The Railway Library, 1909 A Collection of Noteworthy Chapters, Addresses, and Papers Relating to Railways, Mostly Published During the Year

Part 40

Chapter 403,078 wordsPublic domain

=============================================+=============+============ Income Account | | ---------------------------------------------+-------------+------------ Gross income from lease of road |$111,153,013 | Salaries and maintenance of organization | 390,841 | Taxes accrued | 5,881,352 | +-------------+ Net income from lease of road | |$104,880,820 Other income | | 5,436,129 | +------------ Gross corporate income | |$110,316,949 Deductions from gross corporate income | | 62,232,508 | +------------ Net corporate income | |$ 48,084,441 | | Disposition of net corporate income: | | Dividends declared from current income |$ 33,843,577 | Additions and betterments charged to income| 1,088,002 | Appropriations to reserves and | | miscellaneous items | 258,580 | +-------------+ Total | |$ 35,190,159 Balance carried forward to credit of | | profit and loss | | 12,894,282 ---------------------------------------------+-------------+------------ Profit and Loss Account -----------------------------------------------------------+------------ Credit balance in Profit and Loss Account, June 30, 1907 |$ 45,852,031 Credit balance brought from Income Account, June 30, 1908 | 12,894,282 +------------ Total |$ 58,746,313 | Dividends declared out of surplus | 27,550,596 Other profit and loss items--debit balance | 2,006,573 +------------ Balance credit June 30, 1908, carried to balance sheet |$ 29,189,144 -----------------------------------------------------------+------------

Included under the blind item of "Deductions from gross corporate income, $62,232,508" in this statement may be mentioned rents of other roads and facilities of which these leased roads are the lessees, interest on funded debt and other interest, sinking funds chargeable to income and other deductions not specifically provided for elsewhere. In case of operating roads this item also includes the balance of hire of equipment, to which, of course, there is a credit with other operating roads.

The significant feature in this statement is the decrease in the profit and loss credit balance of $16,662,887. But this does not alter the fact that what becomes of rent paid for lease of road is no more a concern of interstate commerce than what becomes of the rent paid for warehouses or office space in any terminal. The operating roads pay all the cost of maintenance of way and equipment. The leased roads are not common carriers in any sense. They are simply distributing mediums of the rents paid them--this rent being the equivalent of interest on so much capital. As appears from the foregoing table, the expense of maintaining the organization of these leased properties amounted in 1908 to 35/100ths of 1 per cent.

DISTRIBUTION OF GROSS EARNINGS.

How the gross earnings of the railways reporting to this Bureau in 1909 ($2,375,141,766) were distributed is shown in the next statement in comparison with a similar division of earnings in 1908 and 1907.

STATEMENT OF DISTRIBUTION OF GROSS EARNINGS OF 221,132 MILES OF LINE IN 1909 COMPARED WITH THE PERCENTAGES FOR 1908 AND 1907.

(GROSS EARNINGS 1909, $2,375,141,766.)

======================================================================= Item | Amount |Per Cent|Per Cent|Per Cent | 1909 | 1909 | 1908 | 1907 -----------------------------+--------------+--------+--------+-------- Operating expenses: | | | | Maintenance of way and | | | | structures | $ 299,757,077| 12.62 | 13.41 | 13.27 Maintenance of equipment | 358,747,371| 15.10 | 15.42 | 14.22 Traffic expenses | 48,453,707| 2.08 | 2.00 | Transportation expenses | 799,690,194| 33.67 | 36.24 | 37.50 General expenses | 61,462,923| 2.58 | 2.58 | 2.54 +--------------+--------+--------+-------- Total |$1,568,111,272| 66.03 | 69.67 | 67.53 | | | | Disposition of same: | | | | Pay of employes | $ 973,174,419| 41.00 | 43.43 | 41.42 Fuel for locomotives | 184,359,112| 7.76 | | 7.74 Oil and water for | | | | locomotives | 19,951,184| .84 | | .88 Material and supplies | 219,463,028| 9.24 | | 11.81 Hire and rent of equipment | | | | and facilities | 54,638,243| 2.30 | | 2.46 Loss and damage | 56,379,042| 2.37 | | 1.83 Miscellaneous(a) | 60,146,242| 2.52 | | 1.39 +--------------+--------+--------+-------- Total expenses |$1,568,111,272| 66.03 | 69.67 | 67.53 Taxes(b) | 88,531,566| 3.72 | 3.53 | 3.10 Rentals of leased roads | 114,903,630| 4.84 | 4.64 | 4.69 Interest on funded debt and | | | | current liabilities | 315,884,884| 13.30 | 13.34 | 13.14 Dividends | 171,607,550| 7.23 | 4.42 | 8.78 Deficits of weak companies | 20,223,246| .85 | 1.24 | .19 Betterments, reserves and | | | | sundries | 47,494,754| 2.00 | 2.07 | 1.50 Surplus | 48,384,864| 2.03 | 1.09 | 1.07 +--------------+--------+--------+-------- Total (gross earnings) |$2,375,141,766| 100.00 | 100.00 | 100.00 Gross earnings 1908 | 2,393,805,989| | | Gross earnings 1907 | 2,589,105,578| | | -----------------------------+--------------+--------+--------+--------

(a) Legal expenses, advertising and insurance are included under "Miscellaneous"; stationery and printing under "Material and Supplies."

(b) Includes taxes paid by leased lines and deducted from rent.

Owing to the fact that interest on funded debt and dividends are paid out of the common fund derived from operation and investments, the amounts devoted to these items in the above statement are necessarily computations. That they are not underestimates is proved by the fact that the surplus would not permit of larger charges for interest and dividends paid out of net earnings. Any interest or dividends materially greater than the amounts stated above, not paid out of the rents accruing to leased roads as given, must necessarily be derived from other sources than transportation revenues, and has no place in railway accounts coming under the provisions of the Act to Regulate Commerce among the several states.

TAXES

So far as taxes are concerned, seasons of prosperity, depression and marking time are alike to American railways. The burden of their taxation knows no recession but mounts steadily, absolutely, per mile and in proportion to gross earnings.

The 368 roads reporting to this Bureau owning 182,046 miles of line and operating 221,132 miles, of which 39,086 miles were leased, paid $82,650,214 taxes in 1909. The Commission's report for 1908 shows that the leased roads paid $5,881,352 taxes out of their rents. Putting a conservative estimate of $200 a mile on the 11,870 miles of line not represented in this report would add $2,374,000 to the above figures and bring the aggregate taxes paid by the railways of the United States in 1909 up to the striking total of $90,905,566.

How railway taxation has increased absolutely and relatively to earnings and mileage during the past twenty-one years is shown in the following statement:

TAXES ANNUALLY AND RELATIVELY, 1889 TO 1909.

============================+=============+==========+=========== | | | Percentage Year | Taxes Paid | Per Mile | of | | | Earnings ----------------------------+-------------+----------+----------- 1909 (Official figures) | $89,026,226 | $382 | 3.73 1908 | 84,555,146 | 367 | 3.53 1907 | 80,312,375 | 353 | 3.10 1906 | 74,785,615 | 336 | 3.21 1905 | 63,474,679 | 292 | 3.04 1904 | 61,696,354 | 290 | 3.12 1903 | 57,849,569 | 281 | 3.04 1902 | 54,465,437 | 272 | 3.15 1901 | 50,944,372 | 260 | 3.20 1900 | 48,332,273 | 250 | 3.24 1899 | 46,337,632 | 247 | 3.53 1898 | 43,828,224 | 237 | 3.51 1897 | 43,137,844 | 235 | 3.84 1896 | 39,970,791 | 219 | 3.48 1895 | 39,832,433 | 224 | 3.70 1894 | 38,125,274 | 216 | 3.56 1893 | 36,514,689 | 215 | 2.99 1892 | 34,053,495 | 209 | 2.90 1891 | 33,280,095 | 206 | 3.04 1890 | 31,207,469 | 199 | 2.96 1889 | 27,590,394 | 179 | 2.86 ----------------------------+-------------+----------+-----------

In this table the figures for 1909 are based on the monthly reports to the Commission and are subject to revision, but they are in substantial agreement with the estimate on the returns to the Bureau.

Observe that the highest ratio of taxes to gross earnings shown in this table was 3.84 per cent in 1897, when everything relating to railways, except taxes, was prostrated under the reign of receiverships that followed the panic of 1893. It was of 1897 that the Official Statistician recorded the fact that "70.10 per cent of outstanding stock paid no dividends, and 16.59 per cent of outstanding bonds, exclusive of equipment trust obligations, paid no interest."

There is instruction and warning behind the remarkable increase in the ratio of taxation shown in the figures for 1894 to 1897. There is the reflection of similar conditions in the rising ratios of 1908 and 1909.

DAMAGES AND INJURIES TO PERSONS

There are two items in railway accounts connected with the expense of operation that give the management most serious concern, because no means has been devised to limit or control them. In a leaflet issued by this Bureau in September last, it was estimated that the payments of American railways on account of "Injuries to Persons" and "Loss and Damage" for the year 1908 would approximate $56,700,000, or more than 2.3 per cent of their gross earnings. The Commission has not yet made public the final figures for 1908, but the returns on these accounts of the 368 roads reporting to this Bureau for the year 1909, aggregate $56,379,024, or 2.37 per cent of their gross earnings.

