Part 18
Alabama $0.88 $1.29 46.59 Arkansas 1.06 1.68 56.49 California (a)2.55 (a)3.81 49.41 Colorado 1.17 1.40 19.66 Georgia (b)1.03 (b)1.38 33.98 Idaho (c)3.33 (c)4.10 23.12 Illinois .72 1.07 48.61 Indiana .84 1.08 28.57 Iowa 1.13 1.62 43.36 Kansas 1.18 1.52 28.81 Kentucky .79 1.06 34.18 Maryland .76 1.20 57.89 Michigan 1.46 1.80 23.29 Missouri 1.08 1.64 51.85 Montana 1.76 1.94 10.23 New Mexico 1.38 1.46 5.80 North Dakota 1.08 1.61 49.07 Ohio .78 1.10 41.03 Oklahoma 1.34 2.04 52.24 Oregon 3.09 2.34 Decrease Pennsylvania-- Bituminous .69 1.04 50.72 Anthracite 1.51 1.91 26.49 Tennessee .81 1.25 54.32 Texas 1.52 1.69 11.18 Utah 1.19 1.52 27.73 Virginia .67 1.02 52.24 Washington 1.94 2.09 7.73 West Virginia .63 .99 57.14 Wyoming 1.21 1.56 28.93
(a) Includes Alaska.
(b) Includes North Carolina.
(c) Includes Nebraska.
It will be noted that the cost of coal increased in every state of considerable production. In California much of the locomotive fuel used consists of petroleum, and the same fuel is used to some extent in Oregon and New Mexico.
The number of tons of coal purchasable at the mines in the several states with $105.00, the gross revenue from the typical shipment which has been used for illustrative purposes, in 1897 and in 1907, would have been as follows:
Tons of coal purchasable for $105.00. ------------------------ Decrease, State. 1897. 1907. per cent.
Alabama 119 81 31.93 Arkansas 99 62 37.37 California 41 28 31.71 Colorado 90 75 16.67 Georgia 102 76 25.49 Idaho 32 26 18.75 Illinois 146 98 32.88 Indiana 125 97 22.40 Iowa 93 65 30.11 Kansas 89 69 22.47 Kentucky 133 99 25.56 Maryland 138 88 36.23 Michigan 72 58 19.44 Missouri 97 64 34.02 Montana 60 54 10.00 New Mexico 76 72 5.26 North Dakota 97 65 32.99 Ohio 135 95 29.63 Oklahoma 78 51 34.62 Oregon 34 45 Increase Pennsylvania-- Bituminous 152 101 33.55 Anthracite 70 55 21.43 Tennessee 130 84 35.38 Texas 69 62 10.14 Utah 88 69 21.59 Virginia 157 103 34.39 Washington 54 50 7.41 West Virginia 167 106 36.53 Wyoming 87 67 22.99
In this connection it should be noted that the United States Department of Labor reports an increase, between 1897 and 1907, in the price of anthracite of 29.23 per cent., and in bituminous coal from the Georges Creek region of 85.54 per cent.
COST OF RAILWAY SUPPLIES.
Bulletin No. 75, of the United States Bureau of Labor, shows average prices for the following articles used by railways, or, as raw materials, for the manufacture of railway supplies:
Price. ------------------------------- Articles. Increase, Unit. 1897. 1907. per cent.
Axes, M. C. O. Yankee Each .39 .68 74.36 Coke, Connellsville, furnace Ton 1.62 2.83 74.69 Bar iron, best refined, from mill Pound .011 .0175 59.09 Barbed wire, galvanized Cwt. 1.80 2.63 46.11 Copper wire, bare Pound .1375 .2402 74.69 Doorknobs, steel, bronze, plated Pair .166 .450 171.08 Files, 8-inch Dozen .81 1.00 23.46 Hammers, Magdole, No. 1½ Each .38 .47 23.68 Lead pipe Cwt. 4.32 6.71 55.32 Locks, common, mortise Each .0833 .20 140.10 Nails, cut, 8-penny, fence and common Cwt. 1.33 2.16 62.41 Nails, wire, 8-penny, fence and common Cwt. 1.49 2.12 42.28 Pig iron, Bessemer Ton 10.13 22.84 125.47 Pig iron, foundry No. 1 Ton 12.10 23.90 97.52 Pig iron, foundry No. 2 Ton 10.10 23.87 136.34 Pig iron, gray, forge, southern, coke Ton 8.80 20.99 138.52 Steel billets Ton 15.08 29.25 93.97 Steel rails Ton 18.75 28.00 49.33 Steel sheets, black, No. 27 Pound 0.019 0.025 31.58 Tin, pig Pound .1358 .3875 185.35 Tin, plates, domestic, Bessemer, coke Cwt. 3.18 4.09 28.62 Zinc, sheet Cwt. 4.94 7.49 51.62 Brick, common domestic M 4.94 6.16 24.70 Cement, Rosendale Bbl. .75 .95 26.67 Doors, pine Each .81 1.88 132.10 Lumber, hemlock M feet 11.00 22.25 102.27 Lime, common Bbl. .72 .95 31.94 Linseed oil, raw Gal. .33 .43 30.30 Lumber, maple, hard M feet 26.50 32.25 21.70 Lumber, oak, white, plain M feet 36.25 55.21 52.30 Lumber, oak, white, quartered M feet 53.83 80.00 48.62 Lumber, pine, yellow M feet 16.44 30.50 85.52 Lumber, poplar M feet 30.67 58.08 89.37 Shingles, cypress M 2.35 4.23 80.00 Lumber, spruce M feet 14.00 24.00 71.43 Window glass, American, single, firsts, 6 by 8 to 10 by 15 inch 50 sq. ft. 2.20 2.81 27.73 Window glass, American, single, thirds, 6 by 8 to 10 by 15 inch 50 sq. ft. 1.96 2.24 14.29
The bulletin indicates that putty, Portland cement and Ames shovels are about the only exceptions to the general rule of greatly increased prices of railway supplies. It is plain that as to all of the important supplies and materials included in the foregoing list the $105.00 of gross receipts from the typical shipment heretofore used as an example would show the same, or a greater, loss in purchasing power which has characterized the comparisons previously shown.
Evidence from official sources thus shows that in purchasing the same quantities either of labor or of supplies the railways have now to expend much larger sums than they did ten years ago. The official statistics already quoted are fully supported and their pertinence to the problem in hand is fully proven by the accounting records of the purchasing departments of the several railways. The Trunk Line Association has obtained detailed information concerning purchases in 1897 and 1907, by important railways represented in its organization, and this information has been carefully and accurately tabulated. A table showing the largely increased cost of articles which this tabulation reveals has been made Appendix B and will be found at pages 194 to 198 of this pamphlet. An examination of this appendix and, particularly of the classes of labor and of the articles shown to have greatly increased in cost, discloses the unquestionable fact that the increased cost pervades the whole aggregate of operating expenses and that there is no considerable exception to the rule that every item of operating expenditure is now very much greater than it was in 1897.
OTHER COSTS OF SUPPLYING RAILWAY SERVICES.
The cost of railway transportation which must be borne out of the receipts for railway services includes operating expenses, interest on capital and taxes. Before discussing the increase in the rate of interest demanded it is worth while to note that the exactions made by the taxing power upon the railways have also notably increased.
The sums annually paid as taxes on railway property since 1897 follow:
Taxes paid. Miles operated ---------------------- and included Average in reports Amount. per mile of taxes paid. operated.
1897 183,284.25 $43,137,844 $235.36 1898 184,648.26 43,828,224 237.36 1899 187,534.68 46,337,632 247.09 1900 192,556.03 48,332,273 251.00 1901 195,561.92 50,944,372 260.50 1902 200,154.56 54,465,437 272.12 1903 205,313.54 57,849,569 281.76 1904 212,243.20 61,696,354 290.69 1905 216,973.61 63,474,679 292.55 1906 222,340.30 74,785,615 336.36 1907 227,454.83 80,312,375 353.09 ---------- ------------ ------ * * $625,164,374 * *
Thus in the years from 1897 to 1907 railway taxation per mile of line has increased from $235.36 to $353.09, or no less than 50.02 per cent.
COST OF REGULATION.
Closely akin to taxation of railway property are the additional expenses which have to be met out of railway revenues on account of public regulation. The increased and, in many cases, minute regulation imposed by the Hepburn law of 1906 and the rules and requirements established thereunder by the Interstate Commerce Commission and by various State enactments have caused the railways many new and augmented expenditures. Among the many purposes for which these expenditures have become necessary are those enumerated below:
1. Preparation, publication, filing, posting, etc., of rate schedules.
2. Compilation and tabulation of statistics, preparation and filing of annual reports of operation and finance.
3. Litigation under regulatory statutes including cases before National and State commissions and including legal and incidental expenses thereof.
4. Appliances and special equipment required by safety appliance laws.
5. Additional employees and additional wages paid on account of laws regulating the hours of labor.
Besides these and other positive additions to the expenses of operation there have been considerable reductions in revenue brought about by the various regulative statutes. Thus there have been reductions in revenue caused by the following:
1. Orders, or suggestions having practically the force of orders, requiring changes in the classification of freight.
2. Orders, or suggestions having practically the force of orders, requiring reductions in rates.
3. Statutory reduction in the rates of compensation for carrying the mail.
4. Reduction of compensation for carrying the mail made by executive order.
A painstaking effort to secure accurate statistics concerning recent increases in these expenditures and losses has been made and data for that purpose have been supplied by many of the railways operating east of the Mississippi river. These data are necessarily incomplete and fragmentary, the accounts of many of the companies not being kept in such form as fully to disclose the items desired. In few cases were the data which could be obtained for any line complete--some companies were able to report particular items while other companies could not give these, but could supply others. Generally speaking, it should be realized that the tabulation of these reports makes a showing which is incomplete mainly in the form of omissions. A conservative computation discloses that the costs due to increases in expenses or reductions in revenue imposed by statutes or by Commissions acting under Federal and State regulatory laws costs the railways of the United States approximately $200,000,000 in two years. That this is not an exaggerated estimate will be appreciated by reference to the principal general items of expenditures as enumerated on the preceding pages. Until these items shall have been assigned a proper classification in the accounts of the railroads the accurate results may not be ascertained, but it will at once occur to those in any measure informed that there has been an enormous increase of work and expense placed upon the carriers to conform to the innumerable requirements of State and Federal laws and the rulings of the Commissions thereunder, and that this burden has extended to all departments of the carriers. Litigation and miscellaneous expenses appear as a large part of these new costs, and in addition the carriers' revenues have been greatly depleted either directly by the laws, orders of Commissions or suggestions having practically the force of orders, resulting in reductions of freight and passenger charges.
COST OF OBTAINING NEW CAPITAL.
In the matter of interest on the capital employed the railways have apparently enjoyed an advantage which would seem to offset the natural tendency of interest rates to rise in response to the stimulus of augmented cost, in dollars and cents, of the commodities entering into the budget of expenditures of the average recipient of interest--that is to say, the advantage growing out of the fact that a large proportion of railway capital is secured under long-time contracts and that many of the contracts now in force unquestionably run back to a time before the extensive depreciation of the American dollar began. This advantage is a real one, but its extent is easily exaggerated. For the purpose of throwing light upon the effect upon the cost of railway transportation of the rise in interest rates which has characterized recent years an analytical study of railway indebtedness (including guaranteed dividends) amounting, in the aggregate, to $9,499,099,065 has been made. This sum represents indebtedness now outstanding and includes some duplication owing to the fact that certain of the securities represented in the aggregate are themselves based upon other securities deposited as collateral or held in the treasuries of the corporations making the secondary issues; duplication which could not be eliminated without adding vastly to the difficulty of the inquiry with no corresponding gain in the accuracy of the result. These data are also subject to the qualification necessarily due to the fact that all of the issues included were not sold at par. In some cases a small premium was doubtless obtained and in other cases a slight discount was required, but, nevertheless, it is believed that the data fairly indicate the general change in interest rates on capital loaned to railways. Of the total outstanding indebtedness of $9,499,099,065 the portion incurred during the years 1897 to 1908, inclusive, amounts to $5,466,340,252, or 57.55 per cent. The following table shows the amounts incurred at the different rates during each of the years named:
Rate of Interest and Amount Incurred During Year and Outstanding.
Year. 6½ per cent. 6 per cent. 5 per cent. 4½ per cent.
1897 -- $11,039,000 $42,126,000 $7,700,000 1898 -- 487,000 7,486,700 207,000 1899 -- 13,094,000 29,197,000 15,896,000 1900 -- 1,133,000 15,926,351 7,979,000 1901 -- 1,777,775 38,840,000 37,845,378 1902 -- -- 44,949,508 19,949,600 1903 -- 1,552,000 53,592,030 22,092,500 1904 -- 256,000 61,191,561 30,241,729 1905 -- 1,810,000 66,346,000 73,996,100 1906 $350,000 1,180,579 141,786,511 40,922,181 1907 -- 30,325,000 289,458,892 177,805,962 1908(a) -- 114,504,970 47,546,385 2,850,000 -------- ------------ ------------ ------------ Total $350,000 $177,159,324 $838,446,938 $437,485,450
Rate of Interest and Amount Incurred During Year and Outstanding.
Year. 4 per cent. 3¾ per cent. 3½ per cent. 3 per cent.
