by any one as to the profitableness of the stock of the Pennsylvania
Railroad Company? Its natural position must give to it more than
sufficient business to make it yield large profits. Indeed, I
confidently advance the opinion that when the Road shall have been
completed that it will not be a question "whether it will pay an
interest on its cost," _but to what point the rates of freight and
passage shall be reduced to give the Company ample revenues and at
the same time make the work most extensively useful to the public_.
Dividends from its revenue can be made of 6, 8 or 10 per cent. by
changing the rates of freight and passage, at the discretion of the
Directors.
From some experience in the management of the business of other
roads, much less favorably situated than this, I feel no hesitation
in making this prediction. I look upon the result as one upon which
there can be no doubt entertained.
The inquiry may be made, "If this Road must prove a profitable
investment, why other works in Pennsylvania, favorably located,
have not yielded remunerating dividends to their proprietors?" In
reply it can be stated that there is no important work, leading from
Philadelphia, that ought not now to divide large profits, if their
stock and funded debts exhibited a fair cash value of the property
represented. Most, if not all, of these works, were commenced with
inadequate capital, for the object in view, and from the anxiety
of the stockholders to realize the large profits promised on their
completion, and the _public_ to _enjoy the use_ of the improvement,
they have been pressed forward faster than true economy, or the
funds of the company, would justify. Engagements were made, relying
upon fortune, or accident, to provide the means to meet them. These
resources failing, they were thrown upon the mercy of either the
contractors or the money lender. And, in consequence, the cost of the
works has been rolled up to an amount not anticipated, and, in many
cases, debts incurred, under the pressure of the moment, in the most
objectionable shape, to meet which the whole of the receipts of the
companies have necessarily been mortgaged.
In New England, and also in New York--where railroads have,
in many cases, been deprived of the privilege of carrying
freight--judiciously located roads have invariably paid well. Their
success has not been caused by the exercise of any peculiar skill
or economy in their management, as generally supposed, for, in this
respect, though they stand deservedly high, there is none that
conduct their business, under all circumstances, with as much economy
as the Baltimore and Ohio Railroad, or some other southern companies.
In closing this communication it gives me much pleasure to
acknowledge the zealous and cordial co-operation that I have received
from my Associate and Assistant Engineers in carrying on the
important work that you have committed to our charge.
Respectfully submitted, by
Your obedient servant,
J. EDGAR THOMSON,
_Chief Engineer_.
Note.--By way of "Then and Now" contrast, the income account of the
Pennsylvania Railroad Company for the year ending June 30, 1909, from
Interstate Commerce Commission Bulletin No. 5 is subjoined.
Revenues and Expenses of the Pennsylvania Railroad Company for the
year ending June 30, 1909.
Miles operated 4,087
Operating revenues $138,449,119
From Freight $100,356,160
Passengers 28,774,281
Other transportation 8,438,972
Non-transportation 879,706
Operating expenses 97,107,751
For Maintenance of Way and
structures $16,503,246
Maintenance of equipment 27,225,887
Traffic 1,844,365
Transportation 48,064,176
General 3,470,077
Net operating revenue 41,341,368
Taxes(a) 2,370,314
(a) Exclusive of some $1,790,000 taxes paid on leased lines.
Observe that the amount expended on maintenance of way and structures
in 1909 was more than double the total estimated cost of the road
from Harrisburg to Pittsburg in 1848.
The amount expended during the calendar year 1909 in revision of
grades and alignment, and for additional tracks, yards and other
terminal facilities, abolition of grade crossings and improvement of
equipment was $5,581,809, exclusive of $4,000,000 applied towards
construction of New York Terminal Extension.
This road as it exists today is a living monument to the sound policy
of the American railway practice of a dollar for improvements for
every dollar of dividends.
S. T.
FOOTNOTE:
[A] By an alteration of the line, since made, the distance lost by
the river route is reduced to four-tenths of a mile.
RAILWAYS AND THE PACIFIC NORTHWEST
BY JAMES J. HILL.
