Production Note Cornell University Library produced this volume to replace the irreparably deteriorated original. It was scanned using Xerox software and equipment at 600 dots per inch resolution and compressed prior to storage using CCITT Group 4 compression. The digital data were used to create Cornell’s replacement volume on paper that meets the ANSI Standard Z39.48-1984. The production of this volume was supported in part by the New York State Program for the Conservation and Preservation of Library Research Materials and the Xerox Corporation. Digital file copyright by Cornell University Library 1994.REPORT New York Commerce Comm! CHARLES A. SCHIEREN, Chairman. C. C. SHAYNE. ANDREW H. GREEN. HUGH KELLY. ALEXANDER R. SMITH, Secretary. BEN L. FAIRCHILD, Counsel. NEW YORK, 10OO.REPORT OF THE New York Commerce Commission* CHARLES A. SCHIEREN, Chairman. C. C. SHAYNE. ANDREW H. GREEN. HUGH KELLY. ALEXANDER R. SMITH, Secretary. BEN L. FAIRCHILD, Counsel. NEW YORK, 1900.CONTENTS, PAGE Preliminary, - 1 The Extent to which the Commerce of New York has Declined, 6 Table showing loss in Grain Exports, ... 9 Table showing loss in Flour Exports, .... 10 Gains made by other Ports in Flour, Wheat and Com Exports, 11-12 The Decline not due to lack of Natural Advantages, - - 21 What has Caused the Decline, General Conditions, - - - - - - 25 Railroad Differential Rates, - - - - - 30 The Canals, - . - - - - - - 64 Canal Terminals, - - - - - - 80 Iron and Steel, - - - - - - 85 Champlain Canal, - - r 88 Capitalization of Canal Corporations, - - - 90 Port Charges, - - . . . 91 Rapid Transit to all Boroughs, - - ' - - 92 The One Cent Arbitrary ..... 93 Elevator Charges, - 96 Lighterage Charges, - - - - 100 Docks, - - - - - - - 102 Insufficient North River Water Frontage, - - - 110 Evasion of Law Relating to Canal Piers, ... 113 Land under Water, - - - - - - 114 Manufacturing Interests and their Bearing upon Commerce, 115 Conclusion, - - - - . - - 116 Summary and Recommendations, - - - 117-122STATE OP NEW YORK. REPORT OF THE NEW YORK COMMERCE COMMISSION. To the Governor : The New York Commerce Commission, appointed in pursuance of Chapter 644 of the Laws of 1898, hav- ing submitted a preliminary report to the Legislature of 1899, Senate Document 23, and having continued the investigation authorized by said act, in accordance with the directions contained in the amendment thereof, Chapter 494 of the Laws of 1899, have the honor to make the following and further report: By said two acts authority was conferred upon the commission “ to examine into the commerce of New York, the cause of its decline and the means for its re- vival.” And to report “ a summary of their conclusions, together with copies of all testimony taken by the com- mission, with recommendations of such legisla- tion as they may deem advisable, together with such bill or bills as they may deem necessary to carry into effect their recommendations.” By said last-named act the report of the commission was directed to be made to the Governor, and the power2 to subpoena witnesses and to compel thereby the pro- duction of books and papers was confirmed and made certain. The investigation prior to the amendment of 1899 was essentially prefatory, due to the limitations of the former act to which the preliminary report of the com- mission directed attention. During this introductory period the commission availed itself of such sources of information as were readily accessible, accumulated statistical information evidencing the loss in New York’s foreign commerce, and held weekly public hearings attended by some thirty or more witnesses, among whom were representa- tive men of commercial organizations, and of large commercial interests, who came prepared, upon the invitation of the commission, to submit information and (suggestions of much value in the conduct of the sub- sequent investigations. The preliminary report to the legislature was sub- mitted January 14th, 1899. The proceedings of the commission were suspended awaiting the action of the legislature thereon. The amended act did not become a law until May 2nd, 1899. Thereupon the commission prepared to take as full advantage of the very large powers entrusted to them as the time yet available would permit. In the prosecution of the investigation subsequent to the enactment of the amended act, the commission have been enabled to hold thirty-two public sessions at which there appeared in response to subpoenas, and were examined, more than one hundred witnesses, selected from among the leading merchants, exporters, elevator owners, representatives of shipping and canal interests, and officials of the trunkline railways and including city officials. The hearings within this State were held in New York, Buffalo and Whitehall, and without the State, in Chicago, St. Paul, Minneapolis and Duluth. The cities of Montreal, Quebec, Boston, Philadelphia, Baltimore and Newport News, were likewise visited for the purpose of examining the terminal facilities at those3 seaports. From Montreal advantage was taken of the opportunity to inspect the new Canadian canals. Beyond the limits of the State, the generous courtesy of public officials and leading representatives of busi- ness interests proved as efficacious in securing infor- mation of consequence, as have the jurisdictional powers of the commission within the State. No less courteous and obliging have been the business men of our own communities, even when, in the exercise of the authority conferred by statute, and having due regard to the exigencies of the investigation, the commission deemed it necessary to require the production of books and papers relating to the business affairs of the indi- viduals and corporations subpoenaed. In the conduct of the investigation, the primary question to be determined related to the extent to which the commerce of New York had declined. The legislation authorizing the investigation, by its terms, assumed that a loss had in fact occurred. The at- tention of the legislature had been first directed to the subject by Governor Black in his annual message at the opening of the session in 1898. That portion of his message forms a part of the history leading to the cre- ation of this commission, and is as follows : “Commerce: I have been so impressed by this subject, in its relation to the State, that I communicate with you, not only for your co-operation, but in the hope of arousing the attention of those most closely in touch with the question and, therefore, best quali- fied to handle it. No man can contemplate the past history of New York without feelings of pride. Surrounded at the beginning, like her sister com- monwealths, with conditions which seemed al- most without hope, she has in a few years at- tained the dimensions of an empire. This trans- formation has been wrought through the unexam- pled gifts of nature, and the industry and skill of citizens protected by a wise and just government. If these reflections inspire pride only, without determination, their main value is lost. An in- spiration that produces no result is no better4 than an agreeable recollection. There must be some practical test to the effect of former achieve- ments upon our present energy. This test will be found in the manner in which the people of this State deal with the subject of their com- merce in its present situation. That situation is not as it ought to be. It is easily the best in the country, but it is not so much the best as it has been and can be made. The commerce of New York is not increasing as rapidly as that of other ports. Perhaps this is inevitable, for the first of yesterday may be the second to-day, and out of the race to-morrow. But it is not likely that New York is suffering from conditions which she cannot overcome. The conditions which hold her back seem to be neither natural nor gen- eral. It is said that the commerce tributary to New York City has been checked and discouraged by a too narrow policy prevailing there with reference to terminal facilities. If this is true, that policy should be corrected, no matter whether it is pursued by the city or by individuals. The facilities of New York belong not to the city or even to the State, but to the country. If by lo- cation she is the best point of shipment to foreign markets for western farmers, then her advantages should be open no more to a Broadway merchant than to a Kansas farmer. And the rights of the latter should not be abridged by restrictions or charges which would drive him to Galveston or New Orleans. Every citizen in this country has a right to get to the sea with his product, no matter whether he lives on the coast or not, and he should not be subjected when there, to unreasonable demands from those who have accommodations which he is obliged to employ. Some communi- ties are so placed that their course not only inter- ests, but largely affects, others. To the extent in which this is true, just to that extent has the public the right to advise and direct those so situated. New York City is in this class. Her affairs are not local, but national, and this view receives constant recognition at the hands of the general government. Millions of money from the general treasury have been expended in New York with national sanction, and millions more should be expended now in the single project of deepening the approaches to her harbor. But5 this national aspect cannot be urged when her ben- efits are considered, and denied when others claim theirs. This State should open such facilities in New York harbor as will draw and accommodate every pound of commerce which would natu- rally come there. The desire on the part of individuals or of the city, for rapid accumula- tions should not prevent this result. The broadest and most liberal policy is the wisest. An outlay for such a purpose would be repaid tenfold in pecuniary returns and in the growth and prestige of the State. Neglect or careless- ness in dealing with this subject would put New York at a disadvantage with other ports in the United States, and might put the whole country at a disadvantage with Canada. The Canadians are just now discussing this subject, and are relying upon advantages afforded by the St. Lawrence river, to attract over that stream, the products of Wisconsin, Minnesota, Dakota and other Western States, intended for foreign markets. This competition should be feared and met. In order that this subject may be treated with that consideration and care which its magnitude demands, I recommend that a commission be created to examine into the commerce of New York, the cause of its decline, the means of its revival, and to report conclusions.” The importance of the subject was likewise urged upon the Legislature, by Governor Roosevelt, imme- diately upon his inauguration, in his first annual mes- sage at the opening of the Legislative session of 1899, as follows: “Of recent years the city of New York has fallen off relatively to other cities as regards the increase of her commerce, and in exports there has been a positive decrease. Under my prede- cessor a commission was appointed to examine into the causes of this decline. I recommend that this commission be allowed ample additional time to close its work, the subject being one of such vast importance, and that it be given all needful aid.”THE EXTENT TO WHICH THE COMMERCE OF NEW YORK HAS DECLINED. Ample justification for the earnest solicitude to which two Governors of the State have successively- given official expression, may be found in the record accompanying this report. The statistics therein con- tained, in part based upon official returns of the Na- tional Government, are substantiated by the testimony of many well-known exporters, not only at the port of New York, but, also, in the great export centres of the West, leading merchants engaged in the foreign trade unite in bearing witness to the decline in New York’s commerce. Full recognition of the serious loss to New York, as shown by government statistics, readily accessible, has been obscured, due chiefly to the commanding position she has continued to maintain in the value of her im- ports. For example : For the fiscal year ending June 30th, 1899, the total foreign commerce of the United States exceeded in value the total foreign commerce of the previous year by 176,787,958. For the same period the increase at the port of New York was $77,206,- 309 ; New York’s increase being nearly a half million dollars greater than that of the entire nation. But less encouragement is derived from these figures when the imports and exports are considered separately. Of the total increase of $77,206,309 of New York’s foreign commerce, $63,277,886 was in imports alone, and only $13,928,423 in exports, being the share she received of a large increase in the nation’s exports of merchandise other than grain. The decrease in the nation’s total exports for the fiscal year, of $4,279,242, was due mainly to a large decrease in the exports of wheat and corn, commodities now exported chiefly from ports other than New York. For the eleven7 months of 1899 to the first day of December from the seven ports of New York, Boston, Philadelphia, Baltimore, Newport News, New Orleans and Galveston, there were 46,657,747 less bushels of wheat and corn exported than for the calendar year of 1898, represent- ing a value, at the prices of the period, of more than thirty-one million dollars. As New York exported in 1898 less than a third of the wheat and com exported from those seven ports, the burden of the loss neces- sarily fell upon the ports that had more than two-thirds of the business—a trade, however, once belonging to New York. No analysis of statistics will permit an escape from a full realization that New York has lost in her export trade—not only has lost, but is losing. The table in evidence in the accompanying record, Exhibit 10 of July 14th, 1899, giving the percentage of exports from six Atlantic ports of the United States, of wheat, corn and flour, shows a steady decline from the port of New York from 77.9$ for 1878 to 29.7$ for 1899 to May 31st of the latter year. The loss appears greater when Montreal, Galveston and New Orleans are included in the calculation. To give this report the benefit of the latest possible statistics available, we have had a table prepared to December 1st, 1899, of exports in food products from the eight principal ports of export—Montreal, Boston, New York, Philadelphia, Baltimore, Newport News, Galveston and New Orleans. The statistics for the calendar year 1898, the last full year for which statistics were available at the time testimony of this nature was being secured by the com- mission, had shown a substantial increase in the ex- ports of wheat from the port of New York. Notwith- standing the fact that the unprecedented demand in foreign countries upon our wheat supply was a matter of common knowledge, taxing all our ports to their full capacity in the effort to ship the wheat across the water, there were those who saw in New York’s tempo- rary increase encouragement to believe that permanent8 conditions favorable to New York had finally been restored. A comparison with 1892, the last preceding year of exceptionally large exports of wheat, did not justify the encouragement. The export of wheat from the eight ports named for the year 1898 was 28,880,905 bushels in excess of 1892, while New York’s gain was only 4,649,192 bushels—less than one-sixth of the total in- crease. The returns for 1899 to December 1st further empha- size the situation. For those eleven months the nation’s total export of wheat was larger than any previous year from 1892 to 1898. New York exported during those eleven months 20,244,694 bushels less than in 1892, as against a total decrease for the eight ports named, of only 8,396,051 bushels. Her loss over 1898 was 24,893,886 bushels out of a total decrease for the entire eight ports of only 37,216,956, and as against an actual increase at Montreal of 862,456 bushels and at the two Gulf ports of New Orleans and Galveston of 1,954,763 bushels. The table, Exhibit No. 3 of July 14, 1899, containing the percentage of exports of wheat from January 1,1873, to May 31, 1899, from the Atlantic ports, alone, but not including Montreal, shows a steady decrease from the port of New York, from 88.79% in 1873 to 49.50% in 1899; and the table, Exhibit No. 9, containing same data for flour, shows a decline from 70.41% in 1873, to 33.09% in 1899. 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O TJX -4-3 J4H o TJX -M «4H 0 o 02 -4-3 1 o O o 0 o 0 • O 0 O 0 O fee ft bO ft bo ft w> ft bO ft bO ft a 'S o a o a < .2 d *o .2 o +3 a -u < .2 h3 d O .2 .2 3 .2 d ’o .2 .2 ‘-5 1 .2 o .2 .2 1 .2 % o .2 .2 d h3 < * rv •» ** •V d -M H-3 -4-3 -4-3 -4-3 -4-3 -4-3 -4-3 c3 d a a d d d d d d d d d o o» o O) o Ol o o» o o> o O) o O) o a> o o> o o> o TJX /—s *-i ^-i f-i ^-4 -g cJ 0) 01 o» o> CD ■ 0) o> O) CD o> O) * 0> Ph pq Ph Ph Ph Ph Ph Ph pp Ph Ph Ph ft co o gf 05 o tP** § o ft 00 o11 In 1897, when 25,085,896 bushels of wheat were ex- ported from New York as against 18,476,263 bushels, the year previous, it was asserted by many that 1896 marked the lowest point of New York’s decline. The total from the port of New York from 1892, had been as follows: 1892 ................ 45,259,966 bushels. 1893 .................36,437,499 “ 1894 ................ 22,913,945 “ 1895 ............... 20,339,263 “ 1896..................18,476,263 “ 1897..............,...25,085,896 “ Then followed 1898 ..........49,909,158 ‘ ‘ But the increase of 1897 of 6,609,633 bushels was out of a total increase from the eight ports of more than thirty million bushels. Reference has been already made to the phenomenal year of 1898. Now comes the year 1899 with the exports from New York not only largely de- creased as compared with 1898, but also about the same as 1897, as against an actual increase over 1897 in the total from the eight ports of 1,333,065 bushels, New York’s proportion of the total exports being smaller in 1899 than ever before in her history. In 1899, too, for the. first time in her history, New York took second place in the amount actually exported, according the first place to the two Gulf ports, with 25,015,272 bushels from New York as against 26,038,593 from the gulf. The fluctuations that occur in particular years from special causes, make reference to any one year often misleading. An analysis of the exports from year to year indicate that the tendency at New York, whether in flour, wheat or corn exports is steadily on the de- cline. What New York has lost has been gained chiefly by the other ports, as indicated to some extent by the following references to the tables in evidence: BALTIMORE. Flour—1895, 2,539,981 bbls. Corn—1895, 9,645,758 bush. 1898, 2,813,166 “ 1899, 3,114,185 “ 1898,45,096,477 “ 1899,42 252,321 “12 PHILADELPHIA. Flour—1895, 903,122 bbls. Corn—1895, 13,307,413 busb 1898, 1,614,426 “ 1898, 29,851,346 “ 1899, 1,954,119 “ 1899, 27,233,279 “ NEWPORT NEWS. Flour—1895, 1,274,045 bbls 1895, Corn—4,866,335 bush. 1898, 1,817,822 “ 1898, 16,115,375 “ 1899,1,576,051 “ 1899, 12,805,454 “ BOSTON. Corn—1895, 5,320,083bush Wheat—1895, 4,810,384bush 1898,11,542,828 “ 1898,12,288,150 “ 1899,16,763,250 “ 1899,10,616,472 “ NEW ORLEANS AND GALVESTON. Flour—1895,144,384bbls. Wheat—1895, 836,202 bush. 1898,469,663 “ 1898, 24,083,820 “ 1899,577,731 “ 1899, 26,038,593 “ Corn—1895, 9,990,183 bush. 1898, 26,301,169 “ 1899, 23,395,747 “ MONTREAL. Flour—(Excepting 1895.) Wheat—1895 3,650,711 bush. From about six thou- 1898 8,989,669 ‘‘ sand bbls. per annum to 1899 9,852,125 “ 1898 857,558 bbls. 1899 1,080,459 “ Com—1895 2,605,848 bush. 1898 19,214,299 “ 1899 13,272,602 “ Although it is impossible to avoid the revelation of New York’s loss, forced upon us by the statistics, the testimony of the leading exporters of the West is even more impressive. Exporters of flour and exporters of grain, in Chicago, in Minneapolis and in Duluth, exporters the magni-13 tude of whose operations have familiarized their names in all the great markets for our products, testified from the evidence of their own transactions. The experience of each accorded with the experience of all, with scarcely a variation. Bach and all had, in former years, exported largely by way of New York, but were using New York less and less year by year. Some had already ceased entirely, or were rapidly approaching that end. Quotations from the testimony of a few of these witnesses will suffice : Grain. Charles Counselman, of Chicago, testified as follows : “Q. How long have you been in that business, [grain exporter] here in Chicago ? A. About twenty years. Q. As a grain exporter and dealer in grain yon own your own elevator here ? A. I do. Q. Will you state what the capacity of the elevators is ? A. About six million. Q. To what extent do you ship at the present time by way of New York ? A. We do very little business by way of New York, very little, not to be mentioned at all. Q. Has that always been the condition ? A. No. Q. How long has that been the case ? A. Oh, it has been growing less and less for the last five years. Q. Before it commenced to grow less what pro- portion of your business went by way of New York? A. Probably half. That is an approximation. Of course, I can’t recollect exactly. Q. Which of the ports have gained the most of what New York has lost ? A. Montreal, Boston, Baltimore and Philadel- phia. * * * New York had a great prestige which lasted a great many years because different people getting in the habit of shipping by certain channels like to do it. We in the West like New York, and love to do our business there,14 but we have been forced away from it a great deal against our will by the competition of those other ports.” D. E. Richardson, another large grain exporter, of Chicago, testified: “ Q. Through what ports do you chiefly export your grain ? A, We export through Galveston, through Portland, Maine; through Montreal and Phila- delphia and New York. Q. Have your shipments in recent years by way of Montreal increased as between Montreal and New York? A. Yes sir, materially.” J. H. Norton, in business in Chicago for thirty years, as a grain exporter, testified : “ Q. You do export grain ? A. We ship grain for export. A large portion of our business lately has been shipping grain to New York which has been sold to exporters there. * ■» * “ I have had occasion to look into the Montreal route this last season because we have found that we could not compete with shippers who were shipping by that route. Q. If it is true that you cannot compete with shippers shipping by that route, how is it that you in such competition do not ship by way of Montreal ? What is the nature of your business that leads you to choose other ports ? A. I say I have been looking into it and expect to do a business that way next season. Q. You expect next season to ship by Montreal ? A. I have done very little by Montreal, but I shall be compelled to or go out of business. * * * Q. You found that you had been a loser by shipping via New York and that you have lost to your competitors, who have shipped by way of Montreal ? A. Yes, sir; my business has diminished this year for that reason.”15 Geo. E. Marcy, of P. D. Armour & Co., after calling attention to the fact that the Gulf competition had taken grain away from Chicago as well as New York, testified: “Q. What efforts, if any, have yon made or are you making to secure for Chicago that busi- ness or any part of that business ? * * * A. * * Things are better now than they were a few years ago, getting in better shape. The main thing that has helped Chicago out the last few years has been Montreal. All of us went to New York and begged the trunk lines east of Buffalo to reduce their charges or do something to help us from losing all that business to the Gulf. Q. How long ago did you begin that ? A. About 4 or 5 years ago. We begged them and told them it was going and asked them if they couldn’t possibly do something to reduce their rates east of Buffalo, so that we could use the water transportation. The officials of the East- ern roads stated that the grain business did not pay them much and they would practically pre- fer to ignore it. When we told them that before they got through they would find that merchan- dise would go the same way, they laughed at us. Q. What has been the result ? A. The merchandise is going just as we told them. In the meantime Montreal has come to our rescue, and, as far as Chicago is concerned, we now don’t care very much what New York does do.” Similar testimony was given by the grain exporters of Duluth: A. D. Thompson, an exporter, doing business in Duluth for ten to fifteen years, testified: “Q. To what extent do you ship at the pres- ent time by way of New York—what proportion of your shipments ? A. Very small proportion. Q. By way of New York ? A. Yes,"sir.16 Q. For how many years has that been the condition ? A. Gradually decreasing for the last ten years. Q. What proportion did you ship by way of New York ten years ago ? A. I should say half. * * * Q. Inside of ten years it has been reduced from one-half of your total shipment to practically nothing at all ? A. Well, practically less than a quarter. Q. Less than a quarter ? A. Yes, sir.” Flour. C. J. Martin, of Minneapolis, the secretary and treasurer of the Washburn-Crosby mills, testified: “ Q. Can you state what the annual output is of your mills ? A. It is about 5,000,000—five and a half million last year. * •* * Q. And by what ports do you export ? A. The port that will give us the cheapest route, all things considered. Q. As a matter of fact by what ports do you ex- port ? A. By New York some, New York very little ; Philadelphia, Baltimore, Newport News, Mon- treal, Boston, Portland and very little by Gal- veston—not Galveston, but Port Arthur. * * * Q. You say that you use New York very little ? A. Yes, sir, a small proportion of our ship- ments have gone that way. Q. For how long a time has that been so ? A. Oh, it has been decreasing I think for several years, as these other ports have offered inducements for shipping that way.” L. P. Hubbard, of Minneapolis, Treasurer of the Pillsbury-Washburn Flour Mills Company, connected with the company at Minneapolis for about twenty-five years, testified:17 “ Q. Will you state what is the capacity— what is the annual output of this mill ? A. Between five and six million barrels of flour. Q. You export to the foreign ports directly from Minneapolis, do you not ? A. Yes, sir. Q. By way of what American ports do you ex- port? A. All excepting the Southern ports. We use them very little, but we use Montreal, Boston, Yew York, Philadelphia, Baltimore and Newport Yews. Q. You mean by the Southern ports, the Gulf ports ? A. I mean Gulf ports, Yew Orleans. Q. Of the Atlantic seaports which ones do you use the most ? A. Well, I should say, in my mind Boston and Baltimore and Newport Yews. Q. To what extent would you say that you use Yew York at the present time, just approx- imately, in percentages ? A. That is something I couldn’t say. I doubt if Yew York takes—I doubt if it takes a quarter of our export business. Q. Has there been any change in that respect now compared with past years ? A. I think there is, yes, I think we export less by Yew York now than we did ten years ago, or say six years ago. Q. How much less ; take six years ago, about what proportion ? A. It used to take the bulk. Yew York and Boston used to take the bulk. * * Q. Now Yew York takes only one-quarter? A. I don’t believe it gets a quarter. •* * * Q. How about Boston; has that remained about the same or increasing quantities ? A. Boston I don’t think has varied a great deal. Q. So that what New York has lost----- A. It has been gained by the South. Q. By Newport Yews; Baltimore has gained on Yew York ? A. Yes, sir. * * *18 Q. Baltimore and Newport News have in- creased a great deal ? A. Yes, sir, and that largely at the expense of New York.” H. P. Gallagher, of Minneapolis, manager of the Northwestern Consolidated Milling Company, owning the flour mills of Duluth, and large mills at Minne- apolis, testified : “ Q. You export directly from here to the foreign ports ? A. Yes, sir. Q. You do your business that way altogether ? A. We contract for a through rate to London, Liverpool, or whatever port we ship to. Q. To what extent, if any, do you now ship flour by way of New York ? A. I should say probably thirty per cent. I haven’t looked that up carefully, but that is as near as I can estimate it. Q. Is that a reduction in amount from what you have shipped ? A. Yes, sir. * * * I should say we shipped eighty-five per cent, of our flour by New York prior to six years ago, and I don’t think over thirty per cent, of it goes that way now.” In all, there were some twenty or more witnesses ap- pearing before the Commission in these Western cities. Further quotations from their testimony on this point would be needless repetition. The monthly summary for the month of October, 1899, of Commerce and Finance of the United States, prepared by the Bureau of Statistics of the Treasury Department, contains the total exports of merchandise, by Custom Districts, for the ten months ending October 31st, for each of the years 1897, 1898 and 1899. The total increase of the nation’s exports from the Atlantic and Gulf ports amounted in value in 1898 to $111,186,138 over 1897. Of this increase, New York received less than half by more than three million dollars. The total increase of the nation’s exports from the same ports, amounted in19 value in 1899 to $36,395,152 over 1898; and New York received less than one-fifth of the increase. She shared in the increase to the extent of $6,893,592, while Boston gained $8,968,742, and Philadelphia gained $8,675,250. Boston, with the total value of her exports in 1897, amounting to only $85,352,566, exhibits an increase in 1898 of $14,825,321, and in 1899 of $23,794,063 over 1897. Philadelphia, with a total value in 1897 of only $41,473,985, increased in 1898 $4,928,186, and in 1899 $13,603,436 over 1897. If the proportion of New York’s increase in 1899 over 1897 had equalled that of Boston, her total exports would have been more than thirty- three million dollars in excess of what they actually were. If New York’s proportionate increase had equalled that of Philadelphia, the gain would have been forty-three million dollars more than it was, in fact. The value of the nation’s total foreign commerce, in- cluding imports as well as exports, for the fiscal year end- ing June 30th, 1899, exceeded the best previous record, in 1892, by $66,639,332. The total for New York was $25,487,742 less than in 1892. And this, too, despite New York’s gain, as heretofore explained, of $63,277,886 in imports for the year 1899. A discussion of the total foreign commerce, including imports, presents the most favorable exhibit for New York. Her retention of the import trade in a measure conceals the extent of her loss in exports. But for how long will she continue to maintain her pre-eminent position, in the import trade, after steamship lines have been established and new channels of trade created between rival ports and the foreign exporting nations, resulting from the loss of New York’s export trade to those rival ports ? New York’s proportionate decline in her foreign com- merce, steady and certain though it has been, reached a level below one-half of the nation’s total foreign com- merce for the first time since she achieved her pre- eminence, in the fiscal year ending June 30th, 1897, in20 which year New York’s total was $35,578,497 less than half. In 1880 New York’s total was $100,700,541 more than one-half of the nation’s total. In 1885, $64,733,967 more. In 1890, $60,745,308 more. In 1895, $33,507,125 more. In 1899 New York’s total had fallen below one- half of the nation’s total by $37,156,818. To avoid the possibility of being misled by any fluctu- ations occurring in particular years from special and transient causes, an average of two decades will be taken for a comparison, with the year 1880 as a standard. The value of the nation’s total foreign commerce for the fiscal year ending June 30th, 1880, amounted to $1,503,593,404. The annual average for the nineteen succeeding years to June 30th, 1899, was $1,590,037,782, showing an average annual increase for the nation of $80,444,878. The total of New York’s foreign commerce in 1880 amounted to $852,497,243. The annual average for the nineteen succeeding years to June 30th, 1899, was $835,839,827, an actual average decrease per annum of $16,657,416. The value of the foreign commerce of the United States for the past nineteen years in the aggregate has been $1,642,543,195 greater than it would have been had the average for each year been exactly the same as for the year 1880, while the aggregate value of the foreign commerce at the port of New York during the same period has been $316,661,887 less than it would have been had New York succeeded in maintaining an annual average for the past nine- teen years equal to her foreign commerce in 1880. Instead of sharing in this vast aggregate increase of the nation’s foreign trade during the past nineteen years, the port of New York has actually fallen behind to the extent of more than three hundred mil- lion dollars. From these figures it must be apparent that there has been an actual as well as a relative decline in the foreign commerce at the port of New York.21 THE DECLINE NOT DUE TO LACK OF NATURAL ADVANTAGES. New York State achieved its pre-eminence as the Em- pire State of the Union, and New York City its superior rank as the principal centre of commerce and finance in the world, next to London, as a result of the bounteous gifts of nature. Chief among these natural advantages must be included the possession of a harbor unexcelled in any part of the globe, providing in its upper and lower bays, and in its rivers, more than 115 square miles of safe anchorage; with a tide limited to a small degree in its rise and fall and with five distinct natural channels to the sea, affording an available low- water depth from the ocean to the lower wharves of the city of 23.3 feet, and capable of improvement as the de- mands of commerce might require. The extent to which the natural channels have al- xeady been deepened and improved, and the relation between the present conditions in the harbor and ocean transportation and rates is fully set forth in the follow- ing statement presented to the commission on behalf of the Maritime Association of the Port of New York, by a committee of the Association appointed to formulate suggestions for submission to the commission, repre- senting the views of that association ; the committee consisting of the president of the association, Mr. L. W. Beasley, and of Mr. Gustav H. Schwab, Mr. E. S. Atwood, Mr. W. P. Clyde, and Hon. W. R. Grace: “As has been the case in railroad transporta- tion on land, the great factor in cheapening ocean transportation has been the increase in the car- rying capacity of vessels, accompanied with constant improvements in motive power, that materially reduce the cost of transportation per ton of cargo moved. Where thirty years ago vessels of 2,500 tons gross register were consid- ered the largest that coaid be economically and safely operated, now freight steamers of 12,000 tons are regularly employed in the transporta- tion of enormous cargoes. This gradual increase in the size of the vessels necessitated by the de-22 mand of commerce for cheaper transportation, has called for a greater depth of water in the channels leading into and out of the harbor of New York; and, on the other hand, as the de- mands of commerce were recognized by the Na- tional Government, and as the channels were in- creased in depth, the number of large freight and passenger carriers grew. In the year 1870, the maximum draft of vessels can be quoted at 22 feet, at a time when the minimum depth in the channels of New York harbor at mean low tide was 23 feet. In 1880, the draft of steamers had increased to more than 23 feet, the depth of water in the channel showing 24 feet in that year. In the year 1890 the efforts of the government had resulted in a depth at mean low water of thirty feet, both in the main ship channel and in the Gedney Channel, permit- ting the construction of the enormous freight car- riers of the present day, whose draft frequently reaches thirty feet, and in some cases exceeds that measurement. A comparison of the range of freight rates dur- ing these years illustrates the advantages gained by the improvements made in ocean transporta- tion during the last thirty years, improvements which have been rendered possible by the action of the national authorities in deepening the ap- proaches to the harbor. In the following table the average rates of freight from New York to one of the continental ports of Europe are quoted as they prevailed in the years 1870, 1880, 1885,1890, and 1895. These rates are subject to fluctuations, but in the main represent the course of the freight market: Rates of Freight. During Tears 1870 1880 Grain, per 100 lbs..... 38 30 Provisions per 100 lbs... 50 36 Cotton, per 100 lbs_____ 80 50 Tobacco, per hogshead.. 