1897 $205,882,500 $ -- $221,663,000 4,998,275 1898 187,898,000 -- 194,724,325 -- 1899 277,784,400 -- 126,734,000 43,231,272 1900 83,735,500 -- 62,577,000 43,689,000 1901 382,131,250 330,000 51,635,000 -- 1902 348,038,050 -- 58,641,500 -- 1903 317,948,000 -- 22,308,000 9,866,435 1904 193,499,500 -- 39,890,000 -- 1905 364,507,404 -- 112,645,155 16,000,000 1906 251,037,681 48,262,548 31,098,670 -- 1907 210,399,075 -- 423,000 -- 1908(a) 101,380,000 -- -- -- ------------- ----------- ------------- ------------ Total $2,924,181,360 $48,592,548 $922,339,650 $117,784,982
(a) January to July, only.
Even a cursory examination of the foregoing statement shows that the average rate of interest demanded by those who supply railway capital has greatly increased. In 1897 and 1898 the largest aggregate of new indebtedness was incurred at the rate of three and one-half per cent. per annum; in 1899, 1900, 1902, 1903, 1904, 1905 and 1906 the preponderating portion was at four per cent.; in 1907 the largest aggregate was at five per cent., while in the months of 1908 for which data are available the greater portion was obtained at six per cent. Loans at three and three and one-half per cent., which supplied a considerable aggregate during all of the years to and including 1906 and particularly in the earlier years of the period, had substantially disappeared before 1907 and no funds were procured at less than four per cent. during the portion of 1908 which is included. The increased volume of loans at five and six per cent. is equally marked. The following table makes this analysis clearer by showing the total borrowings of each year and the percentage at each rate:
======================================================================== Rate of Interest and Proportion of Total Indebtedness Incurred During Year and Outstanding. Year. Borrowed. ----------------------------------------------------- 6½ 6 5 4½ 4 3¾ 3½ 3 per per per per per per per per cent. cent. cent. cent. cent. cent. cent. cent. ------------------------------------------------------------------------ 1897 $493,408,775 -- 2.24 8.54 1.56 41.73 -- 44.92 1.01 1898 390,803,025 -- .12 1.92 .05 48.08 -- 49.83 -- 1899 505,936,672 -- 2.59 5.77 3.14 54.91 -- 25.05 8.54 1900 215,039,851 -- .53 7.40 3.71 38.94 -- 29.10 20.32 1901 512,559,403 -- .35 7.58 7.38 74.55 0.07 10.07 -- 1902 471,578,658 -- -- 9.53 4.23 73.80 -- 12.44 -- 1903 427,358,965 -- .36 12.54 5.17 74.40 -- 5.22 2.31 1904 325,078,790 -- .08 18.82 9.30 59.53 -- 12.27 -- 1905 635,304,659 -- .28 10.44 11.65 57.38 -- 17.73 2.52 1906 514,638,170 0.07 .23 27.55 7.95 48.78 9.38 6.04 -- 1907 708,351,929 -- 4.28 40.86 25.10 29.70 -- .06 -- (a)1908 266,281,355 -- 43.00 17.86 1.07 38.07 -- -- -- ------------------------------------------------------------------------ Total 5,466,340,252 0.01 3.25 15.34 8.00 53.49 0.89 16.87 2.15 ------------------------------------------------------------------------
(a) January to July, only.
The foregoing table shows that while, in 1897, the railways borrowed 87.66 per cent. and in 1898, 97.91 per cent. of the new capital obtained in the form of loans at four per cent. or better, they were compelled, in 1907, to promise more than four per cent. on 70.24 per cent. and in the first six months of 1908 to promise six per cent. on 43.00 of their borrowings. The significance of these figures is made still more apparent by the following table, which shows opposite the aggregate borrowings of each year, the interest charges thereon and the average rate upon the portion of the capital which it represents:
Year. Aggregate interest Av. rate Borrowed. charges. interest.
1897 $ 493,408,775 $ 19,258,593 3.90 1898 390,803,025 14,744,141 3.77 1899 505,936,672 19,804,814 3.91 1900 215,039,851 8,073,638 3.75 1901 512,559,403 20,856,559 4.07 1902 471,578,658 19,119,182 4.05 1903 427,358,965 17,561,577 4.11 1904 325,078,790 13,571,945 4.17 1905 635,304,659 25,758,601 4.05 1906 514,638,170 21,964,215 4.27 1907 708,351,929 32,722,081 4.62 1908(a) 266,281,355 13,431,067 5.04 -------------- ------------ ---- Total $5,466,340,252 $226,886,413 4.15
(a) January to July, only.