Divided according to the new system of accounting adopted by the Commission, these returns show the following figures:

SUMMARY OF PAYMENTS ON ACCOUNT OF INJURIES TO PERSONS AND LOSS AND DAMAGE DURING THE YEAR 1909.

Unlike many of the other expenses of American railways, the burden of this "cost of operation" does not fall heaviest on the large systems. In the case of one road of moderate importance payments on these two accounts amounting to 4.8 per cent of gross earnings were enough to tip the balance into a deficit after paying interest on funded debt; one minor but prosperous road, after paying 14 per cent of gross receipts to meet these two accounts, had nothing left for dividends after paying interest, which amounted to less than 10 per cent of its earnings; and a small third road after being called on to pay 21.5 per cent of its earnings for injuries and damages had only 6 per cent of its operating revenue left to pay interest on funded debt, which called for 20 per cent of the earnings, and taxes reduced the net operating revenue to less than 4 per cent.

These are extreme cases but they illustrate how the "Injury and Damage" claims strike roads that can ill afford to pay them as well as the great systems which are the common prey of every claimant with enough of a grievance to interest an attorney who scents a contingent fee.

That the claims behind these expenses are largely meretricious is indicated, if not proved, by their disproportionate increase in the past ten years, during which the railways have expended millions in providing safeguards for their trains and employes. This increase absolutely and relatively to gross earnings is shown in the following statement:

PAYMENTS ON ACCOUNT OR "LOSS AND DAMAGE" AND "INJURIES TO PERSONS" DURING THE DECADE 1899 TO 1909 AND PROPORTION TO GROSS EARNINGS.

======================+=======================+====================== | Loss and Damage | Injuries to Persons +------------+----------+------------+--------- Year | | Per Cent | | Per Cent | Amount | of | Amount | of | | Earnings | | Earnings ----------------------+------------+----------+------------+--------- 1899 |$ 5,976,082 | .455 |$ 7,116,212 | .541 1900 | 7,055,622 | .474 | 8,405,980 | .565 1901 | 8,109,637 | .510 | 9,014,144 | .567 1902 | 11,034,686 | .639 | 11,682,756 | .676 1903 | 13,726,508 | .722 | 14,052,123 | .739 1904 | 17,002,602 | .861 | 15,838,179 | .802 1905 | 19,782,692 | .946 | 16,034,727 | .770 1906 | 21,086,219 | .907 | 17,466,864 | .751 1907 | 25,796,083 | .996 | 21,462,504 | .829 1908 | -- | -- | -- | -- 1909 | 32,922,986 | 1.386 | 23,456,038 | .988 | | | | Increase in 10 years, | | | | per cent | 450.5 | 204.6 | 229.6 | 82.6 ----------------------+------------+----------+------------+---------

Startling as are these increases absolutely, those relatively to earnings present a condition truly alarming, for which there is no apparent relief except through a revulsion in the popular tolerance of blackmail at the expense of the railways.

In no other country in the world are the railways held up on bogus claims for damages to the extent they are in the United States. Under the strict laws of the United Kingdom, as to compensation for damages and injuries, the British railways paid less than 7/10ths of 1 per cent of their earnings for all damages, losses and injuries, or less than one-third the proportion paid by American railways on the same account.

LOCOMOTIVE FUEL

Despite the continuous improvements in the steam-producing capacity of railway locomotives per ton of coal, the steady advance in the cost of coal during the past ten years has more than offset the economies of locomotive construction. This is shown in the next statement, which gives the cost of locomotive fuel and its relative proportion to gross earnings and operating expenses, and also the average price per short ton of coal in the United States since 1899:

SUMMARY OF COST OF LOCOMOTIVE FUEL AND PROPORTION TO EARNINGS AND EXPENSES OF AMERICAN RAILWAYS, 1909 TO 1899, WITH PRICE OF BITUMINOUS COAL PER TON DURING THE SAME PERIOD.