10 00 7 80 Tobacco, per case...... 3 00 2 85 Measurement. Goods, per cub. ft..... 24 20 1885 1890 1895 15 8i 8 22 21 20 37 35 25 6 60 6 00 6 00 1 68 1 35 1 20 12 10 15 to to 15 1223 These figures, while varying in some years, showing a temporary increase now and later again a reduction, sufficiently indicate the general trend of rates downward as improvements are effected in the vehicles, with free ingress and egress into and from our harbor. The present size and capacity of ocean steam- ships now demand a further material increase in the depth of water provided in our channels. Freight carriers drawing thirty-one feet of water are now not infrequent, and with the advent in the near future of greater vessels, and the neces- sity for protecting the producer in the W est by enabling him, through the medium of cheap trans- portation to the markets of Europe, to compete with South America, Australia, and India, the imperative urgency of an improved channel capa- ble of accommodating vessels of thirty-five feet draft in the near future should be apparent to all who have at heart the best interests not only of our city and State but of the whole country.” Mr. Schwab, in reading the foregoing statement, added: “ It might be proper for me, being a steamship man, to explain that, in my personal opinion, I hold that a depth of forty feet will be required in the very near future. Probably you are aware of the fact that to float a steamer successfully over the bar it is necessary to have three feet of water under her keel. The west winds of the harbor frequently drive the water out so that there is sometimes four feet less. When we speak of thirty-five feet or forty feet, that is mean low water. Furthermore, the use of the East Chan- nel would greatly favor navigation in and out of the harbor, which gives a straight line at the turn; which now, as you know, following the main ship channel down the bay out to the bar gives us an acute angle; we must make an obtuse angle at the Gedney Channel, a very dangerous thing. It is only eight hundred feet wide, whereas it should be two thousand feet. Q. How much of the distance would be saved ? A. Six or seven miles. Q. How much time ? A. About half an hour.”24 As a result of earnest and united endeavors to secure the much-needed improvement in the harbor approaches, the National Congress has made ample provision for the direct channel to the sea, forty feet in depth and two thousand feet wide, and on May 12th, 1899, a con- tract was entered into for the active prosecution of the work. Winter Load Line,—One other suggestion, concern- ing ocean transportation, to which the attention of the commission was directed during the preliminary hear- ings in the fall of 1898, and which has been subsequently eliminated from the discussion by the correction of an evil, related to what is known as the winter load line. The winter load line is the line below which vessels are not allowed to load during the winter months as fixed by the Board of Trade of England at the instance of the Marine Insurance Companies. In the summer the line for loading has always been the same for all the ports. But previous to the winter of 1898-9, ves- sels loading from ports southerly of Philadelphia were permitted to load deeper than when clearing from the more northerly ports. In a recent proceeding instituted before the Interstate Commerce Commission by the New York Produce Exchange against the Baltimore & Ohio RR. Co. et al., testimony offered tended to prove that the advantage to Baltimore, Norfolk and Newport News amounted to from $200 to $600 per cargo in the case of full cargo vessels. Efforts, for some time con- tinued, to remove this discrimination, finally met with success, and the winter load line is now the same at all the ports. With an unsurpassed harbor, with approaches to the sea adequate for present needs, and ample provision made for all future requirements, with steamship lines to every port, unequalled in number and in the capacity of the vessels, with the winter load line discrimination against the port of New York now entirely abolished, New York need not look oceanward to find the cause of her declining commerce.25 WHAT HAS CAUSED THE DECLINE ? General Conditions.—New York attained originally its commanding position as the largest seaport of the nation by reason of its unsurpassed harbor and its su- perior location with reference to water transportation by way of the great lakes and the Erie Canal. By the rapidity of its development from a position formerly far below either Philadelphia or Bos- ton in importance, to a point where its for- eign commerce reached three-fourths of the total commerce of the nation, and more than eighty per cent, of the Atlantic and Gulf ports, it attained a rela- tive position beyond the point where reasonable expec- tation could confidently hope for a permanent main- tenance. We allude solely to New York’s relative position with respect to the total foreign commerce of the nation. The development of the whole country, vast in its territory and boundless in its resources, of necessity would lessen the percentage of the whole shared by a port that had at one time approached to> three-fourths of the whole. The cultivation of new areas, the development of vast natural resources, and of new industries, in territory naturally tributary to other ports, and the resultant construction of numerous lines of railways to such new ports, are all creative of a new commerce, represented in the total exports and im- ports of the nation. They emphasize the onward march of the great republic and are contemplated only with feelings of pride, shared in by all sections alike. When New York secured about three-fourths of the total foreign commerce of the United States, the total for the nation amounted in value to less than $450,000,000. For the fiscal year 1898, the total foreign commerce of the United States amounted to $1,847,581,984, and for the year 1899 amounted to $1,924,819,942. The Government returns of imports and ex-26 ports of merchandise include in their total the returns for the Pacific ports, the northern border and lake ports, and interior river ports, such as Dubuque and Des Moines, Iowa, and Denver, Colorado, for example. For the ten years ending Octo- ber, 1899, the total imports and exports at such inte- rior ports amounted to $6,772,897; at the Pacific ports, $96,126,890; and at the northern border and lake ports, $124,112,562, making a total of $227,012,349, or 13.46 per cent, of the nation’s total exports and imports of merchandise. When to this 13.46 per cent, of the total imports and exports is added the imports and ex- ports at Atlantic and Gulf ports from and to admittedly non-competitive territory to New York, the percentage re- maining of the nation’s total would not equal the highest percentage of the total attained by New York in the past.. In discussing percentages it must also be recognized that New York attained its highest percentage of the total imports and exports during the period of the Civil War, when there was little or no foreign commerce at such southern ports as Charleston, Mobile, Savannah, New Orleans and Galveston, and that since the Civil War the development of the territory naturally tribu- tary to that section has enhanced the importance of the then existing southern ports and resulted in the crea- tion of new ports as ports of entry. Newport News figures for the first time as a port of export in the year 1882, while in the year 1896 her percentage of the total exports of flour, wheat and corn, exceeded that of Philadelphia, and in the following year exceeded that of Boston and nearly equalled one-third that of New York. Unfortunately, an analysis of the statistics dis- close a loss in New York’s relative position too great to be explained away by the conditions to which we refer. Unfortunately, the relative decline has reached the proportions of an actual decline, to some extent sug- gested in the tables and in the analysis of the statistics to which we have already referred in this report. Evi- dence multiplies that exports that would naturally27 come to New York, have been for a number of years diverted elsewhere. When an extensive exporter in the west, retaining loyally his allegiance to New York as his port of export some time after all his competitors have deserted New York for places offering better in- ducements, finally reaches a position where, to save his own rapidly-declining trade, he must seek other outlets to the sea, or go out of business, the time has passed for a discussion only of New York’s relative decline. , The development of railroad transportation, both in mileage constructed into every part of the country and also in economy of operation, has greatly enlarged the limits of competitive territory. It is now difficult, if not impossible, to arbitrarily draw a line beyond which territory can be said to be tributary to one port, and not tributary to another. Railroads have been projected, running from rival seaports into territory at one time considered as naturally tributary to New 11 ork, and those rival ports have reached further and further into that territory we once called our own. If the railroads to these rival ports have thus reached into what we have been pleased to contemplate as New York’s territory, it is likewise true, and even to a greater extent true, that New York’s railways, with their connections,reach as far into the territory adjacent to the other ports. Nevertheless, within the limits of this en- larged competitive territory, New York has been losing ground and her rival ports have been steadily advanc- ing. These suggestions entirely exclude from consid- eration the decreased proportion to New York of the nation’s total, attributable to the imports and exports from the Pacific ports, the northern border and lake ports, and the interior ports. With reference ex- clusively to the Atlantic and Gulf ports, all other prin- cipal ports have made gains where New York has lost. Including Montreal in the calculation, we find a fur- ther actual loss to New York, unexplained by an exam- ination of the statistics of the foreign commerce of the United States. The trade that has been diverted to28 Montreal represents a loss in the nation’s foreign com- merce, as well as in that of New York. Commerce diverted from New York to southern ports, has also been diverted from Chicago. It has come to- be well recognized in the west that the limit of the ter- ritory tributary to Chicago, as between Chicago and the Gulf, is capable of being largely extended, as improved and cheaper facilities by way of the north Atlantic seaports, supplement the economy of transportation on the great lakes. Chicago recognizes, and properly so, that not only is the northwest territory tributary to- the great lakes, but that also the territory lying south- erly, towards the Gulf, remains debatable ground. That Montreal, Boston, Philadephia and Baltimore ap- parently recognize the force of the conclusions reached by the western exporters, and are striving energetically and successfully to advance is evidenced by the fact that while the Gulf ports have been gaining, !the Atlantic outports have retained largely the commerce already acquired and have, in addition, gained sub- stantially a portion of what New York has lost. Aside from those interested in Gulf transportation, and aside from those railroad officials who seek to evade conceding the consequences of railroad discrimi- nation against New York by placing blame upon Gulf competition, when they are not placing it upon such of the port charges in New York in which they are not interested, no one has been found outside of New York who concedes that the central west is not debatable ter- ritory. Members of the commission in visiting other Atlantic seaports, inspecting their terminal facilities, and dis- cussing with their leading merchants and officials in each port their plans and purposes for further increasing the commerce of the port, were impressed with the spirit of civic pride, and of keen, though friendly, competi- tion exhibited at each of the other ports, in which com- petition all interests seemed to be unitedly alive to the possibilities of endeavor. The spirit thus displayed is in marked contrast to the29 impassiveness existing in New York, inexplicable upon any theory consistent with vigor of enterprise. That New York is indifferent is a matter of comment in other seaports, where achievement follows upon achievement while New York sleeps ; and in the western cities as well, where the exporters, discouraged in their appeals to New York, have taken advantage of the in- ducements offered by her enterprising rivals. When the New York Produce Exchange instituted pro- ceedings before the Interstate Commerce Commission against certain railroads to secure the abolishment of the railroad differential rates against New York, the railroads were saved the necessity of a defense by the enterprise of the commercial bodies of other cities, who promptly intervened, upon the ground that the com- mercial interests which they represented were affected by the proceeding. It was a Governor of the State of New York who, at one of the annual dinners of the N. Y. Chamber of Commerce, directed the attention of that organization to New York’s loss of commerce. A committee of that chamber subsequently selected to in- vestigate the subject, after minimizing in their report the actual loss, by including the movement of coin and bullion, as if it were merchandise, further reported as follows: “We have seen that even the diversion of her lost traffic has been largely the acts of her own merchants, who have derived a material advan- tage therefrom, despite the fact that other local interests have suffered. We can well afford to look with complacency, if not actual pleasure, on the increasing prosperity of our sister cities of the Atlantic coast, knowing full well that their re- sources and advantages are all open to us equally with every one of their own citizens. New York now occupies a position of great attraction to all citizens of the United States, who acquire at dis- tant and other places a fortune. She is a centre of art, science and education. She presents marvelous combinations of sources of high moral and intellectual enjoyment and development; in these things it is entirely within our own powers30 and resources to surpass all rivalry. Let us with, equal care watch and strive to advance these ele- ments of supremacy, however much our sister cities may rival or even equal us in commerce,” This quotation is here registered for the sole pur- pose of emphasizing the situation. If the singleness of purpose and resolve for achievement existing in rival seaports, overcoming discouraging obstacles and natural disadvantages, could be transfused into New York’s commercial life in a manner that would displace a little of the complacency with which the men best qualified to act now contemplate New York’s loss, the necessity for investigating committees of the Legislature would not exist. Railroad Differential Rates.—If we were to dis- cuss the subject of New York’s commerce from the standpoint of remedies within the power of the State to apply, we should discuss as first in importance, the improvement of, and terminal facilities for, the canals of the State. In a discussion of the causes for the loss of New York’s commerce, our investigation leads us to place first in importance, the differential rates agreed upon in combination between the trunk line railroads to the Atlantic seaboard, discriminating against New York and in favor of other Atlantic seaports, on all traffic from and to the western point of shipment and delivery. These differences in rates from the initiatory point in the West amount to three cents per hundred pounds in favor of Baltimore, Norfolk and Newport News, and two cents per hundred pounds in favor of Philadelphia, excepting that on grain the differential was reduced about a year ago to one and one-half cents per hundred pounds in favor of Baltimore, Norfolk and Newport News, and one cent per hundred pounds in favor of Philadelphia. The rate from interior points, other than Chicago, is based upon the rate from Chicago, being such a per- centage of that rate as would be suggested by the loca-31 tion of the interior point of shipment. In any case, the rate from any one of these points to Philadelphia, Balti- more, Norfolk or Newport News is made by subtract- ing from the New York rate the fixed differentials above given. , The differentials affect all traffic which originates at Chicago and at any of these interior points from the Mississippi river to Pittsburgh, and from the Ohio river to the Great Lakes, and all traffic which passes through the territory upon its way to the Atlantic sea- board. Under this arrangement the rate to New York and to Boston is the same, but terminal facilities are ac- corded at the railroad terminals in Boston, not accorded in New York, that amount to a substantial differential also in favor of Boston as against New York. Free storage on grain is allowed in Boston for a period of twenty days, and by private contract is frequently ex- tended for an indefinite period, and all the grain in the Boston elevators is insured by the railroads. In New York the storage charge amounts to one-quarter cent a bushel for ten days, and the exporters must insure their own cargoes. Grain exporters testifying before the commission estimated that the free stor- age and insurance privileges at Boston amounted to from one-half to four cents per bushel in the price of the grain in favor of Boston. These privileges are accorded by the railroads to Boston despite the fact that the steamship rates from Boston are, upon an average, considerably lower than from New York. The inland rail rate to Boston is the same as to New York, despite the fact that the distance, by the shortest route, from Chicago to Boston is eighty-nine miles further than from Chicago to New York. The differential of two cents per hundred pounds in favor of Philadelphia is equivalent to 2.1 cents per bushel on wheat and 1.12 cents per bushel on corn, and the differential of 3 cents per hundred pounds in favor of Baltimore, Norfolk and Newport News is equivalent to 1.8 cents per bushel on wheat and 1.68 cents per32 bushel for corn, and, as has been stated,'these differ- entials in favor of the southern ports have been reduced on grain one-half. It was conceded by the railroad officials appearing before the commission that efforts are making to secure a restoration of the differential on grain to two cents and three cents, and no assurances were given by the New York railroads that the efforts might not be successful. The president of the New York Central Railroad testified that “when we get together again we may have to “ again put them Back. * * * “ Q. Conditions may arise when you may think “ it necessary to increase the differentials to favor “those roads? “ A. Yes, sir.” The differentials discriminating against New York on the part of the railroads have existed in one form or another since 1869, when Baltimore, for a period of about a year, had an advantage over New York of ten cents per hundred pounds on grain, when it was re- duced to five cents per hundred pounds on grain and the lower classes of freight. These differentials con- tinued until about 1876. In March, 1876, a system of percentage differentials based upon the relative dis- tances from Western cities to Baltimore, Philadelphia and New York, respectively, was substituted for the system of a fixed differential. Under this agreement between the railroads in 1876, the rate from Chicago to Baltimore was thirteen per cent, and to Philadelphia ten per cent, less than to New York, and from Cincinnati to Baltimore twenty-four per cent, and to Philadelphia twelve per cent, less than to New York. This agreement lasted only a short time, when the New York Central and the Brie withdrew. A subsequent agreement was entered into between the railroads on April 5th, 1877, by which the fixed differences in rates of three cents per hundred pounds in favor of Baltimore and two cents per hundred pounds in favor of Philadelphia, upon all classes of freight,33 were established and were continued until June, 1880, when the New York Central served notice of with- drawal. In January, 1882, an Arbitration Commission was ap- pointed by agreement of the New York Central & Hud- son River Railroad Company, the New York, Lake Erie & Western Railroad Company, the Pennsylvania Rail- road Company, and the Baltimore & Ohio Railroad Company, to act as an Advisory Commission upon “ the differences in rates that should exist, both east- wardly and westwardly, upon all classes of freights be- tween the several terminal Atlantic ports,” and to re- port upon the same. This Advisory Commission made their report on July 20th, 1882, establishing the prin- cipal upon which the differential was based, and ap- proving the rate of three cents discrimination against New York, in favor of Baltimore, and two cents in favor of Philadelphia, which has continued ever since, with the exception already referred to, and is main- tained at the present time. Norfolk and Newport News are given the benefit of the Baltimore rate. The General Traffic Manager of the New York, Lake Erie & Western Railroad testified that “that report is considered as the constitution on which the differentials were founded. Q. It is accepted in that sense by railroad men ? A. Yes, sir.” As a result, therefore, of this compact between the trunk line railroads, enforced by this “Constitution” upon which the differentials are based, every hundred pounds of freight that has been shipped from the west for export, as well as every hundred pounds of freight that has been shipped from the west for local consump- tion by our own people, has been required to pay for transportation, for many years, two cents more on every hundred pounds of freight to New York than to Phila- delphia, and three cents more than to Baltimore, Nor- folk or Newport News. There have been periods when rates have34 not been maintained, when rates have been se- cretly cut, and in those competitive periods, the in- creased proportion of export freight to New York has reflected to some extent the disadvantages under which New York labors by this railroad combination to stifle natural competitive forces. The year 1896, in which the injury to New York finally became sufficiently noticeable to arouse the latent energies of one of her commercial bodies, marked the beginning of the Joint Traffic Association, which went into operation on the first day of January of that year. As a result of a method of arranging, and adhering to, railroad rates, through the management of the Joint Traffic Associa- tion, constituted somewhat as a board of directors acting for all the railroads in combination, rates were severely maintained, and rate agreements were rigidly adhered to, until the Association was declared illegal by decision of the Supreme Court of the United States. Since the Joint Traffic Association has been abolished by decree of the Court, other means have apparently been discovered by railroad management, to maintain rates. The testimony of exporters, without exception, is that the differential has operated with more and more severity against New York for the past six years or more, occasioned in part by the fact that the fixed differential has become year by year more and more dis- proportionate to the total rate, the total rates hav- ing become reduced year by year, being in 1899, upon an average, about one-half of what they were in 1882, from the west to the seaboard ; and occasioned in part by a more uniform adherence to published rates. In addition to the agreed differential, as interpreted by the Arbitration Award of 1882, there existed for a num- ber of years what was known as the “ ex-lake” differ- ential ; that is a differential discriminating against New York, in favor of Philadelphia, Baltimore and Newport News, upon all grain shipped from Buffalo to New York ; and from Pairport, the eastern lake35 terminus of the Baltimore & Ohio Railroad, to Balti- more ; and from Erie, the easterly lake terminus of the Pennsylvania Railroad, to Philadelphia ; amounting to one cent per bushel in the case of wheat and corn. The distance from Buffalo to New York, to Philadelphia and to Baltimore, is practically the same ; the distance to New York from Buffalo by the shortest route being eight miles greater than to Baltimore and eight miles less than to Philadelphia. This differential seemed to be the least defensible of any and was abolished not long after the improvement of the Erie canal was com- menced under the nine million dollars’ appropriation act. It is of value to here refer to this particular differ- ential chiefly as indicating the extent to which, under modern railroad combinations, the commerce of a State can been diverted from the influence of naturally competitive forces and subjected to the de- crees of railroad management. Buffalo and New York are both cities within the limits of this State, and the New York Central Railroad, with liberal franchises from the State, operated entirely within the limits of the State, connects those two cities through a territory conducive to economy of construction and economy of operation. And yet the advantage, that under natural conditions the cheap transportation of the great Lakes would accord to Buffalo and to New York City, was measurably destroyed, and conferred upon Philadelphia and Baltimore by the New York Central Railway Com- pany, uniting with other railway companies in an agree- ment to charge one cent more per bushel on all grain destined for New York than charged upon grain destined for Philadelphia or Baltimore, for the avowed purpose of giving to Baltimore and Philadel- phia a part of the commerce tha,t would otherwise come to New York. And no assurance exists that this differential may not again be enforced at any time. For the same avowed purpose the existing railroad differentials were created and are maintained.36 An effort has been made to defend these differentials upon the ground that the distance to New York is greater from the western points than to Philadelphia, or to Baltimore, or to Newport News, and that, there- fore, a greater charge should be made for the longer haul. But the very agreement that provides for the differential against New York and in favor of those more southerly ports, also provides that the rate to Boston should be the same as to New York, notwith- standing the fact that Boston, by the shortest rail route, is eighty-nine miles further from Chicago than is New York. And the same agreement likewise provides for a differential in favor of Norfolk as against New York, giving to Norfolk the same advantage as exists in favor of Baltimore, as against New York, notwithstanding the fact that by the shortest rail route Norfolk is sev- enty-two miles further from Chicago than is New York. The more economical railway grades between Chicago and New York, involving both an element of economy in construction and operation, has been referred to by New York advocates, as indicating that the cost of hauling the longer distance to New York is no greater than the cost of hauling the shorter distance to Phila- delphia, Baltimore or Newport News. The Arbitration Commission Award—the “ Constitu- tion upon which the differentials are founded”—repudi- ated the distance principle, and the cost principle, and based their decision upon what they called, and what has been called ever since by the railroad management, the “competitive” principle, although sometimes re- ferred to by them as the “equalization” principle, thereby using as synonyms two words of opposite meaning ; a curious liberty taken with terminology, in the effort to harmonize with the principle of compe- tition, a combination entered into for the purpose of avoiding competition. It is of value in a proper consideration of this sub- ject, to fully understand the principle upon which the differential is based. The Arbitration Commission in37 their award, disposed of the distance principle, as advo- cated by some, as follows : “ The general fact now is that distance does not determine railroad charges, and that where com- petition is most active it influences them the least. The distance principle does not, therefore, stand the test of competition, and so far as we can per- ceive, there is no possibility of establishing it except by subordinating competition altogether to it. “ But to do this would require an exercise of arbitrary authority which we do not under- stand those who advocate the distance prin- ciple to advise or desire. We must conclude, therefore, that distance cannot supply for us the controlling principle, and that its proper influence upon transportation charges cannot be determined either arbitrarily or as a matter of antecedent computation or estimate.” The award, likewise, after analysing the arguments pro and con, advocated in favor of the cost principle, disposes of that contention as follows : “ For all the reasons assigned, we are without reliable information by which to apply the cost principle in the regulation of charges of transportation between the Atlantic cities and the interior.” The Arbitration Commission thereupon, in their award, after thus disposing of the distance principle and the cost principle, proceeded to dilate upon the “ competitive principle,” and determined that upon that principle, as analysed and defined by them, the differential was justifiable in theory, and that the dis- crimination of two cents and three cents per hundred pounds, respectively, against New York, was a proper discrimination. For the purpose of according to the railroad advocates of railroad discrimination against New York the full benefit of the argument in support of the theory upon which they base such discrimination,38 we append hereto a full quotation from the opinion of the arbitrators included in that part of their decision.* *“ The Principle op Competition. “ If neither distance nor cost gives us the governing principle, we must next see* “ whether we are to find it in competition. In nearly every other kind of business “ the competition of those engaged in it is the great regulator of charges, and the* “ operation of natural and familiar laws of trade prevents extortion and brings about “ substantial uniformity. Will competition do this in the business of transporting1 “ property by rail? If so, is not the competitive principle the true principle ? And “ will not the competitive principle make cost and distance elements in the de- “ termination of rates, and allow to each its just value, according to the circum- “ stances ? “ We should be glad to feel able to give to these questions an unhesitating answer “ in the affirmative. We have found, however, in the course of our investigations, “ that a species of competition has prevailed from time to time which has brought “ satisfaction to few persons, if any, and which has resulted in inequalities and “ disorders greatly detrimental to trade. Such competition exists when the railroad “ companies, or those who are permitted to solicit business and to make contracts on “ their behalf, set out with the determination to withdraw freights from their rivals, “ and secure them for themselves, at all hazards, and regardless of gain or loss ; and “ when acting upon this determination they throw to the winds all settled rates, and “ in the desperate strife for business offer any inducement in their power which will “ secure it. The country not long since had experience of such a season, and “ everywhere we listened to complaints of the injury which legitimate business; “ suffered from it. It was said by parties interested in transportation that the “ inauguration of such a strife put an end for the time to all possibility of calculating “ from day to day what would be the cost of carriage, and what could be safely paid “ or wisely accepted for grain, provisions, or other articles, destined to another “ market by rail. The control of railroad rates, and, to a large extent, of all railroad “ business, then passed out of the hands of the legitimate and regular corporate “ managers into the hands of solicitors for fast freight lines and other agents, who* “ made from day to day, and from hour to hour, such terms with those having “ business as would secure it, but generally made secret terms, that the bargain with “ one man might not prevent their driving a better bargain with another, as they “ might find opportunity. Under such circumstances persons were favored and “ localities were favored, when the object to be immediately accomplished seemed “ to require it, regardless of the just maxims of legitimate business, and of the rules “ of the common law, which enjoin upon common carriers that they shall deal with all “ customers upon principles of equity and relative fairness. Legitimate business, “ it was said, necessarily passes into an unsettled and speculative state while this “ condition of things exists ; safe and close calculations are impossible ; transportation “ becomes cheap, but neither producer nor consumer is certain to reap the profit,. “ for the middleman cannot calculate upon steadiness in low rates, and as he takes “ the risk of their being raised upon him, so he is in the best position to appropriate “ the benefit while they continue. Meantime, railroad profits disappear, and “ dividends cease to be paid, to the great distress of thousands who rely upon them “ for their living ; and every interest, in any degree dependent on railroad prosperity,. “ must participate in the depression and disaster which accompanies the ownership “ of railroad shares. “ The mere statement of these results is sufficient to show that this is not what in “ other business is known and designated as competition. Competition is the life off “ trade, but this is its destruction ; competition brings health and vigor, and secures “ equality and fairness, but this paralyzes strength, and makes contracts a matter of “secrecy and double dealing. In competition, the sound dealer, operating upon his- “own capital and upon well established credit, has the best chance of success ; but in “ the sort of competition we have mentioned, it is found that the bankrupt corporation “ has the advantage, for its managers, having nothing to lose, may offer rates which- “ solvent roads cannot meet without being dragged into bankruptcy with them.39 A somewhat brief, but possibly more accurate state- ment of the real basis for the discrimination against New York, was contributed by Mr. Callaway, the President of the New York Central & Hudson River Railroad Company, in his testimony accompanying . this report, where he says : “My judgment about it is that these rates never will be adjusted until there is some division of the business. ” And again: “ Q. You mean that if any reduction (of the differential) were made it would increase the business of this port and take it from them.” “A. It would prevent their getting a. fair share of the business.” ****** “Q. Will you define the term‘fair share’?” “ A. My idea of a fair share and their idea of a fair share is entirely different. They think they ought to have as much as New York. No sophistry, no misapplication of terms, however concealed by the intermixing of some self-evident “ Railroad managers do not concede that this state of things is properly designated “ competition, but they speak of it as an unnatural condition of railroad hostility; as “ unreasoning railroad warfare ; as competitive strife, rather than competition. It is “ a state of things that, like a war between nations, from its very destructiveness, “ cannot be a normal condition, but must speedily terminate in peace or in disaster. It “has usually been terminated by some common understanding between railroad “ managers upon a tariff of rates. “But this common understanding, it is urged, in some quarters, eliminates “competition from the sphere of the railroad business, and we escape “the evils of competitive strife by embracing those of monopoly. This “is denied by railroad managers, who insist that understandings respecting the “ reasonable management of their business are not only entirely consistent with “ competition, but that they are the only means whereby the excessive competition at “ some points can be prevented from operating oppressively at others. It is no doubt “ true that competition tends to produce some great inequalities, and that care ought “ to be taken to prevent this. It should never be forgotten tnat the transportation of “ property and persons by railroad is not exclusively a private business, but is carried “ on under franchises granted by the state, which confer upon the owners functions “of a semi-public nature, and charge them with certain public duties. The railroad “ manager, operating under such a franchise, must harmonize the interest of his road “ with the public duty, and he cannot make self interest the exclusive guide, as a “ merchant may, or a farmer. One of the chief of these public duties is to make only “ reasonable charges, and to regulate and apportion these among the customers of the “ road, on principles of equity and relative equality. But the operation of competition “ is perpetually in conflict with this duty ; it is felt unequally along railroad lines ; it40 truths ; however aided by the ability of expression dis- closed in the discussion of the competitive principle contained in the Arbitration Award can make compe- tition for business, and an agreement to divide busi- ness, one and the same thing. Competition, according to Webster, is “the act of seeking, or endeavoring to gain what another is endeavoring to gain at the same time.” To divide, as given by Web- ster, is “to make partition of among a number.” To illustrate the meaning of the word “division” Web- ster includes a quotation, very apt in the present dis- cussion : “I was overlooked in the division of the spoil.” Much of the argument contained in the Arbitration Award relates to the general subject of. fixing rates, in accordance with a usual practice among railway cor- porations, involving no element of discrimination, but merely arranging similar rates, to which all of the com- panies are pledged to conform. The wisdom or advisa- bility of such arrangements form no part of this dis- cussion. The differential in its theory and practice im- “will be active at points where several lines can compete; it will be moderate at “ others where there is little to excite it, while at still others there can be no competi- tion, because there is but a single road. But the capital of a railroad company is “ planted on a certain line; it must be made available to its owners there or nowhere; “it cannot be removed when found unprofitable, as a merchant may remove his “ stock of goods; and the tendency of excessive competition is to cast upon the “ business of non-competing points a cost for transportation which puts them to great “ relative disadvantage, and in extreme cases may prove ruinous. The local traffic is “ likely to experience this result most severely, and the more completely any particular “ line occupies a territory, the more is the local traffic exposed to peril. The New “York Central Railroad,with no connections west of Buffalo, would be a mere local “road, and must find remunerative returns upon all its immense investments from the “ local business ; as a great through line, it is enabled to cast upon through traffic a “ part of the burden which local traffic must otherwise bear ; but if under the stress “ of unreasonable and excessive strife for through freights that class of freights is “ carried at a loss, this loss must either fall upon the corporate shareholders, or it must “be cast by the corporation upon the shippers of local freights. It must be assumed “ that railroad boards will always seek to so arrange their tariffs of rates as to secure “ a satisfactory net profit; and if a part of the business pays too little, the remainder “ may be made to pay too much. This is not a beneficial result of competition, or one “ consistent with the obligations of the railroad companies to the public. No one “ disputes or doubts that for the general public the business of transportation by rail “ is in the most desirable state when it is so conducted that the charges for moving “ property are distributed with relative equality over all the business, so that a “ moderate profit may be reaped from all, and the support of the road, and profits to41 poses not similar, but dissimilar rates, thereby creating artificial barriers to the natural course that commerce would take when subjected alone to the influences of legitimate competition. The imposition of the differ- ential is a recognition of the fact that freedom of com- petition would inure to the benefit of New York. If one railroad is not able to profitably haul freight to the seaboard at a rate at which it can profitably be hauled by another railroad, the law of competition would ac- cord to the first road no share of that particular freight. Legitimate competition between such railroads would induce the first road to bend every energy towards reducing the cost of operation to a point where it too could haul such freight profitably, at such lower rate. If, with similar rates to the seaboard, cer- tain products would naturally be attracted over one railway to the seaboard at one point of shipment, rather than over another railway to another point of shipment, legitimate competition would invite every endeavor in behalf of the less favored, towards improving in every way the facilities, to attract commerce. In either case an insistence that the favored railroad should increase its rate to a point of excessive profit, in or- der that the less favored railroad might carry a “ its owners, not be exacted wholly or mainly from one portion of the business to the “ exemption of the remainder. But it is only when it is in that state that railroad. “ companies are complying with their common law obligation as carriers. If they “ are sacrificing the interests of one class of shippers in the reckless strife to obtain “ the business of another, it is plain that they cannot be dealing impartially or mak- “ ing charges which are relatively just. And certainly no city can be interested in. “ having the trade which is nearest to, and which is the trade of the people constitut- “ ing its best and largest customers, sacrificed to the trade with the people at a dis- “ tance, who deal with it much less. “ It is a fact of which the railroad companies are entitled to the full benefit, that “ the charges for railroad service have steadily declined, even when the railroads “ have been so conducted as to avoid competitive strife. Mr. Poor, in his summary “ of railroad operations for the year 1881, prepared for his Manual, gives some strik- “ ing figures on the subject of rates, and shows that within a quarter of a century,. “ the average charges for the transportation ofproperty on three of the great railroad’ “ lines of the country have been reduced more than seventy percent., and that the “ reduction has continued to go on until the present day. Some of the reasons for the “ reduction are traceable to competition and some not,. The growth of railroad busi- ** ness has kept pace with the reduction of the charges upon transportation, and the “ two have acted and reacted upon each other as cause and effect. When the mer- “ chandise or products of one section of the country, for which there was a demand “ in another, would not bear transportation at existing rates, the railroads have been “ compelled to reduce the rates as a necessary condition to obtaining the property for42 portion of the traffic at a small profit, when such insistence is enforced by a threat of a rate war that would be disastrous to the point of bankruptcy, is not an act of legitimate competition. It is the act of a highwayman. When such rates result in a higher rate than legitimate competition would impose, the result is a hindrance, not only to the seaport losing the business, but also to commerce itself. The producer has a right to sell his goods abroad at the lowest rate for transportation that legitimate profits to the carrier would dictate. The lower the through transportation rate to the foreign market, the better able he is to com- pete with the producers of other countries. If the prin- ciple of legitimate profit prevails in making the inland rate and thereby the producer can secure a lower rate to the foreign port by way of the most favored rail- road, any increase of the rate over such route for the purpose of diverting traffic to a more expensive point of shipment, is a greater imposition upon the producer than it is upon the seaport thus discriminated against. If New York has an unsurpassed harbor, it is her right to secure all the advantages to be derived from such a possession. If New York is disposed to incur 1 carriage; and the reductions which are made in some cases from necessity are made “ in others from policy, because it is found that they stimulate industry, build up ‘ manuf actures, and bring profits to the railroad companies in the great increase of “ business which is thereby prepared for them. In all these cases the common in- “ terest of railroad companies requires that they should yield to any public demand “ for the reduction of rates so long and so rapidly as they find they can do so with “ justice to their shareholders; and they have generally found that the net results “ were such as from a selfish standpoint would fully justify the reductions. Common “ understandings between railroad companies in many such case3 might tend to 44 equalize and steady the rates, but would be grossly impolitic and unreasonable if “ they were directed to the maintenance of such freight charges as would operate as “ a check upon transportation, and thereby reduce their own net revenues. “ But there are influences bearing upon the charges for the transportation of “ property which are beyond the reach of the railroad companies altogether, and 44 which no combination among them can control. The transportation of the pro- “ ducts and merchandise which the different sections of the country exchange with “ each other is only in part in railroad hands, and the carriers by rail are at all times •“ subjected to a competition which is not only active and vigilant, but is possessed of ■*1 * * 4 some most important advantages. It will readily be inferred that we allude here to the *• carriers by water. For the whole distance from Chicago to New York the owners “ of boats on lake and canal are bidding against the railroads for freights. Much of “ the time they are offering rates which the railroads cannot meet without loss, and 44 during the season of water carriage they would take away from the railroads43 large expenditures to improve the facilities in that harbor, it is her right to possess the benefits naturally resulting therefrom. If the possession of that harbor, and the improvement of those facilities, invite larger vessels and cheaper ocean rates, it is likewise the right of New York to be advantaged thereby. The advantages of that harbor, of such improved facilities at the port, and of such resultant decrease in ocean rates, belong equally to the producers of the country throughout all the territory thereby made tributary to New York. To offset all such advantages, by an inland dis- criminating rate against New York, is an arbitrary im- position of a burden upon all the export products of such territory in the competition to which they are subjected in the markets of the world. Such an im- position is not only indefensible from any standpoint of legitimate competition ; it is not only an injury to the harbor and to the State ; it is a crime against the commerce of the nation. When such discrimination is imposed with such far- reaching results, the State is justified in seeking a remedy against the participants in such a combination to the fullest extent that may lie within the power of the State to invoke. “ nearly all the heavy freights, if it were not that the more rapid transit by rail has “ some advantages of which shippers find it for their interest in many cases to avail “ themselves. But even with these advantages the railroads find themselves com- “ pelled to make their charges approximate the charges of carriage by water, or the “ great bulk of heavy freights will inevitably take the water route. Thus the com- “ petition by water operates in reduction of railroad tariffs, and no understanding “ among railroad managers can prevent it. When the Erie canal is closed for the “ winter the railroad companies are enabled to advance their charges ; but even in “ the winter they feel the competition of the water route; for excessive charges will “ not be paid but grain, flour, provisions and other heavy articles, instead of going “ forward by rail at what seem to shippers extortionate rates, will be placed in store “ until the water route is again open. Nor is the competition with the water route “ felt exclusively by the roads to New York ; for unless the seaports to the south “ afford better markets for western products than is found at New York, which they seldom or never do, the roads leading to them will be cut off from cariying these “ products if their charges are made to exceed the charges to New York. The favorable “ influence of the water route upon rates is therefore felt all the way to the Ohio and “ the Potomac, and the maximum of rates is fixed for all the roads by the roads to “ New York, with which the water route comes most directly and immediately into “ competition. “ Under the competitive principle, a maximum of rates is thus established, and “ the railroad companies cannot prevent it, whatever may be their desire. But “ distance, cost, and many other circumstances may then come in to force still lower44 The division of traffic that results from lower rates caused by decreasing the cost of service, is a benefit to the producer, while the division of traffic that results from arbitrarily imposing a higher charge over one route, in order to divert traffic to another route, is an injury to the producer and to commerce. The efforts making at each seaport in the shape of harbor improvements, increased dock facilities, and similar advantages, all tending towards the economy of enlarged capacity, are examples of legitimate competi- tion ; and each seaport, as well as each railroad, is en- titled to the fullest benefit that can be derived from such competitive endeavors. The principle of the dif- erential is directly opposed to all such principles of le- gitimate competition, and admittedly so, as testified to very frankly by Mr. Garrett, the Vice-President of the Lehigh Valley Railroad Company, as follows: “ I will make an effort to answer one question “ that you put to Mr. Callaway, which seemed “ to embarrass Mr. Callaway. It may help you to “ a judgment in your own mind as to what is a “ ‘fair share’. We all have to acknowledge “ that ultimately the ‘ fair share ’ is that which is “ awarded by disinterested arbitrators. Until a “ condition arises in which our minds are en- “ rates on the lines to the cities south of New York. If it is found that the roads “ leading to Baltimore will not obtain a reasonable share in the business without “ offering better rates than are given to New York, such rates will certainly be “ offered. They will submit to the rates which give the business to other cities only “ until the trial proves the prejudicial operation. And when they reduce their “ charges, it will be optional to the New York roads to follow the Baltimore lead, and “ they may no doubt be relied upon to do so if their interests appear to require it. “ But another most important factor in regulating freight charges is the export “trade. “ The prices of the leading American products, in the carriage of which the rail- ** roads compete most actively, are fixed in European markets. These products “ should net to the producer in the American market the foreign price, less reason- “ able charges for transportation and handling ; and he is interested in having the “ trade open to the competition of as many buyers, and the transportation to that of “ as many carriers as possible. Of the Atlantic cities which compete for this trade “ Baltimore and Philadelphia are nearest to the producer, but New York and Boston “ are nearest to the foreign market. Much is shipped to each of these cities for home “ consumption, but the major part of all that they receive is destined to a foreign “ market. Some of it passes from Western towns on through bills of lading to “ foreign ports, but the most of it is consigned to the merchants of the Atlantic “cities, and is reshipped by them. Except at Boston, it has been found imprac- “ ticable to distinguish between that intended for home consumption and that for “ foreign shipment; and, therefore, no discrimination in freight charge is attempted45 “ lightened by such impartial arbitration, what “ we have had in the past is always demanded “ by us for the future ; in other words, the effort “ of the New York roads would always be to pre- 44 serve and to claim the percentage in the class of 44 business which it has had in the recent past. “ The claim of Boston, Newport News, or Phila- “ delphia would be just the same. If they found 44 their business was materially lessened by any “ conditions created by their competitors, they “ would be prone to charge unfairness and to “ seek a remedy. “ Q. That would be their position then, if 44 those favorable conditions were created, not by “ their competitors, but by the state or city ? “ A. Yes, sir ; I think they would take the same “ ground. When you pressed that point to “ Mr. Callaway, it occurred to me that there is “ no difference whatever in its influence upon “ rate making and the attitude taken by “ competing roads whether the expenditure be by “ the railroads or by the State or city. There “ are all the time going on changes at all the 44 ports, by the expenditure of money mainly, “which makes the condition to-day different “ from that of five years ago, we will say. The “result is that in any effort to adjust these “ matters, as between the several railroad com- 4 4 panies as competitors, we are forced to take “ but all is charged as if destined to a foreign market. But when so treated, the “ Atlantic cities become merely so many points on so many through routes between “ the interior of the country and the European ports, and the charges on shipments “ must regard the whole lines and not parts of them merely. On these several “ through lines, competing for the same business between the same interior “ American towns and the foreign ports, the whole charges, if the routes are equally “ favorable, must be substantially the same, or the one giving the best rates would “ obtain the business. The question of ocean rates must, therefore, have an important “ bearing on the inland rates ; for If the ocean rates are greater from Baltimore to “ foreign ports than from New York to the same ports, the inland rates to Baltimore “ must necessarily be lower, or Baltimore will be excluded from the trade. Turning “our attention, then, to the ocean freights, we find that during the year 1881, from “ Baltimore to Liverpool by steam and sail, they averaged nearly three cents per “ hundred pounds greater than from New York, and from Philadelphia nearly two “ cents greater. This is not conclusive of what they might be in another year, but it “ is indicative of a general condition of things. Besides this advantage in the ocean “ freights the New York route has a further advantage in the somewhat greater “ expedition. If, therefore, the railroads to Baltimore and Philadelphia were to “ charge for the inland carriage the same that is charged to New York, they must do “ so with the certain result of losing their present participation in the export trade. “ They must, therefore, of necessity, make their average inland rates at least as much “ lower than the inland rates to New York as will offset the differences in the ocean “ freights. This follows under the sway of competition from the same necessity46 “statistics for a short period of years and not “• rashly to make the claim that we are entitled to “ get that which we had ten years ago. I think, “ as a rale arbitrators would be largely guided in 4 4 awarding fair percentages to any railroad, 44 by the statistics of three or four, or at most, 44 five years, modifying them by new conditions 4 4 that they knew existed and which they thought 44 were fair conditions to receive recognition.” This interpretation by Mr. Garrett of the views of the railroad officials, recalls the more appropriate term ap- plied by them, and by the Arbitration Award, to the principle of the differential. It is improperly termed 44 the competitive principle.” It is more accurately termed 44 the equalization principle.” The Arbitration Award recognized that the facilities from New York to the foreign ports permitted exports to be shipped from New York at a cheaper rate to the producer than from Baltimore or Philadelphia; that producers would naturally seek the advan- tage of such cheaper rates in their competition with foreign markets, and, to the extent that the producer would be thus advantaged, the railroads to the other ports would be disadvantaged. They determined, there- fore, that for the purpose of enabling the Philadelphia and Baltimore railroads to secure a share of that busi- ness to which the law of natural forces would not give “ which forces upon two merchants trading, side by side in the same articles a concur- rence in the same prices. Attempts by agreement or otherwise to counteract this “ law of competition would be of little avail, and of no avail whatever for any great “ length of time. All the leading articles of eastern bound freight would be affected “ by this principle, and this would be so large a proportion of the whole as to govern “ the charges on all. “ The differentials then appear to us to find their reason in competitive forces. A “ brief reference to their history will show that compact has not succeeded in con- “ trolling them. In 1869 there was an agreed difference in favor of Baltimore in the “ rates for the transportation of grain, of ten cents per hundred pounds. But the “ effort to sustain this difference led to a war of rates, as a result of which it was re- “ duced one-half. This lesser difference was maintained until 1876, when an “agreement was entered into by the Trunk Line roads, which based the rates on “ relative distances. But at the end of a month and a half the New York roads with- “ drew from this agreement, being satisfied that its operation was prejudicial to their “ interests. Then followed another war of rates, ending after a long struggle in the “ differentials now existing. The war of rates of 1880 was entered into to get rid of “them, but it proved ineffectual, as before stated. They appear, therefore, to abide “ the tests of competition, and they have come, as prices generally do, nnder the “exigencies of trade.”47 them title, the railroad corporations were justified in forcing the producer to help support a less-favored road by patronizing the more expensive routes, thus impos- ing upon the products of the country an additional tax for transportation to the cheaper port sufficiently great to fully offset the advantage which would otherwise be accorded the producer by that cheaper route. This doctrine, as we have seen, is recognized by the officials of all the Trunk Lines of the Atlantic seaboard, as the “constitu- tion” upon which the discrimination against New York is founded. It suggested the questions to which Mr. Garrett referred as having embarrassed Mr. Cal- laway, but to which, after all, Mr. Callaway gave re- sponses similar in purport to Mr. G-arrett’s candid ad- missions. We quote from Mr. Callaway’s examina- tion as follows: “Q. If, without any arbitrary interference what- ever by any agreement as to discrimination that the railroads may or may not enter into ; without any arbitrary interference whatever with natural conditions, either as to the location of this port as to territory, or as to the conditions at this port, or shipping from this port, a certain amount of exports would come to this port neces- sarily and would go abroad through this port, upon what theory can any railroad man say that Baltimore, or Philadelphia, or Newport News has any share of that business ? “A. If you take the ground that there is only one place in the country and that is New York, and all the business of the country is to come to New York, that is all right. If I was running a road to Baltimore I would see that my road got some of the business. % * * “ Q. The point I want to get at is this: In view of the fact that the decision of the Advisory Commission, to which you say the New York roads adhere, was that, whatever difference ex- isted in favor of New York in the rates, for any cause whatever, should be equalized by putting a corresponding rate upon the inland freight to New York—whether in adhering to that principle48 the New York roads are not adhering to a prin- ciple whereby rates would be changed by a still further increase in the inland rate to New York to offset any advantages that New York state or the city itself might give to New York through its own expenditures ? “A. I have already answered that question as well as I can. The matter has got to be dealt with from time to time and the New York roads are naturally interested to get all the business they can to New York. They hold us up and make us pay terminal charges. I think our terminal charges last year were $2,400,000 for our water business alone. They allow canal boats to come in here and get free docks. “ Q. Suppose New York State could and did legislate to decrease those terminal charges you complain of and was able to do it to an extent that would make the traffic to New York one cent per hundred pounds less than what it is now, compared to Baltimore, my question is under the principle that the New York roads are now conceding to the other roads, would not you immediately concede the demand of the Balti- more & Ohio Railroad by increasing the differ- ential one cent ? “ A. I don’t know whether we would or not. “ Q. Adhering to that principle, would not that require you to do it ? “A. If the increase in New York resulted in New York doing all the business and these other roads were dissatisfied, we would have to make the best arrangement we could with them. * * * “ Q. You have made the suggestion that the excessive port charges should be reduced. Sup- pose this Commission should report to the Legis- lature that they should be reduced; should draft a bill and submit it to the Legis- lature reducing them, and the members of the Legislature, when this commission should ask them to pass such a bill, should say: What is the use of passing a bill reducing those port charges when the New York roads are adhering to a principle that would immediately raise the differential ? “A. I would have to refer you to Mr. Cassatt49 [the president of the Pennsylvania Railroad] for an answer to that question.* “ Q. What kind of an answer could they give? “A. I cannot answer that. I will give yon an answer to all questions that you ask me that are questions of fact, but hypothetical questions I cannot answer. I suppose we would do the best we could. The real fact, if you want my judgment about it, is that these rates never will be adjusted until there is some division of the busi- ness, that is the natural outcome of the thing.” The operation of the railroad differential against New York is a factor in diverting commerce to the Gulf ports to as full an extent as if the railroads leading to the Gulf ports were a party to the agreement. Mr. Harriott, the General Traffic Manager of the Erie Rail- road, disclosed in his testimony that when, on one occa- sion, the differential on grain was decreased by raising the rate to the Southern Atlantic ports, the diversion of grain to the Gulf ports immediately became so * Pennsylvania Railroad Company, General Office, Office of the President. Philadelphia, November 3rd, 1899. Ben L, Fairchild, Esq., Counsel, Commerce Commission of the State of New York, 155 Broadway, New York. Dear Sir.—Your favor of the 30th ultimo, expressing a willingness to endeavor to arrange a date at which I may be heard before the Commerce Commission of the State of New York, and at which I may present my views and the views of the Penn- sylvania Railroad Company on the subject of differentials, was received this morning on my return from a trip to Pittsburgh, and I have to thank you for the courtesy of your offer. As you are aware, the lines of the Pennsylvania Railroad System reach as well to the cities of Baltimore and Philadelphia as to the city of New York, and the Pennsyl- vania Railroad Company is a carrier of traffic to and from all of these cities. Such traffic, as you are also aware, is in principal part interstate in character. The subject of differentials, therefore, is one which equally interests and affects each of the cities named, and it would scarcely seem fair, as it occurs to me, to the other cities that I should voluntarily become a party to an investigation in which but one of the three is represented. Moreover, because of the interstate character of the traffic, the national government, through the Interstate Commerce Commission, has already assumed jurisdiction of the subject, and. after an investigation recently made, as I understand, has passed upon the question. I have concluded, therefore, not to avail myself of your kind offer to procure for me an opportunity to present my views to the Commission. I am, with the expression of the highest respect for the Commission and yourself, Yours very truly, A. J. Cassatt, President.50 marked that, as a result, within a month the Southern Atlantic railroads demanded, and secured, a restoration of the old differential, by again reducing the rate to the southern Atlantic ports. If by raising their rate from three cents to a cent and a half of the rate imposed to New York, the more expen- sive routes through the southern Atlantic ports, lose business to the gulf, it emphasizes the views expressed by Chicago exporters, that if the New York roads would abolish the discrimination against New York by con- forming to the Baltimore rate, the area of territory tributary to Chicago and thence to New York, would be greatly enlarged, and thereby the gulf competition, that has injured Chicago as well as New York, would be successfully met. It is an unfortunate commentary upon the situation that Chicago appears to have dis- covered relief by way of Montreal, a foreign seaport, after relief had been refused by way of New York, an American seaport. It is of value at this point to recall the fact that New York, in wheat, has now not only lost her relative position with other ports, but this past year was finally relegated to second place, as between New York and the two Gulf ports of Galveston and New Orleans ; that in 1895, these two Gulf ports exported only 886,202 bushels of grain, or 2.30 per cent, of the total exports from the six Atlantic and the two Gulf ports ; while in 1899, the ship- ments from Galveston and New Orleans, amounted to 26,038,593 bushels, or 30.56 per cent, of the total. Also that while New York, partly as a result of this Gulf competition, exported in 1899,23,893,886 less bushels of grain than in 1898, thereby reaching her lowest per- centage of the total shipments, Montreal exported 863,456 bushels of grain more than she did in 1898. It is this situation with reference to the Gulf ports that appears to have had much to do with the increasing injury resulting in recent years from the railroad discrimination against New York. Were it not for this differential agreement, the New York railroads would be more free to meet the Gulf51 competition; they would have been able to accord the exporters of Chicago, who appealed to them in vain for relief, a different answer than the one here- inbefore quoted. Conditions have, in other respects, materially altered in recent years, compared with the situation existing in 1882, when the Arbitration Award was made. The dif- ferential is a fixed amount. Its discriminating effects, therefore, operate to a less degree the higher the total rate to the seaboard, and to a greater degree the lower the rate. Three cents, when added to a forty cent rate, may occasion a small diversion, although, when added to a twenty cent or a twenty-five cent rate, may be almost prohibitory. It appears in the testimony of Mr. Harriott that in 1882, the rate on provisions from Chicago to the sea- board, taking New York as a basis, was forty cents, that on June 11th, 1899, it reached as low as twenty-two and one-half cents, then subsequently twenty cents, and that at the time he gave his testimony was twenty-five cents. On grain, he testified that the rate in 1882 was twenty-five to thirty cents, and that, with some inter- mediate fluctuations, it reached a lower and lower level, fluctuating from fifteen to twenty cents in 1896, and since then ranging from twenty to seventeen cents un- til 1899, when the lowest level was reached, being twelve cents on export grain. There has also been a substantial change in the con- ditions regarding ocean rates. It will be seen that the arbitration award estimated that the ocean rate from Philadelphia, in 1882, was just about two cents greater than from New York, and that the ocean rate at that time from Baltimore was just about three cents greater than from New York; and, therefore, after deciding that the equalization theory of the differential was correct, it determined that in amount the particular differentials of two cents and three cents respectively were equitable and just, and should be adhered to. New York appears to have no longer the advantage over the southern Atlantic ports of lower ocean rates.52 The testimony tends to prove that for full cargo busi- ness the New York rate is higher than the rate from the southerly Atlantic ports and that she has no ad- vantage in berth rates, excepting when a steamship of one of the regular lines, with a fixed date for sailing, has not secured a full cargo, and, therefore, accepts grain at special rates. Mr. Harriott testified that: “ In 1882 New York had, I will not say the entire traffic of the country, but Boston and New York together practically had the only decent steam- ship service between Europe and America. In those days the boats were smaller and slower than they are now. They ran on a certainty, and they were a high class of boats from an insurance standpoint. I remember in 1883 that we got ves- sels into Baltimore. I was there then and they would not insure within fifteen per cent, of the vessels going to New York. They were in those days what is known as ‘ tramps.’ It was just about the time of the beginning of the formation of the lines running out of Baltimore, and we had to take what we could get. New York had every advantage in the way of quicker time. She had better insurance and more frequent sailings. * * * I remember when I was in Baltimore and we finally got one or two good lines there and Newport News started in. * * * “ Q. Now you say the rates from Baltimore are less ? “A. I think the rates from Baltimore must be a trifle lower than the New York rates. # * # u Q. What would you say ; that the rate from Philadelphia was higher than from New York ? “ A. I would say it is about the same. u Q. And from Baltimore a little less ? UA. Yes, sir.” It will therefore be readily perceived the extent to which differential rates have become more and more onerous, year by year, under these changed conditions. The very changed conditions suggested in the Arbitration Award have prevailed for a number of years. The trunk53 line railroads, while professing adherence to that award, have, in fact, for some time past, been violating the principle therein established, wherein the award deter- mine : “But we do not assume that the rates which are just to-day will be just indefinitely. They have become established by the force of circum- stances, and they ought to give way if future cir- cumstances shall be such as to render it right and proper. They constitute a temporary arrange- ment only ; equitable, as we think, for the pres- ent, but which may become inequitable before the lapse of any considerable time. Whenever they shall be found to operate unfairly, and to give a forced or unnatural direction to trade, and when- ever it shall appear that they tend to deprive any one of the seaports affected by them of the pro- portion of business that would naturally come to it under the operation of normal competition, the want of equity in the rates will appear, and it will be right to modify, or, perhaps, abolish them.” What is the remedy ? A consideration of the valuable franchises, money contributions and ben- efits that have been conferred by the State of New York, and by her municipalities, upon at least one of the New York railroad corporations—and it is self-evident that we refer to the New York Central & Hudson River Railroad Company—would lead to the reflection that that corporation owes a duty to the State, that was violated when its officers entered into a compact to discriminate against the State and against her lake and ocean ports, and that should dictate a precipitate withdrawal therefrom. There is little that this corporation has asked from the State and from these municipalities that has not been granted. It has been allowed posses- sion of both banks of the Hudson River from Albany to the seaboard; a portion of a railroad line con- trolled by it has been permitted to be constructed upon canal lands belonging to the State; it has been accorded every opportunity to pre-54 erapt the most advantageous terminal locations in the State’s seaport and in the State’s lake port as well; it alone, among all the railroads terminat- ing at the port of New York, has been permitted to move its freight trains through the streets of the chief city of the State to a direct connection with ocean trans- portation ; it has been enabled to glory in the possession of the only passenger station in the city of New York, permitting it to land its passengers in the heart of the city, while its competitors have been unable to reach nearer than the New Jersey shore ; it has been granted an approach to that station through a permit to occupy for miles one of the main and most central avenues of the city, destroying as a thoroughfare what would otherwise have become one of the main arteries of the city’s upward growth; it has planted its station directly across that avenue, completely dividing the lower from the upper portion, and, for a considerable distance, the eastern from the western portion of the city; it has compelled the city to share with it to the extent of millions the expense of building its tunnels and elevated structures to accommodate its trains in transit to its passenger terminal; it has received these favors and many more ; and with its wealth and achieve- ments, based upon the franchises and opportunities con- ferred by the State, it has been enabled to reach out, un- til to-day it possesses railroads in other States, and stands pre-eminent and all-powerful among its competitors. The New York Central Railway is not the only trunk line terminating at the port of New York that has be- come a party to the differential agreement. But none other has equalled the New York Central in benefits received from the State, and from none other has the State as much a right to expect relief from onerous con- ditions, made possible only by the acquiescence of this much-favored corporation. New York makes no re- quest that her seaport be favored over others. She offers no complaint because the differential imposed against her to offset higher ocean rates from the South Atlantic seaports has not been invoked in her favor to55 offset the lower ocean rates from Boston. But she should insist, and to the point of drastic measures, if need be, that she be not discriminated against by the railway receiving so many benefits at her hands. It may be, as railroad managers have taken occasion to declare, that under the Interstate Commerce provisions of the United States Constitution it is beyond the power of the State to interfere. * *The Baltimore and Ohio Railroad Company. OPFIOE OF THE PRESIDENT. Baltimore. John K. Cowen, Baltimore, October 81, 1899. President. Ben. L. Fairchild, Esq., Counsel, Commerce Commission of New York, 155 Broadway, New York City. My Dear Sir. - -Since telegraphing you on Saturday, I have looked carefully over your letter and the statute to which you refer, and beg to say I do not see that I could be of any service by going before your Commission. The question of railroad differentials between the various Atlantic seaports is one relating purely to interstate commerce. The amount of these differentials has been at various times arranged by agreement between the railroads running to the- seaboard, and then, again, by arbitrators chosen by the same lines, and within the last eighteen months the subject has been most thoroughly examined and determined, upon the petition of the New York Produce Exchange, by the Interstate Commercer Commission. As the question is one relating purely to interstate commerce, and as Congress has assumed entire jurisdiction of this commerce, and a commission appointed under the Interstate Commerce Act has examined and refused to disturb the differentials, it does not Occur to me that a purely state commission, appointed by New York, is a body that could fairly hold the balance even between the different competing ports of the seaboard. Congress is vested specially by the Constitution with the power to regulate com- merce between the several states, in order to avoid prejudiced views which might be' taken by individual states as to the commerce through, into or out of the same. With the greatest respect, therefore, for your Commission, it does not seem to me that it is so constituted that it can do justice in its conclusions or arguments to ports like Philadelphia, Baltimore, Newport News, Norfolk, New Orleans, Galveston and- other ports competing with New York. I should say precisely the same thing about a commission organized specially in Pennsylvania, looking to the advancement of the export trade of Philadelphia, or similar commissions in Maryland, Virginia, Louisiana and Texas, which had specially in charge the investigations of the export trade from the ports of their respective states. The subject has been investigated by a body authorized to make the investigation,, to wit : The Interstate Commerce Commission ; it has power to make any additional investigation it may desire at any time, and upon the complaint of any body. It seems to me, therefore, it would be useless for those of us who insist that New York, with her mighty advantages, is to-day getting the “ Lion’s share ” of the export and import traffic, to appear before your Commission in order to show that the smaller ports are entitled to at least something, and that the differentials they now receive' do not secure to them an undue share of this export and import trade. Thanking you and your Commission for the courtesy extended, I am obliged to’ decline to appear before the Commission. Very respectfully, JOHN K. COWEN, President.”56 It may, however, be that from the standpoint of the power the State may have over a railway corpora- tion, incorporated under the laws of this State, and whose termini, and whose every mile of track lie wholly within the State, a method may be devised to make it less profitable for the railroad to adhere to the discrimination than to perform its duty to the State. Granting that the differential is something beyond the power of the State to regulate, it is concededly within the power of the New York Central to refuse to continue longer to be a party to the differential agree- ment. While we are not unmindful of the disadvan- tage of rate wars, while we give due consideration to the arguments made regarding their disastrous effects, while we are not forgetful of the testimony offered by the railroad officials, that the weaker roads, having nothing to lose, are willing to carry on rate wars to the point of bankruptcy, it is difficult to be- lieve that the Pennsylvania Railroad Company, on the one hand, would be willing to incur bank- ruptcy for the purpose of sustaining the differential in favor of Philadelphia, or that, on the other hand, the weaker railway corporations further south would be able to plunge the New York Central Railroad into bankruptcy. If it were, in fact, as Mr. Callaway suggested in his testimony, the policy of the Chesapeake & Ohio Railway Company to insist to the point of bankruptcy upon the maintenance of the differential in favor of Newport News as against New York, that road would be even now engaged in a rate war with the Gulf railways, for the purpose of retaining the trade once diverted by the differential from New York to Newport News, but now diverted to the cheaper routes by way of the Gulf. But it appears that the management of the Chesa- peake & Ohio Railway entertain, after all, a somewhat better appreciation of the law govern- ing competitive forces. The present managers of that road have evidently recognized that thejlegiti-57 mate basis for the prosperity of a railroad is the- traffic that is naturally tributary to it, and for which it is able to compete without demanding tribute in the nature of an agreement with their rivals that they should discriminate against themselves. These obser- vations are suggested by a statement contained in the annual report of the Chesapeake and Ohio Railway Company for the fiscal year ending June 30th 1899,, wherein it is stated that: “ The earnings upon other coal show a slight increase, and the average received per ton per mile from freight, other than coal, is exactly the* same this year as last. The through rate was less, but the local business largely increased, while the through business decreased—it havingr been the policy of the Company during the last year not to solicit certain through business upon which the rates had been reduced to a figure at which it was not profitable to carry it when the cars could not be loaded back. For instance,, during the past twelve months, as compared with the previous twelve months, there was a decrease of 7,96‘5,5J+3 bushels of grain carried to Newport News.” (The italics are ours.) There is nothing in that statement suggestive of a demand upon the Gulf railways for a differential to off- set the economical advantages the producers have dis- covered by way of the Gulf. We believe that the dif- ferential against New York would not exist one moment beyond the time when the southern roads became con- vinced that the New York Central Railroad Company would never again participate in an agreement to dis- criminate against the state and city to which it owes* so much. A further reason for that belief is the evidence at hand that the New York Central Railroad Company has not in the past seriously contended against this discrimin- ation. Why it has not, need not be answered in this- discussion, but the fact that the increased rate to New York provided by the differential agreement applies to> products destined for home consumption as- well as to-58 those destined for export, * may suggest an explana- tion. Although the New York Central Railroad Company served notice in 1881 of withdrawal from the differential agreement, we have the authority of the Arbitration Commission, subsequently appointed, that it presented no argument against the differential, and that it even avoided appearing at any of the hearings before the Commission, apparently by agreement with the other railroad companies, f This fact was commented upon, in the following lan- guage, in the opinion of the Interstate Commerce Com- mission in the proceeding instituted by the New York Produce Exchange to secure an abatement of the dif- ferential : “ Apparently for the purpose of considering the * The Arbitration Award stated that “ Much is shipped to each of these cities for home consumption, but the major part of all that they receive is destined to a foreign market. Some of it passes from Western towns on through bids of lading to foreign ports, but the most of it is consigned to the merchants of the Atlantic cities, and is reshipped by them. Except at Boston, it has been found impracticable to distinguish between that intended for home consumption and that for foreign shipment; and, therefore, no discrimination in freight charges is attempted, but all is charged as if destined to a foreign market.” But while thus conceding that an increased rate to New York, not only becomes a tax upon New York’s commerce, but also a tax against the people of New York upon everything that enters into the cost of living and the cost of manufacturing requiring transportation from the West, the Arbitration Award ignores any comment upon this important element of the differential. This tax upon the people of New York is indefensible upon the theory of the differential, even conceding all of the arguments in favor of that theory. It is indefensible upon any theory that admits the ability of the New York Central Rail-road Company, to supply the people of New York with the products of the West as cheaply as they are supplied to the people of Philadelphia by the Pennsylvania Railroad, or to the people of Baltimore by the Baltimore & Ohio Railroad. t The following statement appears in the preliminary observations of the report of the Arbitration Committee : “ Accepting the appointment, the undersigned met and organized as a Com- mission, at the City of New York, on February 13,1882, by designating Mr. Thurman to act as Chairman and selecting Mr. Thomas C. Moore, of Indian- apolis, as Secretary. On conferring with Mr. Albert Fink, who on that occa- sion represented the several railroads named, we were informed that it was not the purpose or desire of the railroad managers to take part in the proposed inquiry after setting it on foot; but that they proposed to leave it exclusively in our hands, in the expectation, however, that other parties interested in the problems of railroad transportation would make before us a full showing of the / facts supposed to have a bearing upon the question, and that we would then express our opinion, uninfluenced by the wishes or interests of the railroad companies. The managers informed us, however, that they held themselves ready to furnish any such information as might be peculiarly within their knowledge, at any time when we might call for it.” The succeeding paragraphs of the award refer to commercial bodies of the several cities as “ the other parties interested in the problem of railroad transporta- tion.”59 claims of these different communities and perhaps placating the public, rather than of settling the ques- tion for the carriers, the New York Central, the Erie, the Pennsylvania and the Baltimore and Ohio joined in requesting Allen G. Thurman, Elihu B. Wasliburne, and Thomas M. Cooley to act as an advisory commis- sion for the purpose of investigating and reporting upon the general matters of these differentials. These gen- tlemen accepted the invitation and entered upon their work in February, 1882. In their investigation the railroad companies themselves declined to participate further than by furnishing to the commissioners what- ever information might be asked for.” The Interstate Commerce Commission were, no doubt, also impressed with the similar course adopted by the New York railroad companies in that very proceeding in which the opinion here quoted from was rendered. All these companies were made defendants in that proceed- ing, and they appeared by their respective attorneys, but at the outset commercial bodies representing vari- ous cities requested and were given leave to intervene, and thereafter the railway corporations withdrew from active participation, leaving it for those commercial bodies to fight it out among themselves. By such manouvre that proceeding lost the aspect of a litigation on the part of the Produce Exchange against the rail- road companies, and, as suggested in the opinion of the Interstate Commerce Commission, “upon the trial the issue apparently narrowed itself to one between New York, Philadelphia and Baltimore.” The failure of the New York Central Railroad Com- pany in the past to take advantage of these oppor- tunities to secure, or at least endeavor to secure, a ju- dicial decision adverse to the differential, is inconsist- ent with the theory that a fear of a rate war alone de- ters this corporation from irrevocably withdrawing from the differential agreement. We can find nothing in the policy that has been thus far pursued by the New York railroads to encour- age a hope that they will refuse longer to discriminate60 against the State to which they owe their existence and prosperity. The State must itself seek for and apply the remedy to secure it against further loss of its commerce and the restoration of that which has already been di- verted. The efforts constantly making at other seaports to in- crease their facilities and to lower the cost of commerce at those ports are all suggestive of benefits that might accrue by well considered improvements in our own harbor facilities and well advised reductions in port charges. But, so long as it is in the power of railroad corporations through differential agreements to off- set any advantages that New York may secure for itself, through its own endeavors, such im- provements and such reductions in port charges may prove without avail, unless New York can find a method of regulating rates to an extent that will make railroad discrimination against her impossible. There is one certain remedy that lies within the power of the State to apply. The surest regulator of freight rates is successful competition. Although the State is prohibited, by the consensus of opinion, from engaging in the operation of a railroad, it is within its province to adequately improve its waterways. None understand better the difficulties surrounding New York, none are more quick to discover the cheapest route to the foreign market, and to under- stand the elements making for a lower tax on transpor- tation over one route and a higher tax -over another route, than the exporters of the great west. Success in. their respective occupations is dependent upon accurate knowledge regarding transportation facilities to the markets of the world and the opinions of those among them who have achieved success are well worth our serious consideration, especially in view of the unan- imity of their conclusions and the fact that those conclusions coincide with the experience and sugges- tions of the leading commercial bodies of our own city. Their views were well expressed by Mr. Counselman,61 of Chicago, when testifying before the commission, as follows: “ Q. What then would you suggest we can re- commend ? “A. You demand that New York get the same rate of freight to New York f. o. b. any vessel that can be made by the way of Baltimore or Philadelphia or Boston or other ports. That is the real question. That is all you can do and unless you do that you don’t accomplish any- thing. Anything less than that your efforts will be in vain. “ Q. The differential prior to 1882 existed at times to a much greater extent than it did sub- sequent to 1882. The differential has existed since 1877—3 cents in favor of Baltimore and New- port News, and a 2 cent differential in favor of Philadelphia has existed since 1882. On the first of January last it was reduced to 1 1/2 cents on grain. That being the case can you give an explanation why within the past five or six years the differential has operated so decidedly against New York, whereas, it apparently main- tained its own to a large extent from 1877 until five or six years ago with that larger differ- ential ? “ A. Well, two things. First, I have just stated New York had a great prestige. That lasts in business for a considerable length of time. That is one reason why she maintained it. Secondly, these other ports had not developed to the point where they have to-day. They are able to do business to-day better than they were at that time. Newport News, I don’t know that it was hardly known at that time as much of a factor. Baltimore certainly did not get these vessels as she gets now. I will tell you how this thing operates and if you don’t correct it New York will not only lose its grain trade, but a great deal of other business you think you have to-day. A vessel goes to Baltimore and takes a cargo of grain to Hamburg. Before that vessel starts from Baltimore she is being chartered for mer- chandise and other goods for re-shipment to Balti- more again, such goods being hauled by the Baltimore & Ohio back for distribution. The result is that there is competition going on all62 the time to divert from New York this general class of freight which used to go there. “ Q. So that she loses imports as well as ex- port as a result of the loss of exports ? “ A. Certainly. When men can offer their cargo by way of Baltimore, instead of Baltimore having five steamers, she will have 10, 40 and 100 and they are all taken away from New York. What should they do ? They are not only haul- ing grain from Baltimore, but those vessels are being loaded back to Baltimore and they will give a preferential rate because they will be sure of their cargo. To-day you have no business in New York except a partial business. Here is the only place where New York is used at all to-day, partial freights. A vessel has room for 50,000 bushels, and she is going to sail to-morrow or in two days and the manager goes to an exporter in New York and says : ‘ We have got to have this 50,000 bushels by Monday, have you got them ?’ ‘ Yes, we have got them,’ and they offer a freight so low that that shipper has his railroad freight equalized by the decline in the ocean freight on his partial lot and he says ‘ I will take it at any price rather than have it empty.’ You have a partial business in New York and your cargo business is gone. The very moment Baltimore and these other points get enough liners your parcel business is gone because then they will ship partial lots from there too. These liners have got to have this room used on sailing days. You have lost your cargo business and you will lose your partial business. You will lose your general import business because you have per- mitted this vessel business to be diverted to other points and can not get it back. You can look at this business in any way you choose and ap- peal to all your imaginary causes, but there is one fact, and that is, you have got to have it so that a man can ship by way of New York as cheaply as any other city and no differential. I was talking to a Mr. Newman, the President of the Lake Shore Railroad, an old friend of mine for a good many years. I said: ‘ Mr. Newman, there is one way to make this business right, stop these differentials and stop all rebates. Have the freight from the western points to Chicago and St. Louis the same ’—I mean from a63 common western point. Have the freight from St. Louis and Chicago eastward the same to any Atlantic seaboard point. You see what I mean ? • “Q. Yes. “ £ A. Stop this through rating of stuff. That is the cause of our trouble here—cause of trouble everywhere. Have the stuff come into Chicago and Peoria and St. Louis. Have that the line instead of the Mississippi. Have this local rate just the same to any seaboard point. There is no necessity for anybody to cut in rates any more and there is no necessity for any differentials in rates in favor of any of the cities.5 He agreed with me perfectly and I think they are working along that line gradually to-day. “ Q. They informed us in Hew York that if they were to do that it would involve a rate war against the railroads terminating at Hew York brought about by the railroads terminating at Philadelphia and Baltimore that 'would be disastrous. “ A. The proposition is this : Rather than have a rate war they will sacrifice you. “Q. That is what they have said in so many words ? “A. They must sacrifice Hew York and its commerce in favor of the other cities. You are the vicarious offering. “ Q. The officials of the railroad to Baltimore, to Philadelphia and to Hewport Hews, have, by correspondence, in substance stated that they would have a rate war before they would allow the differential to be abolished and the officials of the railroads to Hew York, the Hew York Cen- tral, Lehigh Yalley and the Delaware and Lacka- wanna and the chief officials and the president of the Hew York Central have on the witness stand under oath stated that they believed in the prin- ciple of the differential; that if they attempted to abolish it there would be a rate war which they couldn’t stand and wouldn’t stand, and they did not propose to abolish it ? u A. The only remedy is your canal. “ Q. Then Mr. Fairchild put this question, that if Hew York and the State or city, or both, should, by large expenditures of money, increase the facilities at the port of Hew York and de- crease the expenses at that port, and they then in-64 sisted that it would be their duty, and they would increase the differential against New York in order to give their fair share of the business to the competing railroads terminating in Philadelphia and Baltimore ? “ A. Then your only hope is your canal.” While we consider the subject of harbor facilities and port charges an important element in this discussion, we are convinced that adequate improvement of the State canals will be the most potent factor in restoring to the State the commerce it has lost, and of advancing it still further as the Empire State of the Union. Before enter- ing, therefore, upon the consideration of the port charges, we will discuss the subject of the State’s water- ways. THE CANALS. The Interstate Commerce Commission in the case of the New York Produce Exchange against the Trunk Line Railroads, involving the railroad discrimination against New York, in their opinion, suggested that : “ The great supremacy of New York in the past has been measurably due to its canals. If it would hold that supremacy in the future, it must give attention to that same water way. * * ■ * * If the canal were to be restored to-day to the same position in this carrying trade that it has occupied in the twenty years past, the commerce of the port of New York could not suffer.” At the present time the’State maintains and operates a system of canals that, including feeders, river im- provements, etc., aggregates a total of 638 miles of nav- igable waterways. These canals are : Erie, Champlain, Black River and Cayuga and Seneca. The Erie is the chief canal, in its length and importance, and connects the Hudson River, at Albany, with Lake Erie, at Buf-65 falo; the Champlain comes next, connecting Lake Champlain, at Whitehall, with the Hudson River, at Waterford. The Oswego Canal connects Lake Ontario, at Oswego, with the