Net interest on funded debt | $282,354,000
Interest on current liabilities | 31,835,708
Rent paid for lease of roads | 113,529,261
Net dividends | 104,074,006
+-------------
Total | $531,792,975
---------------------------------------------------+-------------
This total was equivalent to 4.15% on the net capitalization
of the roads represented. The rental paid the lessor roads
constituted the fund from which those roads paid their interest and
dividends. Further remark on the misleading and harmful statement
of the Official Statistician as to dividends declared in 1908 is
unnecessary.
V
COST OF CONSTRUCTION
Incomplete as are the figures of the cost of the railways of the
United States, and exclusive as they are of the millions put back
into the properties out of income for additions, betterments and
reconstruction in the process of operation, yet the statistics of the
cost of construction and equipment afford a complete answer to all
charges that American railways are over-capitalized.
Upon the question of the cost of road and equipment in 1909, the
returns of the 368 roads reporting to this Bureau furnish the
following data:
SUMMARY OF COST OF ROAD AND EQUIPMENT COVERING 221,132 MILES OF
OPERATED LINE FOR 1909.
=====================================================+================
Item | Amount
-----------------------------------------------------+----------------
Cost of road (182,046 miles owned) | $6,603,504,463
Cost of equipment | 1,122,409,813
Undistributed cost of road and equipment | 3,080,064,960
Cost of 39,086 miles leased lines rental capitalized | 2,415,699,876
+----------------
Total | $13,220,678,876
-----------------------------------------------------+----------------
Adding to this $290,750,000 to represent the 11,870 miles of road not
reporting to this Bureau at $25,000 per mile, we obtain
=$13,417,438,876=
as the cost of road and equipment of the 233,002 miles of line
employed in the transportation industry of the United States in 1909,
or
=$58,031 per mile of line.=
This is an underestimate by reason of the failure of a few lines
to furnish even approximate figures on the accumulated cost of
their properties. Averaging the cost of locomotives at $15,000,
of passenger cars at $6,000, of freight cars at $800, and of
company's cars at $500 apiece--their present cost rates much
higher--the equipment of American railways represents an investment
of over $3,000,000,000, and its bare maintenance alone involves an
expenditure of nearly $400,000,000 annually.
PHYSICAL VALUATION OF THE RAILWAYS.
It is worthy of passing note that just as the railway companies have
shown their indifference to a physical valuation of their property,
the clamor of regulators and agitators in its favor has subsided.
The proposal lost its attractiveness to them the moment they became
convinced that such an investigation would put a valuation on the
roads so high as to take not only the wind out of their sails but the
last drop of water out of their mouths. To-day the only insistent
demand for this futile undertaking comes from quarters interested in
the distribution of the appropriation of several millions it would
cost.
Credit for the reversal in the popular and political attitude on this
subject is largely due to the valuations attempted by the states of
Minnesota, Washington and Wisconsin. The results in these states may
be briefly summarized as follows:
===============================+========+==============+===============
| Miles |Capitalization| Valuation by
| of Line| per Mile |State, per Mile
-------------------------------+--------+--------------+---------------
Minnesota, 1907 | 7,596 | $44,206 | $54,201
| | |
Washington, 1908: | | |
Great Northern | 806 | 44,078 | 73,900
Northern Pacific | 942 | 70,278 | 106,500
Oregon R. R. & Navigation Co | 501 | 43,012 | 38,900
| | |
Wisconsin, 1906 | 7,135 | 33,424 | 34,630
-------------------------------+--------+--------------+---------------
Even Senator Albert B. Cummins of Iowa has seen such a bright light
on this subject that in his speech before the Traffic Club of Chicago
last February he said that he would not be willing to make a present
valuation of railroad property a basis for determining rates,
"for the reason that it was more than probable that the present
capitalization of between fifteen and sixteen billions would be
increased to twenty billions."
In the Bureau's Statistics for 1908 it was said:
"If the valuations in Minnesota and Washington, made by none too
friendly commissions, are any criterions of what a national valuation
made under presumably unbiased federal authority would be, the
present cost to reproduce the railways of the United States would be
nearer $20,000,000,000 than any sum within the anticipations of those
agitating for such valuation."
CAPITALIZATION OF FOREIGN RAILWAYS.
With both sides of the balance sheet testifying to a capital
investment in American railways of under $60,000, and official
valuation abandoned _because it would demonstrate that they could not
be reproduced for less than $80,000 per mile_, the reader is asked
to compare the American figures with those of the capitalization, or
cost of construction, of the principal foreign countries set forth
below. These have been compiled from the latest available official
returns.
SUMMARY OF RAILWAY CAPITALIZATION OF THE PRINCIPAL FOREIGN RAILWAYS
FROM LATEST DATA.
======+===========================+==========+=================+=========
Year | Country | Miles of | Capital or Cost | Per
| | Line | of Construction | Mile
------+---------------------------+----------+-----------------+---------
|Europe: | | |
1908 | United Kingdom | 23,205 | $6,382,296,742 | $275,040
1908 | Germany | 35,558 | 3,903,848,400 | 109,788
1907 | Russia in Europe (excl- | | |
| usive of Finland) | 32,900 |(a)3,170,876,360 | 80,985
1907 | France |(b)24,730 | 3,447,366,000 | 139,390
1907 | Austria | 13,427 | 1,515,576,885 | 112,879
1907 | Hungary | 11,769 | 741,586,391 | 63,010
1907-8| Italy (State roads only) | 8,699 | 1,086,000,000 | 124,730
1905 | Spain (13 roads) | 6,840 | 583,632,000 | 85,327
1906 | Sweden | 7,938 | 257,408,450 | 32,427
1907 | Belgium (State only) | 2,537 | 430,800,000 | 169,806
1907 | Switzerland | 2,740 | 298,709,210 | 109,000
| | | |
|Other Countries: | | |
1909 | Canada | 24,104 | 1,608,990,656 | 66,752
1908 | British India | 30,576 | 1,364,669,375 | 44,632
1907 | Argentine Republic | 13,690 | 820,433,796 | 59,930
1908 | Japan | 4,444 | 190,173,728 | 42,800
1909 | United States of America | 233,002 | 13,508,711,173 | 57,976
------+---------------------------+----------+-----------------+---------
(a) Russian capitalization, including railways in Asia, covers a total
of 39,277 miles, from which the capital per mile is computed.
(b) This is exclusive of 4,259 miles of local interest.
The most striking feature in this table is the steady advance it
shows in the capital cost of German railways. In ten years this has
increased from 251,597 marks per kilometer in 1898 to 283,608 in
1908, _i. e._ 31,731 marks per kilometer or $12,282 per mile. This
means an increase of $991,687,440 in capital cost for an increase of
only 5,525 miles of line.
VI
OWNERSHIP OF AMERICAN RAILWAYS
Returns to this Bureau place the number of stockholders of record at
the date of the last election of directors prior to June 30, 1909, of
the 368 roads reporting at 320,696. As only 182,046 of the 221,132
miles operated by these roads was covered by the capital stock, this
would show 1¾ stockholders for each mile of road and would indicate
that there are at least 415,000 stockholders in all the railways of
the United States. Owing to the incompleteness of the returns on this
subject and the fact that large blocks of stock are held in the names
of associations and trustees, it is safe to estimate that the actual
ownership of railway stock is distributed among at least 440,000
persons.
In 1905 the Commission reported the number of stockholders of record
prior to June 30, 1904, as 327,851, but has given no later figures.
It may be of interest to compare these figures with the partial
reports to this Bureau since then.
===================+=================+==============
Year | Number | Number of
| Reporting | Stockholders
-------------------+-----------------+--------------
1904 | 1,182 roads | 327,851
1906 | 284 " | 226,986
1907 | 317 " | 240,554
1908 | 315 " | 315,727
1909 | 340 " | 320,696
-------------------+-----------------+--------------
If the ownership of railway bonds, which is even more widely
distributed than that of stocks, could be traced, it would be found
that over a million investors are interested in the financial welfare
of the railways. This would give to each an interest of $13,000, from
which the average income is not over $520 a year.
The attempt of the Commission in 1908 to secure evidence that the
control of the railways was concentrated in a few hands by calling
for a statement of the "ten largest holders of voting securities"
of the reporting companies having established that nowhere did they
_own_ a majority or an approach to a majority of the controlling
stock, inquiry along that line was dropped in 1909.
In railways, as in any republic, the latent power is widely
distributed among the many, while the administrative responsibility
is necessarily entrusted to the few.