[On the occasion of the completion of the Spokane, Portland
& Seattle Ry., connecting Portland with British Columbia,
Mr. Hill delivered three noteworthy addresses at Portland,
November 6, 1908, at Tacoma November 9 and Seattle November
10. The speech at Portland was an earnest plea for a more
intelligent and economical cultivation and conservation of the
vast agricultural resources of the Pacific northwest; the other
two related largely to the part played by the railways in the
development of that territory. The portions of these addresses
which follow are taken from the full reports which appeared in
the Seattle and Tacoma newspapers the next days.]
MR. HILL AT SEATTLE.
After Mr. Hill had been introduced and warmly applauded as the
"Empire Builder," who had been intimately associated with the
development of the northern tier of states from the Lakes to the
Pacific Ocean, and he had acknowledged his obligation to the
indomitable spirit of Seattle and its people, he began his address
by disclaiming the ownership of the Great Northern railway. "Fifteen
thousand people own it." said he. "The average holding is about 120
shares. Over 6,000 women are owners in the Great Northern railway,
and I have to manage their affairs." Then he proceeded:
"It is three years since I was here, and I never expected that three
months would pass without my coming to Seattle, but three years
have passed and what do I find? I think the city in three years has
doubled. I think it has doubled in everything that goes to make a
city. Just look at the streets lined with commercial houses which
would be a credit to any city in the world. It is far beyond what I
expected to find, and I think that Seattle has a future. Seattle is
entitled to her growth, and if the same spirit that has moved her
citizens in the past continues, if the mantle of the older men falls
on the shoulders of the younger men, Seattle cannot help but thrive.
You have behind you one of the richest states in the Union; one of
the very richest.
* * * * *
DEVELOPMENT OF RAILWAYS.
"Now, to come back to the relation of the railway to the development
of the country. Next to the cultivation of the soil itself, in the
amount of money invested and in the importance to all the people, is
the railway property of this country. It is on a little different
basis, I am sorry to say, from the general attitude of the public,
from any other property. From what Judge Burke says as to the Golden
Rule, if you can have it fairly applied, it would make our hearts
glad.
"We frequently hear about railroad watered stock. It is a hackneyed
phrase which is used with which to catch gudgeons, and it has
caught a great many. Now, let us see. You can open a bank--five of
us sitting here, if we had the money, could open a bank, put up
the building and draw our checks, and that is disposed of. We have
a million or a million and a half of capital, and, conducting the
business of the bank within the law applied to bankers, we can earn
any dividend we like, and we can divide it, even up to 40 or 50
per cent., and it has been done, and nobody finds any fault. Now,
we might start a manufacturing establishment and we can divide any
profits that we can legally make up to 40 or 50 or 100 per cent., or
we can start a mercantile establishment and conduct it so as to bring
any profit--there is no limit so long as we are within the laws of
trade. But take the railroad.
"Now, remember, you can run your manufacturing establishment
twenty-four hours a day, or you can run it one day in the week, or
you can run it half the time and you can close it and it will not
affect you, or you need not run it at all; and if you do not like
the business you can dispose of it. You can liquidate your bank and
go out of business; and so with the mercantile establishment, you
can close it at any time. But when you have invested your money in
a railway, you have undertaken an obligation to serve the public;
you have taken a business risk that is greater than the business
risk of any other business in the world. If you do not run it, move
your trains with regularity, move your trains so as to accommodate
the business, the courts will appoint a receiver and will issue
receiver's certificates to an extent that would wipe out your
investment. If there were anything left they would hand it back, but
the chances are altogether that if you could not make it pay the
receiver could not.
RAILROAD BIGGEST RISK.
"Now, I mention this simply to show that the business risk in
building or operating a railway is greater than it is in any other
business. There is nothing guaranteed, and sometimes you are told
what appliances you may use; you are told what you must not use;
you are told whom you can hire, and you are told when you can
discharge him, and it has been at least hinted as to what you should
pay him--what his wages and condition of work shall be. So that
the only privilege that was left for the railroads was to pay the
bills. That they are always expected to do, and it would be a great
disappointment if they were not able to.
"In the section of this country, the portion of this country east
of Chicago, I do not know anywhere north of the Ohio River, where
a railroad, built with the greatest care and economy, could pay
one per cent. on its cost; that is, a new road, built between any
of the large cities of the west to the large cities of the east,
paying the present price of real estate and terminals and the cost of
construction, the cost of eliminating great profits, the cost of the
necessary expenditure of money to make life and limb safe.
"Take, for instance, a railroad from New York to Chicago. I had
curiosity enough to inquire from the leading real estate man who
was getting the additional property for the New York Central, their
terminals, what it would cost from Thirty-eighth street to Harlem
River, a narrow strip of blocks on the East Side, say ten blocks,
from Thirty-eighth to Forty-eighth street, to be used as a terminal.
He told me it ought to be secured for $200,000,000, but he would not
like to take the contract. Now, follow that up through Albany and
Syracuse, Rochester and Buffalo and Erie and Cleveland and on to
Chicago, and if you can get into Chicago and get out of New York with
any reasonable cost I want to say that when your road was finished,
at the present rate, it could not pay 1 per cent. on what it cost in
money.
NO ROOM FOR MORE ROADS.
"Now, what chance is there for more roads between New York and
Chicago, or between any Atlantic city and any large city in the west?
During the ten years from 1898 to 1908 the railroad mileage in the
United States increased about 24½ per cent., the passenger business
increased 125 per cent., and the freight business increased 148 per
cent. The additional burden was placed on the railways, with an
increase of over 148 per cent. in the tons moved. What is it costing
the Pennsylvania road to get into the City of New York? I do not know
the exact figures, but I have seen it estimated from time to time at
one hundred millions of dollars to secure passenger facilities in
the City of New York. When I think of these things and see what you
have here I think that we have reason to congratulate ourselves, and
I think that we had a narrow escape from being compelled to do our
business west of Commercial street in place of where we are today.
There are no places that I know of today where there is any room or
any use for any other large railway enterprise.
"The Milwaukee & St. Paul are coming to the Coast--and we are glad
they are there. At different times, when people largely interested
in that enterprise talked with me, I said, 'By all means build to
the Coast; extend your road--if you do not, somebody who has more
enterprise than you will take the business and will keep it on
their own rails and you will not get a share of it.' But when that
enterprise is finished, I do not know, north of the Platte River,
where there is room for another railroad or occasion for one. There
will be branches built, and they are necessary for the development
of the country. You had expended, and there is being expended now, a
very large sum during the last two years.
"The Northern Pacific and the Great Northern, within the State of
Washington, have spent millions of dollars between Portland and
Spokane. It ought not to frighten you; it will not wipe you out; you
have your roots deep in the ground and they will stay there.
TACOMA IS WAKING.
"Now, I find in summing up the present population of the new country
between Blaine and Vancouver--Portland is on the other side of the
Columbia, although, fortunately, the state line does not limit our
commerce or our right to trade with each other--there are over
700,000 people living on the line of the railway between Blaine and
Vancouver. Portland claims 200,000, and I feel sure that she must be
near that figure. Portland has grown rapidly, and I think possibly
the young men have taken a sheet out of your book. There was a time
when they were altogether too wealthy in Portland. Every man had
business of his own to attend to and was so deeply engaged in it that
he overlooked the business of the city. They did not take hold. You
could come there if you were willing to bear all the expense and take
what you could get. But Portland has had an awakening, and I believe
that Portland, notwithstanding its remoteness from the sea, will have
a good growth. It has a good country behind it and there is no reason
why it should not have a good growth.
"Another city down here where we were beautifully entertained last
night, Tacoma--I remember when we came out here they really did
not need us and we did not want to force ourselves on them, and
so we stayed right here. But I think, and I hope, that Tacoma is
getting its eyes open and that it wants more railways. We don't ask
much; we want the privilege of a place for foothold, a place to do
our business at our own expense; and I think that we will probably
succeed in getting it--I hope so.
GROWTH PLEASES HIM.
"I wanted to come back to your city here. I was more than surprised
at your growth and I am more than gratified. I rather gathered that
you had grown fast and that possibly you wanted a resting spell, but
I don't see that there is any rest for you now. I think that you will
go on as you have begun, and I was more than glad to see what you are
doing in the way of adjusting your street grades. It is inexpensive;
the burden may be hard upon some people, and difficult to carry, but
it will cost infinitely less to do it now than in five or ten years,
after those streets were lined with buildings that had cost a great
deal of money and you could not afford to throw them away. Lay your
foundations right and the structure will take care of itself.
"It will grow by degrees, and, when it is finished it will be part of
a complete whole and you will be glad you did it. We have a good many
communities to take care of along our railway, and with every one
of them we have always the feeling that their prosperity means our
prosperity. They have to earn the money before they can pay it to us,
and what they do pay us we think is a small part; but we expect the
railway business must depend upon close management and small savings.
"Take the dividend of the Great Northern railway. _Three copper cents
in moving a ton of freight ten miles pays our dividends._ A ton of
freight on a country road would be a fair load for a farmer's wagon,
and ten miles would be a fair day's work if he returned the same
night. We do that. Our dividend amounts to about 3 cents--a little
less than three copper cents--for moving that load of freight. We
find that we have neither poisoned the air nor the water and you
have all the highways that you had before we came, but we give you a
better one and a cheaper one.
MUST HAVE MONEY.
"And remember that you never can injure the railway without injuring
yourselves. The railway has only two sources from which to get
money. It must either earn it or borrow it, and if it borrows, and
borrows judiciously, the rate of interest ought not to be high, but
whatever it is, high or low, you pay it. Sometimes people who do not
know better think that they are serving a good cause to stick the
railway--the company is rich--a personal injury case or something of
that kind--but it is a railway and they can afford it--stick them.
Now, who pays the bill? Can we charge that up to the construction of
a station?
"It is a part of the expense, and the law says that you must pay us
for the use of our property enough to pay our expenses and our taxes,
and a reasonable return upon the investment, so that all is charged
in your bills.
"We had in one thriving city on the Great Northern, I recall, a suit
for $20,000. A young brakeman stumbled against a pile of cinders that
it was represented the trackmen threw out from between the rails and
poured water upon it, and it froze in the winter and was solid, and
as he was running alongside of his train he stumbled and fell and
was injured--some great injury to the spine that wrecked his entire
nervous system, and we inquired and found out how the coal got there,
and our experience and education have made us suspicious; we took
the cinders to the laboratory and had them analyzed and absolutely
they were anthracite, and there never was a ton of anthracite coal
burned in a locomotive in the State of Minnesota; we followed it up
and we found that the man who brought the suit--a professional suit
bringer--had, with a brakeman and his own son, taken the cinders from
his own office and piled them there and poured water on them. Now, I
speak of that just as an illustration of some applications of that
Golden Rule.
COMPARES RAILWAY COST.
"Your future growth will depend on yourselves hereafter, as it has
largely depended upon your own efforts in the past. The commerce
going to and from the Pacific Coast cities by the sea is being
largely carried in foreign bottoms. There was a time when the
American nation was a nation of seafaring men, but that does not
apply any longer, and I am sorry that that is so. I believe that the
people of the United States, I believe that the genius of the country
is just as able to carry upon the sea as upon the land. As matters
stand today, any bay or inlet where a foreign flag can force its way
inland into our country they can call to us to drop the bundle and
they take it from us and we can't help ourselves. Now, we ought to be
able to help ourselves, for on the land we have so far surpassed the
others that there is no comparison.
"In Great Britain their average railway cost is $234,000 per mile.
In the United States it is a little less than $60,000 per mile. In
Germany it is about $110,000, in France about $140,000, in Austria
about the same. Now let us see what they do with their two hundred
and thirty-four thousand dollar machine and their one hundred and
ten and one hundred and forty. In Great Britain they move an average
of five hundred thousand ton miles to the mile of road at a cost
of $2.16 for every hundred miles. In Germany they move about seven
hundred thousand ton miles at a cost of a trifle under $1.36 for
every hundred miles. In France 450,000 ton miles at a cost of $1.40
for every hundred miles. In Austria the cost is $1.50 for moving a
ton of freight a hundred miles, and in the United States the cost is
74 cents and a fraction.
AGAINST SHIP SUBSIDY.
"Now we in the United States move the business for less than half
the average cost of Europe. We pay from twice to four times the rate
of wages, and we do it with an investment of about a third of their
average. If we can do that on land, why can't we do it on the sea? I
know that if the ships of the United States had the same care and the
same opportunity that the ships of other nations have they would do
it, and until then no subsidy, no ship subsidy, will ever enable them
to compete with other business, because in principle it is wrong to
tax all the business of the country--to put your hand into the public
treasury and hand out to one particular business a cash subsidy in
order that it may live.
"I want to tell you that a steamship line that cannot live without
a cash subsidy will make a mighty, mighty lean race with one. It
ought to rest on a business foundation. That is the only reason for
running ships, because they can be made to pay, and if we can make
our railways pay and work at the low rates that the railways in the
United States do carry and pay the scale of wages that they do pay,
why can't we succeed on the high seas? If we can't, let us hand that
business over to somebody who will do it cheaper and better; but I
don't feel that the case is a hopeless one, but, on the other hand, I
do feel that it would only limit the efforts of those who were trying
to make and to build up a merchant marine for the United States; it
would only limit their efforts to extend a subsidy to a few ships
engaged in the business.
FOREIGNERS GET SUBSIDY.
"I remember on one occasion that I went home from here and there was
no tonnage to move the stuff we had to send to the Orient. Absolutely
no tonnage was available, and when I got home there was a reception
to one of our public men, and the late Senator Mark Hanna was there.
I took up in a few remarks the question of a subsidy, and I said. 'If
we are going to have one, let us pay a subsidy for something that is
going to do us some good. Let us pay a tonnage on the actual products
that reach a new market.'
"That would have done some good. The tonnage of the products that
does not reach a new market, we wouldn't have anything to pay on
that, and on that that does we could afford to pay. Now, we were
driven out of the business on the Atlantic, but we might retain a
hold upon the business of this ocean. Immediately there was a scheme
for Congress for an appropriation, I think of $9,000,000, for ship
subsidies, and they found that 80 per cent. of it would go to one
line, under the bill that was being then drawn--and that line on the
Atlantic Ocean--and I know that the men and most of the officers
lived on the other side of the Atlantic, and the stock was owned
on the other side of the Atlantic. Now that would not build up a
merchant marine for us.
"A company over there has disposed of this old boat to our people
and taken what new money they got and built new boats. That was all
and that was celebrated--a portion of that was celebrated as the
inauguration of a new merchant marine for the United States. Think of
it!
"But some of our statesmen were wise enough to believe that it was
going to succeed, but it did not. It fell ingloriously. When we have
a merchant marine it will be because there is a reason for it. But
until that time comes, just put up with the business that we can get,
and let the others carry it who can carry it lower and better than we
can in this country.
"But bear this in mind: That all your great harbors in the country
when compared with the railroad yards sink into insignificance in the
tonnage that they move. I think that, in Seattle, I would be safe in
saying that twenty tons are moved by rail where one goes by water,
unless you can count saw logs. And I had occasion to look up St.
Louis. The Mississippi at St. Louis has from eight to twelve feet of
water for nearly nine months in the year and boats run in and out of
St. Louis, and we are all anxious to make a deep water channel from
there to New Orleans.
"Now, in looking up the amount, I found that, notwithstanding they
had from eight to twelve feet of water for nine months in the year,
or about nine months, less than 1 per cent. of the tonnage that came
into St. Louis moved by water; and out of over 1,500,000 tons of
coal--and if there is any article among all the shipments that could
be moved by water easily and cheaply it would be coal--not one ton of
coal moved out of St. Louis by water last year.