The Government cannot justly ask a railroad company to carry the mails
without profit.
The passenger business on the Burlington road is conducted without
profit if it is charged with the expenses assignable to passenger
traffic, and a proper proportion of the expenses not thus specifically
assignable, and a fair share of the taxes and the charges for capital
in the form of interest on bonds and dividends on stock. The profit in
the business comes from the freight.
This fact gives force to the present inquiry of the Post Office
Department to determine whether the Government, in proportion to the
service and facilities it requires from the roads on passenger trains,
is contributing a fair proportion of the passenger train earnings. If
the passenger train business, as a whole, is carried on at a loss, the
Government ought, in fairness, to stand at least its share of the
loss.
The earnings of the Burlington Company from all passenger train
service in November were $2,242,099.
The following table shows the earnings from passengers, from mail and
express, and the space used in passenger trains by the three classes
of traffic and the proportion of earnings contributed for facilities
so used:
_Earnings._ _Car Foot Miles._
Passengers $1,859,839 (82.95%) 428,164,920 (80.80%)
Express 187,825 ( 8.38%) 39,525,540 ( 7.45%)
Mails 194,435 ( 8.67%) 62,246,130 (11.75%)
---------- -----------
Total $2,242,099 529,936,590
This table shows that for each one thousand feet of space used in
passenger trains the three classes of passenger traffic contributed in
earnings as follows:
Passengers $4.34 139.1%
Express $4.75 152.2%
Mails $3.12 100%
In proportion to the space occupied and facilities used on passenger
trains, the Burlington road receives from passengers 39 per cent more
than the Government pays for mail transportation, and from the Adams
Express Company 52 per cent more; that is, the express business pays
the railroad company better than the Government pays for carrying the
mails by 52 per cent.
If the Government had paid to the railroad company as much as the
express company for each foot of space required and used on passenger
trains, it would, for November, have paid $101,233 more than it did
pay, or an increase in annual mail pay of more than a million dollars.
* * * * *
It may be of interest to note that the returns for the Pennsylvania
System just being filed show the following:
_Earnings._ _Car Foot Miles._
Passengers 79.8% 76.2%
Express 12.6% 13.7%
Mails 7.6% 10.1%
For each 1,000 feet of passenger train space used on the Pennsylvania
the traffic contributed in earnings as follows:
Passengers $4.45 139%
Express 3.91 122%
Mails 3.20 100%
On the Pennsylvania the passenger business is worth to that company 39
per cent more than the Government mail business, and the express
business is worth 22 per cent more than the mails, indicating that
express rates are relatively higher in the West than the East, but
that neither in the East nor in the West is it a paying business to
carry the mails at present rates.
IS THE GOVERNMENT PAYING THE RAILROADS FOR CARRYING THE MAILS THE COST
OF DOING THE WORK?
No. The Government paid the C. B. & Q. for carrying the mails in
November $194,435, or at the rate of $2,333,220 annually.
The total operating expenses of the road for that month were
$5,452,830.
The items of passenger train operating expense strictly assignable
were as follows:
Transportation Expense $454,208
Fuel passenger engines $132,709
Salaries passenger engineers 100,511
Salaries passenger trainmen 87,557
Train supplies, etc. 55,664
Injuries to persons 19,904
Station employees 17,160
Joint yards and terminals 15,610
Miscellaneous 25,093
--------
Maintenance of Equipment $107,626
Repairs, passenger cars $67,650
Depreciation, passenger cars 39,639
Miscellaneous 337
-------
Traffic Expense $48,971
Advertising $17,249
Outside agencies 16,673
Superintendence 10,272
Miscellaneous 4,777
-------
Maintenance of Way, etc. $12,970
Buildings and grounds $7,053
Joint tracks, etc. 4,440
Miscellaneous 1,477
------
General Expense $13,580
Salaries, clerks, etc. $8,994
Insurance 2,478
Legal expense 1,153
Miscellaneous 955
------ --------
Total $637,355
Proportion operating expense not assignable $1,278,016
----------
Total $1,915,371
A large part of the operating expenses of every railroad, such as
maintenance of roadway, station expense, general office expense and
the like, are common to both the freight and passenger service, and it
seems impossible to assign all of them specifically. The Post Office
Department, in the circular under which the roads are reporting,
recognizes this condition and calls for the "proportion" of the
expense "not directly assignable and the basis of such apportionment."
The apportionment of non-assignable expense on the Burlington has been
made on the basis of train mileage.
In the month of November the mileage of passenger trains was
forty-five and four-tenths per cent of the total train mileage, and
the foregoing sum ($1,278,016) of non-assignable expense is forty-five
and four-tenths per cent of the operating expenses for that month,
common to both kinds of traffic, and therefore incapable of specific
assignment to either.
These two classes of passenger expense (assignable and non-assignable)
aggregate $1,915,371 monthly, or at the rate of $22,984,452 per year,
and 11.75 per cent of this sum, or $2,700,675, is the annual operating
cost to the Burlington Company of transporting the Government mails.
Cost of carrying the mails $2,700,675
Earnings from carrying the mails 2,333,220
----------
Loss $367,455
These figures show that, in proportion to the service rendered, the
Government paid to that company $367,455 less than the actual cost of
doing the work, not including anything for taxes, nor for interest
paid by the company upon its funded debt, which was necessary to be
paid, in order to preserve the property, to say nothing of a return
upon the capital represented by the capital stock.
The correct mail's proportion of taxes and interest for the year is
$634,713, which added to the $367,455 loss above operating expenses,
shows a loss of $1,002,168:
Loss, operating expenses over revenue $367,455
11.75% of taxes and interest 634,713
----------
Annual loss on mails $1,002,168
This takes no account of the annual value at two cents per mile of the
transportation of inspectors and postal employees, other than clerks
in charge of the mails ($74,352), nor of clerks in charge of the mails
($746,340).
These two items of service rendered to the Government by the C. B. &
Q. road are of the admitted value of $820,692 annually.
The railroad company has the same duty and legal responsibility
towards these clerks as towards passengers.
* * * * *
Is there another fair way of testing this question?
In a letter dated March 2, 1910, from Hon. Frank H. Hitchcock,
Postmaster-General, to Hon. John W. Weeks, Chairman of the Post Office
Committee of the House, printed in full herewith, he states it is
estimated that the average annual cost to the railroads of operating a
post office car for the Government is $19,710, including $2,049 for
lighting, heating, repairs, etc., and that the total average pay
received for the car and its contents including post office car pay,
is $16,638 per annum, showing a loss in this branch of the service of
$3,073 per car. There are 1,111 full postal cars in actual service in
the country, and the loss thereon, therefore, aggregates $3,414,103,
to say nothing of the 231 postal cars in reserve.
But that is the smaller part of the loss. There were 3,116 apartment
cars in actual use in 1909, averaging twenty feet in length, and the
cost of operating each of these, according to Mr. Hitchcock's figures,
would be one-third of $19,710, or $6,570.
The average haul of apartment cars is 48 miles, and the average load
in a twenty-foot apartment car is officially stated as 607 pounds,
making the rate per mile on routes carrying an average daily weight of
only 607 pounds, $68.40 per annum, and the average earnings,
therefore, $3,283 per year, an average loss of $3,287 per car and an
actual loss per year from operating the 3,116 apartment cars of
$10,642,292, to say nothing of the 639 apartment cars in reserve.
The C. B. & Q. has 76 full post office cars and 104 apartment cars,
and applying to them the foregoing figures given in Mr. Hitchcock's
letter, the loss from operating them in 1909 was $575,396, adding to
which $634,713, the mail's proportion of taxes and interest, that
must be included in estimating "cost," in which the Government's
business should share, the estimated loss on the business was
$1,210,109, compared with $1,002,168, arrived at by charging the
Government business with 11.75 per cent of the passenger expense, that
being its proportion of the space used in passenger trains.
The Government should be willing to pay fairly for what it exacts from
the railroads, and it exacts from the C. B. & Q. 11.75 per cent of its
passenger train facilities. If it had paid 11.75 per cent of the
passenger train expenses of the road in 1909, it would have paid
approximately a million dollars more than it did pay.
The Government which demands from the railroads that they build and
transport daily over their roads for its benefit 5,100 traveling post
offices as full postal cars and apartment cars should be willing to
pay what the Postmaster-General estimates to be the actual cost of
operating those cars, and a fair proportion of the taxes and interest.
If it had paid such cost in 1909, it would have paid to the C. B. & Q.
approximately a million dollars more than it did pay.