VII
PUBLIC SERVICE OF THE RAILWAYS
It is the reproach of our system of government statistics of railways
that their first concern is financial results, which the government
takes no thought to improve, and the harrowing roll of accidents, and
not the adequacy of the service and the steady development of the
means of transportation. Every month, almost every week, the public
is informed of the volume of traffic, and every quarter the record of
casualties is told in sensational head lines. It is left for belated
annual reports to record the public service of this great industry
upon whose progressive efficiency every other industry in the United
States depends.
It is not upon what the railways earn, but upon what they DO that the
whole industrial fabric of the republic rests. It is not upon the
dividends they pay but upon the traffic they carry, the net income
withheld from dividends and put into improvements, that their success
as carriers depends.
THE PASSENGER TRAFFIC.
In considering the public service of the railways it is customary to
give first attention to the passenger traffic. This is not because it
is the most important branch of the service but because passengers
are numbered by millions, where thousands suffice in the enumeration
of the shippers, who frequently mistake themselves for the entire
American people.
In twenty years between June 1, 1889, and June 1, 1909, the
population of the United States increased from 61,289,000 to
88,806,000, or nearly 45%. In the meantime the passenger cars
provided by the railways increased from 24,586 to 46,026, or over
87%. But this does not measure the liberal provision made by the
railway for the travelling public, which is more fully and accurately
expressed by the amazing growth of the number of passengers carried
one mile from 11,553,820,445 in 1889 to approximately 29,452,000,000
in 1909, or nearly 155%.
Here is shown an increase of cars not far short of double the
increase in population and an increase in passengers carried
proportionately greater than the numerical increase in cars.
In the meantime the average receipts of the traffic have declined
from 2.165 cents per passenger mile in 1889 to 1.916 in 1909--a
decline of over 11%, although every item involved in the service,
locomotives, cars, track, stations, labor, etc., cost more. The
passenger service, except as precursor to the freight service, and in
certain densely populated sections, was unremunerative in 1889 and is
more so now. It is maintained at the expense of the freight service
by what the Railroad Commission of Wisconsin has characterized as "a
species of piracy practiced upon the shippers of freight."
The salient features of the passenger service reported to this Bureau
for the year 1909, as compared with the final official returns for
the preceding year, are shown in the following statement:
======================================+================+================
Item | Bureau Figures |Official Figures
| 1909 | 1908
--------------------------------------+----------------+----------------
Miles of line represented | 221,132 | 230,494
Passengers carried. | 854,255,337 | 890,009,574
Passengers carried 1 mile | 28,788,855,000 | 29,082,836,944
Passenger revenue | $551,634,278 | $566,832,746
Mileage of passenger trains | 491,903,107 | 505,945,582
Average number of passengers in train | 58 | 54
Average cars to a train | 5.3 |
Passenger car miles | 2,594,508,987 | 2,705,659,994
Average passenger journey (miles) | 33.71 | 32.66
Average receipts per passenger mile | |
(cents) | 1.916 | 1.937
--------------------------------------+----------------+----------------
According to the monthly reports to the Interstate Commerce
Commission covering an average of 233,002 miles of line, the
passenger revenues in 1909 were $564,302,580, or $1,943,077 less than
the above revenues for only 228,164 miles of line in 1908.
The average receipts per passenger mile in 1909 are the lowest ever
reported for American railways.
Taken in connection with the official returns covering the period
since 1900, the above figures afford evidence of the confiscatory
effect of the 2-cent passenger laws on railway revenues, as appears
from the following statement:
SUMMARY OF PASSENGER MILEAGE, REVENUE AND RECEIPTS PER PASSENGER
MILE, 1900 TO 1909.
============+================+===========+==============+==========
| | Increase | |
| Passengers | Over | | Receipts
Year | Carried | Preceding | Passenger | per
| One Mile | Year | Revenue | Passenger
| |(Per Cent) | | Mile
------------+----------------+-----------+--------------+----------
1900 | 16,038,076,200 | | $323,715,639 | 2.003
1901 | 17,353,588,444 | 8.2 | 351,356,265 | 2.013
1902 | 19,689,937,620 | 13.4 | 392,963,248 | 1.986
1903 | 20,915,763,881 | 6.2 | 421,704,592 | 2.006
1904 | 21,923,213,536 | 4.8 | 444,326,991 | 2.006
1905 | 23,800,149,436 | 8.6 | 472,694,732 | 1.962
1906 | 25,167,240,831 | 5.7 | 510,032,583 | 2.003
1907 | 27,718,554,030 | 10.1 | 564,606,343 | 2.014
1908 | 29,082,836,944 | 4.9 | 566,245,657 | 1.937
1909 | 29,452,000,000 | 1.3 | 564,302,580 | 1.916
| | | |
Increase, | | | |
per cent | 83.7 | -- | 74.6 | --
------------+----------------+-----------+--------------+----------
Here it is shown that the passenger service rendered has increased
12% more than the passenger revenues. But more significant than
this is the column of yearly increases in service by percentages.
This utterly explodes the theory that passenger travel is greatly
stimulated by low fares--aside from some positive incentive to
increased travel, such as periodical expositions, the Louisiana
Purchase Exposition for instance, the effect of which is clearly
traceable in the increased service in 1905, which includes the heavy
travel during the months of heavy attendance, July 1 to December 1,
1904.
The 2-cent passenger laws were passed so as to become generally
effective July 1, 1907, and their effect on passenger receipts during
the following year was such that these receipts were actually less in
1909 than in 1907, although the service performed by the railways was
over 6% greater. Had the railways received the same rate in 1909 that
they did in 1907 their revenue from passengers would have been nearly
$29,000,000 more than it was.
PASSENGER TRAFFIC 1909-1888.
In the next statement the salient facts in regard to the passenger
traffic since the Commission began collecting the data is passed
under review.
======+==========+==========+=======+========+=======+=======+========
| | | | | | |Average
|Passengers|Passengers|Mileage|Average |Average|Pass. |Receipts
Year | Carried | Carried | Pass. | Pass. |Journey|Revenue| per
|(Millions)| One Mile | Trains|in Train| Miles |(Mill.)|Pass.
| |(Millions)|(Mill.)| | | |Mile
| | | | | | |(Cents)
------+----------+----------+-------+--------+-------+-------+-------
1909 | 888 | 29,452 | 507 | 58 | 33 | 504 | 1.916
1908 | 890 | 29,082 | 500 | 59 | 33 | 566 | 1.937
1907 | 873 | 27,718 | 509 | 51 | 32 | 564 | 2.014
1906 | 797 | 25,167 | 479 | 49 | 31 | 510 | 2.003
1905 | 738 | 23,800 | 459 | 48 | 32 | 472 | 1.962
1904 | 715 | 21,923 | 440 | 46 | 31 | 444 | 2.006
1903 | 694 | 20,915 | 425 | 46 | 30 | 421 | 2.006
1902 | 649 | 19,689 | 405 | 45 | 30 | 392 | 1.986
1901 | 607 | 17,353 | 385 | 42 | 29 | 351 | 2.013
1900 | 576 | 16,038 | 363 | 41 | 28 | 323 | 2.003
1899 | 523 | 14,591 | 347 | 41 | 28 | 291 | 1.978
1898 | 501 | 13,379 | 334 | 39 | 27 | 267 | 1.973
1897 | 489 | 12,256 | 335 | 37 | 25 | 251 | 2.022
1896 | 511 | 13,049 | 332 | 39 | 26 | 266 | 2.019
1895 | 507 | 12,188 | 317 | 38 | 24 | 252 | 2.040
1894 | 540 | 14,289 | 326 | 44 | 26 | 285 | 1.986
1893 | 593 | 14,229 | 335 | 42 | 24 | 301 | 2.108
1892 | 560 | 13,362 | 317 | 42 | 24 | 286 | 2.126
1891 | 531 | 12,844 | 308 | 42 | 24 | 281 | 2.142
1890 | 492 | 11,847 | 285 | 41 | 24 | 260 | 2.167
1889 | 472 | 11,553 | 277 | 42 | 25 | 254 | 2.199
1888 | 412 | 10,101 | 252 | 40 | 24 | 237 | 2.349
------+----------+----------+-------+--------+-------+-------+-------
Increase 1888 to | | | | | |
1907 115% | 191% | 101% | 45% | 38% | 138% |
Decrease | | | | | | 18.4
------+----------+----------+-------+--------+-------+-------+-------
The several increases shown in the first, second, third and sixth
columns of the table reflect the general advancement in passenger
traffic. That of 45% in the average passengers to a train marks the
progress in density of that traffic which may eventually place it
on a profitable basis. In Massachusetts, where this density yields
an average of 79 passengers to a train there is no demand for a
two-cent rate statute, for the conditions have made a rate of 1.64
cents profitable. In the group of states consisting of Ohio, Indiana,
Michigan, Illinois, Iowa, Wisconsin and Minnesota, where the density
of traffic yields only 46 passengers by train, a statutory two-cent
fare becomes confiscatory because it costs at least one dollar to
operate a passenger train one mile and 46 times two cents is only
92 cents. Moreover the 46 passengers per train is only an average
and there are as many trains that average less as more. The average
has to be raised above 50 to yield any margin of profit on passenger
traffic. If it were not for the density of traffic in the New England
and North Atlantic group of states the average for the entire United
States would be well below 46 passengers per train.
The steady increase in the distance traveled per passenger reflects
the effect of trolley competition in diverting the short haul
passenger traffic.
The most noteworthy feature of the seventh column is the decline
of 98/1000ths of a cent in the average receipts per passenger mile
between 1907 and 1909, making a new low record after hovering around
the two cent mark for fourteen years. As noted above, this reduction
in the average cost the railways nearly $29,000,000 on the passenger
traffic of 1909.
In this connection it is interesting to recall that between 1888 and
1893 the Official Statistician, then as now Professor Adams, made the
following computation of the average cost of carrying one passenger
one mile for the whole United States:
============================+======+======+======+======+======+======
| 1888 | 1889 | 1890 | 1891 | 1892 | 1893
----------------------------+------+------+------+------+------+------
Average cost of carrying a | | | | | |
passenger one mile, cents | 2.042| 1.993| 1.917| 1.910| 1.939| 1.955
----------------------------+------+------+------+------+------+------
It will be observed that the average receipts per passenger mile in
1909 are below the computed cost in every one of the years above
named, except 1891. When the advance in the cost of everything
necessary to the service--track, labor, equipment, conveniences,
speed, terminal facilities--is considered, the practical coincidence
of average cost and receipts leaves no margin for legitimate profits.
RECEIPTS FROM MAIL AND EXPRESS.
Closely associated with the passenger traffic of the railways are
the mail and express services. Although principally carried by
passenger trains, each has a special service of its own by mail and
express trains. But all are included under the passenger service.
The receipts from these two branches of the service during the last
decade are shown in the following statement:
SUMMARY OF RECEIPTS FROM MAIL AND EXPRESS, 1899 TO 1908.
====================+=====================+=====================
| Mail | Express
+------------+--------+---------------------
Year | Revenues |Percent-| Revenues |Percent-
| | age of | |age of
| |Earnings| |Earnings
--------------------+------------+--------+------------+--------
1899 |$35,999,011 | 2.74 |$26,756,054 | 2.04
1900 | 37,752,474 | 2.54 | 28,416,150 | 1.91
1901 | 38,453,602 | 2.42 | 31,121,613 | 1.96
1902 | 39,963,248 | 2.31 | 34,253,459 | 2.07
1903 | 41,709,396 | 2.19 | 38,331,964 | 1.98
1904 | 44,499,732 | 2.25 | 41,875,636 | 2.12
1905 | 45,426,125 | 2.18 | 45,149,155 | 2.17
1906 | 47,371,453 | 2.04 | 51,010,930 | 2.19
1907 | 50,378,964 | 1.94 | 57,332,931 | 2.21
1908 | 48,517,563 | 2.03 | 58,602,091 | 2.45
1909 | 50,935,000 | 2.08 | 63,669,000 | 2.60
| | | |
Increase, per cent | 41.5 | -- | 138.0 | --
--------------------+------------+--------+------------+--------
Aside from the striking contrast in the percentages of increase of
revenues from these two sources, the most significant feature of this
table is the reversal it shows in their respective importance from
the railway revenue point of view. Prior to 1905, carrying the mails
brought larger, if not more profitable, returns to the railways.
Since then the returns from express have increased so much more
rapidly that they are now nearly 23% more than those from mails.
If proof were needed of the absolute falsity of the charge that the
railways are receiving an exorbitant rate for carrying mail, the
above table of their receipts from the service in connection with
the following statement of mail handled and revenues in view of the
finding of the Joint Commission of Congress in 1899 would furnish it.
After a thorough investigation of the subject lasting from August,
1898, to July, 1900, the Commission came to the following conclusion:
"Upon a careful consideration of all the evidence and the statements
and arguments submitted, and in view of all the services rendered
by the railroads, we are of the opinion that the prices now paid to
the railroad companies for the transportation of the mails are not
excessive, and recommend that no reduction thereof be made at this
time."
The increase in the railroad service since this report was made is
shown in the following statement of miles of mail transportation
by railroads, the postal revenues and the number of clerks in the
railway mail service since 1899: