Number of Cars Handled by 36 Car Service Associations and Demurrage Bureaus during Twelve Months ending December, 1905-1909.Names of Associations and BureausTwelve Months Ending December19051906190719081909Alabama752,982744,548779,402631,487700,393Central New York611,601654,861753,269738,054804,419Central (St. Louis)863,788908,096919,130838,0171,001,136Chicago2,166,9102,251,7632,282,1912,161,7672,790,801Cincinnati675,117748,763771,990635,365712,145Cleveland (a)640,364796,6871,016,003715,764843,609Colorado425,140455,540445,900385,260428,760Columbus394,152443,638469,773363,130401,696East Tennessee320,855358,733388,066293,597330,055Indiana912,827962,9411,104,8551,077,7861,211,793Intermountain116,533158,231184,577153,885201,077Lake Superior332,633371,312415,642338,109370,490Louisville Car495,095541,945506,528518,955565,748Memphis235,569258,316255,169239,156224,648Michigan687,428766,950838,928696,926859,812Missabe Range30,24137,61342,78642,93054,934Missouri Valley1,538,0871,665,8821,910,1391,606,7581,863,052Nashville300,602336,110351,572326,385337,234New York and New Jersey997,3041,100,0671,409,1611,248,6091,416,831North Carolina357,474374,710407,257404,334445,398Northeastern Pennsylvania802,072836,443917,936633,655594,231Northern1,467,0411,722,3451,736,9811,515,7061,636,588Pacific761,382972,3981,166,8861,147,3451,390,948Pacific Northwest647,726727,474888,093845,405987,115Philadelphia2,056,7442,218,7552,326,7231,921,1422,508,204Pittsburg3,375,5303,295,4632,935,2991,977,8912,807,256Southeastern813,444862,379853,720823,948981,737Southern273,273301,273492,914513,437649,384Texas932,992977,630986,4751,118,6221,302,211Toledo262,875312,329530,617383,870492,127Virginia and West Virginia818,915866,861893,905778,940942,231Western New York812,409881,640986,962806,488931,185Western (Omaha)622,868718,872770,470733,346775,828Wisconsin1,157,0361,119,3261,118,7201,022,2701,006,050Total reported by 34 associations and bureaus (b)27,659,00929,749,89431,858,03927,638,33932,569,156Baltimore and Washington Demurrage Bureau(c)721,428(c)740,903(c)735,103588,930672,954Illinois and Iowa Demurrage Bureau(d)3,054,3153,258,770(d)3,561,740(a) Cleveland reported 10,016 lake coal cars for December, 1909.(b) The Butte Terminal Association was superseded by the Montana DemurrageBureau inMay, 1908. The returns of the new bureau for the twelve months endingDecember, is448,381 cars.(c) Figures apply to larger territory; change and revision of 1907, 1908 and 1909 figures made October 1, 1909.(d) Not reported.
Having in the preceding pages given the facts as to the provision made by the railways for fulfilling their obligations as common carriers, it is now in order to present a brief review of their receipts and expenditures in relation to their public service.
For the second successive year the Bureau has to warn the reader that innovations in the forms of keeping railway accounts prescribed by the Commission preclude the making of strictly accurate comparisons of the returns for 1909 with those of any preceding year. In submitting its report for 1908 the Commission made the following explanation:
"A number of important changes have been made in the annual report forms for 1908, particularly in the grouping of certain items in connection with the Income Account and the Profit and Loss Account. The figures which follow do not include returns applying to carriers classed as switching and terminal. The changes in the income account submitted in the report under consideration are so far reaching in their results, in a number of instances, as to impair direct or close comparison with figures for similar items contained in previous statistical reports."
In the comparative Income Account below, which aims to present the situation as it would result from the actual operations had such operations been conducted by a single corporation, the Bureau has sought to make the returns for 1908 and 1909 conform as nearly as possible to "previous statistical reports." It should be premised, however, that the official figures for 1908 exclude the returns from switching and terminal companies, whereas the Bureau's figures for 1909 include some portion of these returns, which are as much an integral part of the transportation service of American railways as any they perform. The official figures for 1908 do not correspond absolutely to the preliminary figures for the same year compiled from the monthly reports as reviewed in the Introduction to this report.
With this by way of explanation, the comparative Income Account for the years 1909 and 1908 is submitted:
Comparative Income Account of the Railways in the United States Considered as a System for the Years ending June 30, 1909 and 1908.ItemAmount1909(221,132 miles operated)1908(230,002 miles operated)Passenger revenue$ 551,634,278$ 566,832,746Mail revenue49,508,97248,517,563Express revenue61,883,69558,692,091Freight revenue1,643,028,5641,655,419,108Other earnings from operation69,086,25764,344,481Gross earnings from operation$2,375,141,766$2,393,805,989Operating expenses$1,568,111,272$1,669,547,876Taxes82,650,21478,673,794Total$1,650,761,486$1,650,761,486$1,748,221,670$1,748,221,670Net earnings from operation724,380,280645,584,310Net revenue from outside operations5,410,3385,977,268Operating income$ 729,790,618$ 651,561,587Disposition:Net interest on funded debt$ 293,338,105$ 282,354,001Interest on current liabilities22,546,77931,835,708Rent paid for lease of road120,784,982111,153,013Additions and betterments charged to income24,807,54628,086,454Appropriations to reserves and miscellaneous items22,587,20821,636,182Other deductions70,174,47364,669,546Total deductions$ 554,239,093$ 539,734,904Surplus available for dividends, adjustments and improvements175,551,525111,826,683Net dividends171,607,550104,074,006Balance to profit and loss$ 3,943,975$ 7,752,677
In 1909 the "Income Account" of the railways was swelled and confused by including therein $200,725,696 of intercorporate payments, while that for 1908 includes $274,450,192 "Other Income" which, as has been formerly noted by the Official Statistician, swells the totals to a fictitious figure. It is out of this fictitious income that fictitious interest and dividends are paid, fictitious deductions made, and fictitious surpluses accumulated. If "Other deductions" in the above statement had been charged against "Other income"instead of being deducted from earnings from operation the balance to Profit and Loss for each year would have been so much larger.
What becomes of the rent paid by operating roads for leased roads is well shown in the statement included in the Commission's preliminary report of statistics for 1908 in which the amount received by the latter mentioned in the table just submitted is disposed of.
Condensed Income Account and Profit and Loss Account of Leased Roads for the Year ending June 30, 1908.Income AccountGross income from lease of road$111,153,013Salaries and maintenance of organization390,841Taxes accrued5,881,352Net income from lease of road$104,880,820Other income5,436,129Gross corporate income$110,316,949Deductions from gross corporate income62,232,508Net corporate income$ 48,084,441Disposition of net corporate income:Dividends declared from current income$ 33,843,577Additions and betterments charged to income1,088,002Appropriations to reserves and miscellaneous items258,580Total$ 35,190,159Balance carried forward to credit of profit and loss12,894,282Profit and Loss AccountCredit balance in Profit and Loss Account, June 30, 1907$ 45,852,031Credit balance brought from Income Account, June 30, 190812,894,282Total$ 58,746,313Dividends declared out of surplus27,550,596Other profit and loss items—debit balance2,006,573Balance credit June 30, 1908, carried to balance sheet$ 29,189,144
Included under the blind item of "Deductions from gross corporate income, $62,232,508" in this statement may be mentioned rents of other roads and facilities of which these leased roads are the lessees, interest on funded debt and other interest, sinking funds chargeable to income and other deductions not specifically provided for elsewhere. In case of operating roads this item also includes the balance of hire of equipment, to which, of course, there is a credit with other operating roads.
The significant feature in this statement is the decrease in the profit and loss credit balance of $16,662,887. But this does not alter the fact that what becomes of rent paid for lease of road is no more a concern of interstate commerce than what becomes of the rent paid for warehouses or office space in any terminal. The operating roads pay all the cost of maintenance of way and equipment. The leased roads are not common carriers in any sense. They are simply distributing mediums of the rents paid them—this rent being the equivalent of interest on so much capital. As appears from the foregoing table, the expense of maintaining the organization of these leased properties amounted in 1908 to 35/100ths of 1 per cent.
Distribution of Gross Earnings.
How the gross earnings of the railways reporting to this Bureau in 1909 ($2,375,141,766) were distributed is shown in the next statement in comparison with a similar division of earnings in 1908 and 1907.
Statement of Distribution of Gross Earnings of 221,132 Miles of Line in 1909 Compared with the Percentages for 1908 and 1907.(Gross Earnings 1909, $2,375,141,766.)ItemAmount1909Per Cent1909Per Cent1908Per Cent1907Operating expenses:Maintenance of way and structures$ 299,757,07712.6213.4113.27Maintenance of equipment358,747,37115.1015.4214.22Traffic expenses48,453,7072.082.00—Transportation expenses799,690,19433.6736.2437.50General expenses61,462,9232.582.582.54Total$1,568,111,27266.0369.6767.53Disposition of same:Pay of employes$ 973,174,41941.0043.4341.42Fuel for locomotives184,359,1127.76—7.74Oil and water for locomotives19,951,184.84—.88Material and supplies219,463,0289.24—11.81Hire and rent of equipment and facilities54,638,2432.30—2.46Loss and damage56,379,0422.37—1.83Miscellaneous(a)60,146,2422.52—1.39Total expenses$1,568,111,27266.0369.6767.53Taxes(b)88,531,5663.723.533.10Rentals of leased roads114,903,6304.844.644.69Interest on funded debt and current liabilities315,884,88413.3013.3413.14Dividends171,607,5507.234.428.78Deficits of weak companies20,223,246.851.24.19Betterments, reserves and sundries47,494,7542.002.071.50Surplus48,384,8642.031.091.07Total (gross earnings)$2,375,141,766100.00100.00100.00Gross earnings 19082,393,805,989Gross earnings 19072,589,105,578(a) Legal expenses, advertising and insurance are included under "Miscellaneous"; stationery and printing under "Material and Supplies."(b) Includes taxes paid by leased lines and deducted from rent.
Owing to the fact that interest on funded debt and dividends are paid out of the common fund derived from operation and investments, the amounts devoted to these items in the above statement are necessarily computations. That they are not underestimates is proved by the fact that the surplus would not permit of larger charges for interest and dividends paid out of net earnings. Any interest or dividends materially greater than the amounts stated above, not paid out of the rents accruing to leased roads as given, must necessarily be derived from other sources than transportation revenues, and has no place in railway accounts coming under the provisions of the Act to Regulate Commerce among the several states.
So far as taxes are concerned, seasons of prosperity, depression and marking time are alike to American railways. The burden of their taxation knows no recession but mounts steadily, absolutely, per mile and in proportion to gross earnings.
The 368 roads reporting to this Bureau owning 182,046 miles of line and operating 221,132 miles, of which 39,086 miles were leased, paid $82,650,214 taxes in 1909. The Commission's report for 1908 shows that the leased roads paid $5,881,352 taxes out of their rents. Putting a conservative estimate of $200 a mile on the 11,870 miles of line not represented in this report would add $2,374,000 to the above figures and bring the aggregate taxes paid by the railways of the United States in 1909 up to the striking total of $90,905,566.
How railway taxation has increased absolutely and relatively to earnings and mileage during the past twenty-one years is shown in the following statement:
Taxes Annually and Relatively, 1889 to 1909.YearTaxes PaidPer MilePercentage of Earnings1909 (Official figures)$89,026,226$3823.73190884,555,1463673.53190780,312,3753533.10190674,785,6153363.21190563,474,6792923.04190461,696,3542903.12190357,849,5692813.04190254,465,4372723.15190150,944,3722603.20190048,332,2732503.24189946,337,6322473.53189843,828,2242373.51189743,137,8442353.84189639,970,7912193.48189539,832,4332243.70189438,125,2742163.56189336,514,6892152.99189234,053,4952092.90189133,280,0952063.04189031,207,4691992.96188927,590,3941792.86
In this table the figures for 1909 are based on the monthly reports to the Commission and are subject to revision, but they arein substantial agreement with the estimate on the returns to the Bureau.
Observe that the highest ratio of taxes to gross earnings shown in this table was 3.84 per cent in 1897, when everything relating to railways, except taxes, was prostrated under the reign of receiverships that followed the panic of 1893. It was of 1897 that the Official Statistician recorded the fact that "70.10 per cent of outstanding stock paid no dividends, and 16.59 per cent of outstanding bonds, exclusive of equipment trust obligations, paid no interest."
There is instruction and warning behind the remarkable increase in the ratio of taxation shown in the figures for 1894 to 1897. There is the reflection of similar conditions in the rising ratios of 1908 and 1909.
There are two items in railway accounts connected with the expense of operation that give the management most serious concern, because no means has been devised to limit or control them. In a leaflet issued by this Bureau in September last, it was estimated that the payments of American railways on account of "Injuries to Persons" and "Loss and Damage" for the year 1908 would approximate $56,700,000, or more than 2.3 per cent of their gross earnings. The Commission has not yet made public the final figures for 1908, but the returns on these accounts of the 368 roads reporting to this Bureau for the year 1909, aggregate $56,379,024, or 2.37 per cent of their gross earnings.
Divided according to the new system of accounting adopted by the Commission, these returns show the following figures:
Summary of Payments on Account of Injuries to Persons and Loss and Damage During the Year 1909.AccountAmountPer Cent of EarningsInjuries to persons$23,456,038.99Maintenance of way$ 2,702,066Maintenance of equipment2,315,119Transportation18,438,853Loss and damage32,922,9861.38To freight$24,768,453To baggage300,869To property4,469,496To live stock, etc.3,384,168Total$56,379,0242.37
Unlike many of the other expenses of American railways, the burden of this "cost of operation" does not fall heaviest on the large systems. In the case of one road of moderate importance payments on these two accounts amounting to 4.8 per cent of gross earnings were enough to tip the balance into a deficit after paying interest on funded debt; one minor but prosperous road, after paying 14 per cent of gross receipts to meet these two accounts, had nothing left for dividends after paying interest, which amounted to less than 10 per cent of its earnings; and a small third road after being called on to pay 21.5 per cent of its earnings for injuries and damages had only 6 per cent of its operating revenue left to pay interest on fundeddebt, which called for 20 per cent of the earnings, and taxes reduced the net operating revenue to less than 4 per cent.
These are extreme cases but they illustrate how the "Injury and Damage" claims strike roads that can ill afford to pay them as well as the great systems which are the common prey of every claimant with enough of a grievance to interest an attorney who scents a contingent fee.
That the claims behind these expenses are largely meretricious is indicated, if not proved, by their disproportionate increase in the past ten years, during which the railways have expended millions in providing safeguards for their trains and employes. This increase absolutely and relatively to gross earnings is shown in the following statement:
Payments on Account or "Loss and Damage" and "Injuries to Persons" During the Decade 1899 to 1909 and Proportion to Gross Earnings.YearLoss and DamageInjuries to PersonsAmountPer Cent of EarningsAmountPer Cent of Earnings1899$ 5,976,082.455$ 7,116,212.54119007,055,622.4748,405,980.56519018,109,637.5109,014,144.567190211,034,686.63911,682,756.676190313,726,508.72214,052,123.739190417,002,602.86115,838,179.802190519,782,692.94616,034,727.770190621,086,219.90717,466,864.751190725,796,083.99621,462,504.8291908————190932,922,9861.38623,456,038.988Increase in 10 years, per cent450.5204.6229.682.6
Startling as are these increases absolutely, those relatively to earnings present a condition truly alarming, for which there is no apparent relief except through a revulsion in the popular tolerance of blackmail at the expense of the railways.
In no other country in the world are the railways held up on bogus claims for damages to the extent they are in the United States. Under the strict laws of the United Kingdom, as to compensation for damages and injuries, the British railways paid less than 7/10ths of 1 per cent of their earnings for all damages, losses and injuries, or less than one-third the proportion paid by American railways on the same account.
Despite the continuous improvements in the steam-producing capacity of railway locomotives per ton of coal, the steady advance in the cost of coal during the past ten years has more than offset the economies of locomotive construction. This is shown in the next statement, which gives the cost of locomotive fuel and its relative proportion to gross earnings and operating expenses, and also the average price per short ton of coal in the United States since 1899: