Part 1
Produced by Jeannie Howse, Adrian Mastronardi, The Philatelic Digital Library Project at http://www.tpdlp.net and the Online Distributed Proofreading Team at http://www.pgdp.net (This file was produced from images generously made available by The Internet Archive/American Libraries.)
THE MAIL PAY ON THE BURLINGTON RAILROAD
Statements of Car Space and all Facilities Furnished for the Government Mails and for Express and Passengers in all Passenger Trains on the Chicago, Burlington and Quincy Railroad
Prepared in accordance with requests of the Post-Office Dept.
THE MAIL PAY
ON THE
Chicago, Burlington & Quincy Railroad
The present system under which the Government employs railroads to carry the mails was established in 1873, thirty-seven years ago. Under this system, the Post Office Department designates between what named towns upon each railroad in the country a so-called "mail route" shall be established. Congress prescribes a scale of rates for payment per mile of such mail route per year, based upon the average weight of mails transported over the route daily, "with due frequency and speed," and under "regulations" promulgated from time to time by the Post Office Department. To this is added a certain allowance for the haulage and use of post office cars built and run exclusively for the mails, based upon their length. The annual rate of expenditure to all railroads for mail service on all routes in operation June 30, 1909, was $44,885,395.29 for weight of mail, and for post office cars $4,721,044.87, the "car pay," so-called, being nine and five-tenths per cent of the total pay. The payment by weight is, therefore, the real basis of the compensation to railroads. The rate itself, however, varies upon different mail routes to a degree that is neither scientific nor entirely reasonable. The rate per ton or per hundred pounds upon a route carrying a small weight is twenty times greater than is paid over a route carrying the heaviest weight. The Government thus appropriates to its own advantage an extreme application of the wholesale principle and demands a low rate for large shipments, which principle it denounces as unjust discrimination if practiced in favor of private shippers by wholesale. The effect of the application of this principle has been to greatly reduce the average mail rate year by year as the business increases. This constant rate reduction was described by Hon. Wm. H. Moody (now Mr. Justice Moody of the United States Supreme Court) in his separate report as a member of the Wolcott Commission in the following language:
"The existing law prescribing railway mail pay automatically lowers the rate on any given route as the volume of traffic increases. Mr. Adams shows that by the normal effect of this law the rate per ton mile is $1.17, when the average daily weight of mail is 200 pounds, and, decreasing with the increase of volume, it becomes 6.073 cents when the average daily weight is 300,000 pounds."
NOTE.--Since 1907 the railroads have been paid at much reduced rates. On the heavy routes the pay is now 5.54 cents per ton per mile.
Post Office Department officials have announced, as their conclusion from the results of the special weighing in 1907, that the average length of haul of all mail is 620 miles.
The bulk of the mail is now carried on the heavy routes at 5.54 cents per ton per mile, or $34.34 per ton for the average haul, that is, for one and seven-tenths cents per pound.
The railroads, therefore, receive less than one and three-fourths cents per pound for carrying the greater part of the mails.
* * * * *
But the rate reduction for wholesale quantities has not had the effect of reducing the actual remuneration of the railroads for carrying the mails to nearly so great an extent as the increasing requirements for excessive space for distributing mails en route. This feature was likewise discussed by Judge Moody in his report in the following language:
"The rule of transportation invoked is based upon the assumption that the increase of traffic permits the introduction of increased economy, notably, the economy which results in so loading cars that the ratio of dead weight to paying freight is decreased. Yet this economy is precisely what our method of transporting mail denies to the railroads. Instead of permitting the mail cars, whether apartment or full postal cars, to be loaded to their full capacity, the Government demands that the cars shall be lightly loaded so that there may be ample space for the sorting and distribution of mail en route. In other words, instead of a freight car, a traveling post office."
An illustration of the extent to which the reductions have been carried, as shown upon one railroad system, is set forth in the letter of January 21, 1909, addressed to the Committee on Post Offices and Post Roads of the House of Representatives by Mr. Ralph Peters, President of the Long Island Railroad, who states that the actual cost to his company of carrying the United States mail for the year was $122,169, while the total compensation for that service paid by the Government was $41,196. Mr. Peters says:
"The Long Island Company received from the Government for mail service performed in expensive passenger trains one-half the rate received by it per car mile for average class freight in slow-moving freight trains."
The Long Island Company notified the Government that it would decline to carry the mails by the present expensive methods, unless Congress makes some provision for a more adequate compensation. A notification of similar import has been given by The New York, New Haven & Hartford Railroad Company, the principal carrier in New England. Their position in this matter will undoubtedly be taken by other roads, because the same condition of inadequate compensation prevails upon hundreds of small railroads and mail routes, especially in the Southern and Western States.
Notwithstanding these facts, a powerful interest, which commands the public ear and derives great profit from the one-cent-per-pound rate of postage, has, in order to divert public attention from itself, for years industriously and systematically circulated false statistics and false statements among the people regarding the railroad mail pay, and is now circulating them.
The extent to which the public is being deceived regarding the railroad mail pay is disclosed daily. In a recent hearing before the Senate Committee on Post offices and Post-Roads, Senator Carter of Montana said:
"We are all getting letters on this subject. I received the other day a letter from a very intelligent lady in Montana claiming that the Government is paying to the Northern Pacific Railway on that branch line for carrying the mail $97,000 per year. On inquiring at the Post Office Department, I find that the total compensation of the Northern Pacific Company for mail service on that line is $3,070 per year."
This state of things was a sufficient reason for the Post Office Department to institute the present series of inquiries tending to show the space in passenger trains upon the railroads demanded and used by the Government for the mails in comparison with the space devoted to express and passenger service, and the relative rates of compensation in each class of service and the extent to which the roads are receiving for carrying the mails the cost to them of performing the service. In order to give these facts fair consideration, it is not necessary to admit that "space" is, or is not, a better and more workable basis for determining what is reasonable mail pay than "weight," nor to admit that the companies are only entitled to be paid by the Government for the service rendered to it the bare cost of rendering that service, that is, to receive back the train operating cost. Questions of speed and facilities furnished, and the preference character of the traffic and the exceptional value of the service, and other elements, must be considered as well as space and cost, but that is no reason why the relative proportion of space used and the relation of compensation to cost should not be ascertained and given due weight, in the consideration of the important question of what is adequate mail pay to the railroads.
The following pages are based upon answers to the interrogatories of the Post Office Department and contain a statement of the mail service performed by the Chicago, Burlington and Quincy Railroad Company, a system extending westward from Chicago into eleven different States and embracing approximately ten thousand miles of main and branch lines.
The two principal tables of interrogatories were sent out under date of September 28, 1909, by the Post Office Department as the basis for this investigation.
These tables indicate the minute and thorough manner which the Department employed in making this inquiry.
Some questions having arisen regarding the meaning and scope of the word "authorized" in connection with the returns of space occupied and used for the mails in Post Office cars and apartment cars, and in certain other features, the Department, under date October 23, 1909, issued an important supplementary letter of instructions.
Pursuant to these interrogatories, instructions and requests the Burlington Company has filed with the Department the exact and detailed statements, train by train and car by car, of the mail service upon each of the one hundred and two mail routes on its system, large and small, for the month of November, 1909, which were thus called for. These answers state the facts and state them in the manner prescribed wherever possible. Every inch of space on passenger trains and cars which in these tables is shown to be occupied or used for mail or express or for passengers is set down from actual measurements made, car by car, and not upon any "estimate" or "consist" basis.
In the appendix will be found four tables prepared under the direction and supervision of Mr. DeWitt which contain the results of this investigation into the mail service upon the Burlington, as disclosed in these statements.
Exhibit A is a statement of the car facilities or space used in every car in service on the road during the month of November for mail, and for express or occupied by passengers based upon replies to questions prescribed in Form 2601.
Exhibit B is a statement of the station facilities, furnished for the mail, prepared on Form 2602.
Exhibit C is a statement of Revenues and Expenses and of train and car mileage, prepared on Form 2603.
Exhibit D is a statement of the number, and cost, and present value of Post Office cars and Apartment cars, prepared on Form 2605.
THE INTEGRITY OF THE RETURNS.
In November, 1909, all the service rendered in all passenger trains and cars of the Burlington system, reduced to a common basis of car foot miles (that is, each foot of linear space that was carried one mile), amounted to 529,936,590 car foot miles, divided as follows:
In Passenger Service. Mails. Express. 428,164,920 62,246,130 39,525,540 (80.8%) (11.75%) (7.45%)
The original circular of the Post Office Department contained certain "notes," to the effect that in reporting the length of postal cars and apartment cars, and the space therein used for mails, the railroad companies should only report the length or space "authorized" by the officials of the Department; also that in reporting space used in cars for what is known as the "Closed Pouch Service," the railroads should make an arbitrary allowance of six linear inches across the car for the first 200 pounds or less of average daily weight of pouch mail and three linear inches for each additional 100 pounds.
These directions were modified by the subsequent circular letter of the Department, dated October 23, 1909.
This letter, among other things, directs the company to take credit for "surplus" space in post office cars and apartment cars, if actually used for the storage of mails.
The practical difficulties attending the measurement and proper allotment of the space used for the mails in postal and other cars run on a passenger train will be better understood when it is known that such space is or may be described in at least eight different ways, and is actually used on the Burlington road as follows, namely:
1. Space in post office cars specially "authorized" (43.03%).
2. Space in apartment cars specifically "ordered" (20.69%).
3. Space ordered in post office cars operated in lieu of apartment cars (4.3%).
4. Additional space actually used for storage of mails when the railroad company operates larger post office or apartment cars than the authorization calls for (1.5%).
5. Space in storage cars actually used for mails (12.87%).
6. Space in baggage cars used for closed pouch mails (4.06%).
7. The return deadhead movement of space ordered and required in one direction only (8.35%).
(Ninety-five per cent of all the "space" shown in these returns for the Burlington, as used for the mails, comes within the foregoing seven classes, as properly authorized space about which no question can arise.)
8. "Surplus" space; that is, space furnished to the Government in post office and apartment cars in excess of actual requirements (5.2%).
This five per cent is the only portion of the space claimed as used for mails regarding which any question can be raised, affecting the integrity of these returns.
What is the correct view as to this five per cent?
It is manifestly against the interest of the railroad company to furnish space for mails that is not required, and it will never furnish such space if it can be avoided. But the "requirements" of the Post Office Department are not fixed and certain quantities, by any means. It is entirely impracticable for any railroad company to keep on hand at all times a supply of cars of all lengths in order to meet exactly the requirements of the Department officials.
These statistics have been called for by the Post Office Department to enable it to make accurate comparisons between the space used and the facilities furnished on passenger trains for the three classes of service performed, that is, for express companies, for the Government in mail carriage, and for passengers. The point of the whole inquiry is this:
Does the Government contribute to the cost of the passenger train service upon the railroads of the country its fair share, that is, in proportion to the space and facilities it demands and requires the companies to furnish for the mails?
In making the comparison all the car space in all passenger trains must be measured and tabulated and has been measured and tabulated in the tables here submitted.
A passenger car may have seats to accommodate eighty persons; the average load it carries may be fifteen persons. But in making up these returns of "space," all the empty space in that car is credited as passenger space. That car may likewise be loaded only one way and returned "dead head," but these returns have credited such return movement as passenger space.
The same is true of the express service in these returns. All space in all baggage and express cars set aside for the express company's use is, in these tables of statistics, credited to express, whether in fact loaded or "surplus," or "dead head" space.
How is a comparison possible, unless the space credited to the mails is recorded in the same way? As stated above, only five per cent of the whole space is involved in the question of "surplus" space, and if that five per cent should be entirely thrown out, the percentage results would not be materially changed.
RESULTS UPON THE BURLINGTON ROAD.
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).