of the reason
ing which led to the announcements.
I'm the first place, actual operating
expenses and taxes took up 80.7 cents
out Of every dollar Of revenues which
class l railroads earned in 1928" DR..
Parmalee said. 1T is obvious that
money to meet actual expenditure in
rendering service must be provided BY
the rates, whatever valuation totals are
assigned to railroad property. or the
service will not be maintained. This
proportion berne by railroad expenses
and taxes to the total receipts from rem
dering railroad service has been steadily
cut down in recent years by the effort
OF arrangements, but cannot be expected
to go much lower.
After payment of expenses and
taxes there remained in 1928 about
1873 cents out of each dollar Of rail-
road receipts, classed as railway OPP
Grating income, which Is available to
meet the capital charges, interest on
borrowed money and return on invest
ment. This Is the only portion of the
receipts from railroad rates which can
be varied by final findings as to the
value of railroad property. Now, the
Commerce Commission figures as to rail
valuation are understood to be, on the
O'Fallon basis, about Is per cent below
the total Of the corporation book value
of railroad investment.
Thus, II the courts, the commission
and the Government should finally
agree to give the carriers the book in
vestment value, and If rates should
be increased to make the higher values
effective in operating income, this figure
would be raised to equal about - cents
out of each dollar of 1928 receipts. As
Stunning expenses and taxes to remain
the same. general railroad rates would
only have to be increased to a total
figure Of 104 per cent Of existing levels
to provide reasonable return on the
highest valuation figures that have been
discussed
DR.. Parmalee Is careful TO point out
that his calculations relate only to
valuation theory, and to add that even
the per cent rate increase mentioned
might never be sought.
This summary is merely designed to
show why better informed people dis
count the influence Of valuation in prac-
tical rate making" he said. In that
field the question of competition, Of
ewhat the traf1c will bear. and like fac
tors come into play. There is much
misrepresentation as TO this, because 1t Is
rather easy to fall into the error of
thinking that If valuations are raised
rs per cent, rates would have to be
raised Is per cent also"
In 1920 class / railroads were tenta-
lively estimated by the Commerce Com
mission at $4,000, 000. 900 for rate-mak-
ing purposes. DR.. Parmalee estimated
that about S., 00O, 900 900 of new invest
ment had been made by carriers since
that date, so that the commission might
be found ultimately contending for FIX
ing total valuation Of class rail prop
erty at $4,000, 100000. Railroad book
investment total for the same property
is Just under $4,000, O00, 900,