======+=========+==============+==========+==========+========== | | |Proportion|Proportion|Price of |Miles of | Cost of | to | to | Coal at Year | Line | Locomotive | Operating| Gross | Mines | | Fuel | Expenses | Earnings |per Ton(a) ------+---------+--------------+----------+----------+---------- 1909 | 221,132 | $184,359,112 | 11.757 | 7.77 | -- 1908 | 230,494 | 197,385,513 | 12.098 | 8.25 | 1.12 1907 | 227,454 | 200,261,975 | 11.471 | 7.74 | 1.14 1906 | 222,340 | 170,499,133 | 11.119 | 7.34 | 1.11 1905 | 216,973 | 156,429,245 | 11.278 | 7.51 | 1.06 1904 | 212,243 | 158,948,886 | 11.893 | 8.05 | 1.10 1903 | 205,313 | 116,509,031 | 11.675 | 7.70 | 1.24 1902 | 200,154 | 120,074,192 | 10.776 | 6.96 | 1.12 1901 | 195,561 | 104,926,568 | 10.602 | 6.61 | 1.05 1900 | 192,556 | 90,593,965 | 9.809 | 6.09 | 1.04 1899 | 187,534 | 77,187,344 | 9.478 | 5.88 | .87 ------+---------+--------------+----------+----------+----------

(a) These figures are from the latest report of the United States Geological Survey.

The significance of this table is that it cost the railways almost one-third more for fuel per dollar earned in 1909 than it did in 1899, the increase in the proportion of fuel cost to gross earnings having been 32%, due to the advance of 31% in the price of coal at the mines during that period.

The effect of the anthracite coal strike and the Commission's award of date March 18, 1903, upon the cost of bituminous coal is seen in the sharp advances in 1902 and 1903.

The railways have not escaped the advance in their cost of living due to the increased price of fuel any more than the public at large, and so far they have not been able to shift any portion of that cost, as manufacturers and shippers have done.

XII

THE SAFETY OF AMERICAN RAILWAYS

Never before in the history of railways has such a record for comparative safety been made as that recorded of American railways during the year ending June 30, 1909. Following its custom the Interstate Commerce Commission has published the report of accidents. It remains to set forth here the more remarkable record of safety.

OF THE 368 COMPANIES REPORTING TO THIS BUREAU, NO LESS THAN 347, OPERATING 159,657 MILES OF LINE AND CARRYING 570,617,563 PASSENGERS, WENT THROUGH THE YEAR WITHOUT A SINGLE FATALITY TO A PASSENGER IN A TRAIN ACCIDENT.

Of the remaining 21 companies, no less than 10, operating 27,681 miles and carrying 185,447,507 passengers, only missed such perfect immunity by a single fatality each in accidents to trains. This leaves 11 roads whose misfortune it was to bear the burden of train accident fatalities to passengers during the year.

The invariable rule of the Bureau precludes the publication of the honor roll of safety. And it is well so, for it would lead to invidious comparisons, where, in such matters as accidents, all comparisons are as irrelevant as they are invidious.

But it may be stated that the roll of immunity includes roads in every section of the union, from Maine to California, several great systems operating over 7,000 miles of line each, as well as little branch lines of below ten miles of single track; lines operated with all the safety appliances known to twentieth century progress and lines operated under as primitive conditions as prevailed on this continent more than half a century ago.

THIS RECORD OF COMPLETE IMMUNITY, STRETCHING OVER 159,657 MILES OF OPERATED LINE, REPRESENTS A MILEAGE NEARLY SEVEN TIMES THAT OF ALL BRITISH ROADS, AND EQUALS THE AGGREGATE OF ALL EUROPE, EXCLUDING RUSSIA BUT INCLUDING THE BRITISH ISLES.

What immunity to fatalities to passengers over such a vast mileage means may be partly realized from the fact that only twice in half a century has it occurred on the 23,000 miles of British railways, and never, to the writer's knowledge, so far as statistics reveal, on the railways of any of the great divisions of Europe. Certainly it has never occurred on the aggregate railways of Europe.

It would take seven consecutive years of immunity from fatalities to passengers in train accidents on British railways to equal this phenomenal record of American roads.

In presenting similar returns for 1908, it was said that "considering the myriad units of risk involved, the record for immunity from fatal accidents to passengers is without parallel in the history of railway operation." How that record has been not only equalled but surpassed is shown in the following statement for the last two years:

SUMMARY OF MILEAGE AND TRAFFIC OF ROADS ON WHICH NO PASSENGER WAS KILLED IN A TRAIN ACCIDENT DURING THE YEARS 1908 AND 1909.

=====================================+=================+================ | 1909 | 1908 -------------------------------------+-----------------+---------------- Number of operating companies | 347 | 316 Mileage of these companies | 159,657 | 124,050 Passengers carried | 570,617,563 | 455,365,447 Passengers carried 1 mile | 18,953,025,000 | 14,776,368,000 Tons of freight carried | 1,116,877,052 | 916,123,410 Tons of freight carried 1 mile | 151,974,495,000 | 121,589,399,000 Passengers killed in train accidents | None | None Passengers injured in train accidents| 2,585 | 2,695 -------------------------------------+-----------------+----------------