Erie Canal, at Syracuse. The other canals are laterals, and in part feeders, and are of minor importance. The construction of the Erie Canal was begun in 1817, and was completed in 1825. As originally con- structed, it was 368 miles in length, 40 feet in surface and 28 feet in bottom width, with a depth of 4 feet, ac- commodating boats 78.62 feet in length, 14.46 feet in width, drawing 3 1/2 feet of water, and carrying car- goes of 75 tons. In 1835 the Legislature authorized its enlargement, which was begun in 1836 and completed in 1862. The dimensions of the canal after its enlarge- ment were : Length, 352 miles ; surface width, 70 feet; bottom width, 56 feet ; depth, 7 feet; and this canal is now capable of accommodating boats 98 feet in length, 17.5 feet beam, drawing 6 feet of water, and capable of carrying cargoes of between 240 and 250 tons. The locks of this canal are 72 (pairs) in number, 110x18 feet, one tier of which, except at Cohoes, Little Falls, Newark and Lockport, consists of double-length locks, and per- mit of the passage of two boats at one lockage. An im- provement to this canal was authorized in 1895, and was partially completed. This improvement contemplated the lengthening of all of the unlengthened locks, the deepening of the prism of the canals to 9 feet, except over permanent structures, where the depth was to have been 8 feet. The cost of the original construction of the Erie Canal was $7,143,789, the cost of its enlarge- ment was $44,465,414, and under the act of 1895, there was expended upon this canal $6,833,390.37. The construction of the Champlain Canal was begun in 1817 and completed in 1822. It is sixty-six miles in length, and originally its surface width was forty feet, its bottom width was twenty-six feet and its depth was four feet. As enlarged, under authorization of the Legislature of 1860, the surface width is now fifty, the bottom width thirty-five and the depth five] feet. The66 total cost of construction and improvements, up to 1875, was $4,044,000. Under the act of 1895, the depth of this canal was to be increased to seven feet through- out, which would then enable it to accommodate boats of the same size and draft as at present navigate the Erie Canal. The locks of this canal are of the same size as those of the Erie and Oswego, but none is lengthened. The sum expended upon the Champlain Canal improvement, under the act of 1895, amounts to $582,700.81. The construction of the Oswego Canal was begun in 1825 and was completed in 1828, at a cost of $565,473. It is 38 miles in length and was originally of the same dimensions as the Erie. Its enlargement was author- ized in 1854 and the work completed in 1862. Its di- mensions, except as to length, are identical with those of the Erie, as are its twenty locks, nine of which are yet to be lengthened. The enlargement of the Oswego Canal, completed in 1862, involved an expenditure of $4,427,589, and there was expended under the improve- ment authorized in 1895, the sum of $451,833.18. This last-named improvement provided for the deepening of the Oswego Canal to conform to the increased depth of the Erie. Statistics fail to show the tonnage and value of the commerce of the canals preceding 1837. Subsequent to and including 1837, and up to and including 1899, the commerce carried over the canals aggregated 264,- 672,565 tons, of a value of $10,152,473,855. The total cost of constructing, enlarging, improving and main- taining the Erie, Champlain and Oswego Canals, to and inclusive of 1892, was $107,652,032, while their revenue covered into the State treasury, during the same period, was $131,907,634. New York’s preeminence in commerce is un- doubtedly very largely due to the construction, enlargement, improvement and maintenance of its canals. During the eighteenth century, Virginia and Maryland, the Carolinas, Pennsylvania, and Massachusetts, each possessed a greater commerce67 than, did New York. With the advent of the present century, however, and the construction of her canals, New York became, and has ever since remained, far in the lead in the value and volume of her commerce. Preceding the opening of the Erie Canal, the cost of moving a ton of freight from Buffalo to Albany was $100, which cost immediately fell to $10 per ton upon the opening of the canal. During the present year the cost of moving freight upon the canal from Buffalo to New York has not exceeded an average of $1 per ton, while the cost of carrying freight from New York to Buffalo, by canal, has varied between 50 cents and $1. The distance between Buffalo and New York, via the Erie Canal and the Hudson River, is a full 500 miles. During the last quarter of a century, the commerce of the canals has steadily declined in volume and in value, and this decline has been attributed, by some, to indi- cate that the canals have outlived their usefulness; that that they are obselete ; that they have been superseded by the railroads ; that they are no longer a factor in rate making, in competition with other routes .of transporta- tion ; that their further improvement and their mainten- ance is a heavy burden upon the taxpayers of the State ; and that they should either be abandoned, or turned over to the Federal Gfovernment, in order in the latter case, that their future enlargement and maintenance may be borne by the whole country, upon the claim, by some alleged, that the benefits of New York’s canals are enjoyed only by those outside of the State. The testimony presented to this Commission during the course of its investigation is conclusive against such contentions. At the terminal points, where the business conducted upon the canals originates and ter- minates, those engaged therein have uniformly testified to the usefulness of the canals, and have presented convincing reasons why they should be further im- proved. This is even true of those who came to prove that the canals had outlived their usefulness and had been superseded by the railroads. The agents of rail- roads paralleling and competing with the canals were68 the most effective witnesses in proving the comparative economy of canal transportation even with the present inadequate canal. The enlargement of New York’s canals, authorized by the Legislature of 1835, is the measure of the capacity and usefulness of these canals in 1900. Between 1862 and 1895 no substantial improvement was made, and the work begun, pursuant to the Act of 1895, remains unfinished from lack of money, with the result that no larger vessels and no larger cargoes can pass through these canals now than was possible in 1862. The following table is of value, as showing the rise and decline in the commerce of New York’s canals: Table showing tons oe freight and value THEREOF MOVED OVER NEW YORK STATE’S CANALS, FROM 1837 TO 1896, INCLUSIVE, IN FIVE-YEAR PERIODS : AVERAGE TEARS. TONS. ANNUAL TONS. 1837-41 6,877,727 1,855,545 1842-46 8,813,183 1,762,636 1847-51 15,220,122 3,044,024 1852-56 20,415,855 4,083,171 1857-61 19,948,786 3,989,757 1862-66 25,514,293 5,102,859 1867-71 30,622,287 6,124,457 1872-76 27,874,727 5,574,945 1877-81 27,126,503 5,425,300 1882-86 26,206,733 5,241,346 1887-91 25,676,696 5,135,389 1892-96 19,711,726 3,942,345 Totals 254,008,637 VALUE. AVERAGE ANNUAL $353,462,432 . VALUE. $70,692,486 443,456,637 88,691,323 752,761,600 170,152,320 1,036,784,609 207,356,922 748,691,711 149,738,342 1,244,882,211 248,976,442 1,304,143,783 260,828,757 857,402,097 171,480,419 1,016,945,572 203,389,114 757,475,234 151,495,047 698,385,363 139,675,072 661,100,202 132,220,040 $9,875,501,451 The merchandise moved over the canals during 1897, 1898, 1899, amounted, in tons, to 10,663,928, possessing a value of $276,972,494, the average for each of the three years being, in tons, 3,554,643 and in value, $92,324,135. The slight decline that began immediately preceding the completion of the enlargement of the canals, was, it09 will be seen, promptly checked, and the zenith period of canal commerce was projected forward another dec- ade. Although there was a general and steady decline subsequent to 1871, nevertheless, up to the beginning of the present decade that decline was slow, the loss during the last five-year period embraced in the table amounting to 25 per cent, in tonnage, alhough not so marked in value. The only improvement made by the State, between 1862 and 1895, was upon the Erie Canal, and this re- sulted from the methods employed by the boatmen them- selves to facilitate and cheapen transportation. Apart from the prizes offered, in pursuance of act of the Leg- islature of 1871, for the best motive power, other than animals, for the navigation of the canals, and which led to the introduction of steam upon the canals as a much more efficient and economical method of pro- pulsion, the doubling of the locks (one tier), at such places as natural conditions did not interpose serious obstacles, was by far the most effective. The introduction of a system of locking two boats rigidly together, their navigation thereafter being under the guidance of one helm, led the boatmen to clamor for the double-lengthened locks in order to save the time con- sumed in one lockage, at each of the seventy-two locks on the Erie Canal. About two-thirds of the locks had been so lengthened, previous to 1895, with much benefit to the boatmen and the facilitation of their progress. Meanwhile, however, the prism of the canal was permitted to accumulate eel grass, silt, debris and other obstructions to the navigation of the canals, and the lack of appropriations for bottoming out the canals, and keeping them at their statutory depth, seriously re- tarded vessels navigating them, at times causing serious loss and sometimes utter ruin to boats. The walls, and banks, in many places, were in a dangerous and dilapidated condition, and it was generally conceded that unless relief came quickly, the canals would soon have to be abandoned as unsafe. Nearly every witness who has appeared before the70 Commission has declared that the f arther improvement of New York’s canals is essential to the preservation and further expansion of its commerce. Of the reports prepared for the Commission by engineering and trans- portation experts the same is true. There exists a wide difference of opinion as to the extent of the improve- ment that should be made, but this difference is con- fined to the discussion of the Erie Canal. There are some who believe that nothing short of a great ship canal, capable of accommodating anything now afloat, will prevent a further loss of New York’s commerce. Others advocate a smaller ship canal, capable of being navigated at a depth of 20 feet. Still others favor an enlargement of the Erie Canal to a depth of 14 feet, capable of accommodating vessels with cargoes aggre- gating between 2,500 and 3,000 tons. Again the suggestion is made, upon the recommendation submitted to the War Department by Major Thomas W. Symons, United States Army, of a barge canal, to be 12 feet in depth, with locks 33 feet in width and 420 feet in length, capable of accommodating vessels carrying cargoes of 1,500 tons. And, finally, the sug- gestion is made by others that the State should com- plete the improvement of the canals, as begun under the Act of 1895, which would give the Erie Canal a depth of 9 feet in the prism, and which would complete the lengthening of the unlengthened locks, so as to permit the passage of boats in rigidly connected pairs through all of the locks. The cost of a ship canal is entirely conjectural, and estimates made by engineers range between $200,000,000 and $500,000,000. A Commission of Engineers appointed by the Federal Government has, we understand, just completed an elaborate survey for a ship canal to con- nect the waters of the Great Lakes with the Hudson. This survey has occupied several years and has cost nearly half a million dollars, the result of which and the recommendations thereof, will, doubtless, soon be placed before the country. The undertaking of such a construction, if found71 desirable, should be at the expense of the entire na- tion. The construction of a ship canal by the Federal Government across New York State, should not be per- mitted to interfere with existing State canals. At best, it is undeniable that such a construction will occupy an extended period of time. If undertaken, it should be so conducted as to leave unimpaired all existing canals, so that the commerce of the State shall in no wise be abridged, or diverted elsewhere, even tempo- rarily. With such a project under serious discussion by the national Government at the present moment, any consideration of a ship canal by the people of this State, as a project to be undertaken by the State, will, it is believed, be time wasted. So, too, would be the consideration of any minor ship canal project of this State at this time. As to the suggestion of a 14-foot Erie Canal, capable of accommodating vessels and cargoes approximately as large as can now be accommodated upon the im- proved Canadian canals: This Commission is entirely without data as to the probable cost of such a construc- tion, and we are aware of no survey that has been made that would even approximately determine the probable cost. Its necessity, in order to prevent the diversion of the traffic to and through the State of New York, has not been made clear. It is not to be doubted that if a 14-foot canal connected the Great Lakes with the Hud- son River such a canal would be an immense aid to commerce, and would be availed of by vessels several times larger than now navigate the Erie Canal, which would unquestionably have the effect of sub- stantially reducing the cost of transportation between the Great Lakes and New York. It would, moreover, probably do away to a large extent with the necessity of breaking bulk at Buffalo. This is a matter that was well considered pre- vious to 1894-5, with the result that in those years the consensus of opinion was that neither the threatened competition of Canada, nor the com- mercial necessities of New York, had demonstrated the72 need of a canal of equal depth to the system Canada was then completing. At that time Canada’s canals were able to accommodate barges with cargoes several times larger than were carried upon the Erie Canal, with no serious consequences to New York’s great port of Buffalo, and no substantially in- creased benefit to Canada. That conditions, and there- fore competition, will be different with the Canadian canals capable of accommodating vessels carrying car- goes ten and twelve times as large as are now carried upon the Erie Canal, and that this competition will be infinitely more serious to New York if no further im- provement of its canals is made, is not to be doubted. But without data as to the cost, we are unable to rec- ommend such a construction to the people of the State, especially as its completion could hardly be expected under a cost approximating, in all probability, close to a hundred million dollars. Nor do we feel justified in recommending that a survey be made for such a canal, in view of the completed and thorough official survey, showing the probable cost of a much smaller, but effec- tive improvement, if promptly carried out. The suggestion of a barge canal, capable of accommo- dating barges carrying 1,500 tons, has its origin with an officer of the United States Government, who sug- gests it as a project worthy of being undertaken by that Government. He suggests that it be made along the line of the present Erie Canal, which would necessitate its cession to the United States Government for that pur- pose. There is nothing in the history of New York’s canals to show that the people of this State are pre- pared to turn them over to the Federal Government. On the contrary, there is much to indicate that the great mass of the people of this State are still anxious to retain, maintain and improve their own canals. One has but to go back to the year 1882 to find a vote of the people, which vote, by a majority exceeding!322,000, forever thereafter freed the canals from all tolls, accom- panied by the declaration at the same time that the canals should never be sold, leased, or abandoned, but73 that they should remain the property of the State forever. By a majority of over 115, 000 the people of this State in 1894 adopted a separate amendment to the Constitution of the State, providing for the improvement of the canals in such manner “ as the Legislature may direct.” In the succeeding year, the Legislature directed, by law, that the Erie, Oswego and Champlain canals should be deepened throughout, two feet beyond their then exist- ing depth, and that the unlengthened locks on the Erie and Oswego canals should all be lengthened so as to accommodate the passage of boats in pairs through the locks at one lockage. By a majority exceeding 276,000 the people approved of that act, at the general election of 1895. That was the last time the people had oppor- tunity to express their will concerning the canals of this State. That the amount appropriated by the State, to carry out that improvement, was quite inadequate to the undertaking, does not justify the abandonment of that plan of improvement, until, at least, the people have again been permitted to indicate their will with regard to their canals. On the other hand, there is nothing indicating that the national Government would either accept New York’s canals, or agree to maintain or further improve them. Indeed, should the national Government agree to take over, maintain and further improve the canals, there is no power vested in the State of New York, once it parts with its canals, to compel the fulfillment of such an agreement, should a future Con- gress decide to abandon or otherwise^ dispose of them. The suggestion of a 1,500-ton barge canal, the dimen- sions of which have been stated by the distinguished army engineer who recommended it to the Department of War as a project worthy of being undertaken by the Federal Government, would, according to his calcula- tions, effect a saving of 21 cents per ton over the amount that can be saved if the improvement contem- plated under the act of 1895 comprehends the limit of the State’s undertaking. This latter improvement,74 however, according to Major Symon’s calculations, will effect a saving of 38 cents per ton upon the present cost of transportation over the Brie Canal. The com- pletion of the improvement already begun by the State, and authorized by the people at the general election in 1895, would, it is believed, effect a reduction of 45 per cent., upon the present cost of canal transportation, with an expenditure of $15,000,000. The con- struction of a 1,500-ton barge canal of the di- mensions he recommends, would, upon his estimate, unaided, however, by the existence of any survey, cost $50,000,000, and would effect a reduction in rates of Erie Canal transportation of 66 per cent. It would cost a large sum of money, and consume a considerable period of time, for a survey to be made between the Great Lakes and the Hudson River, to ascertain with thoroughness and accuracy, the exact cost of constructing such a canal. There is a possibil- ity that the expense of its construction would consider- ably exceed the conjectural estimates upon which Major Symons has based his recommendation.* It is not to be doubted that the 1,500 ton barge canal is one that, if assured that the money was available and the project freed from doubt as to its ultimate comple- tion, either by the Federal Government or the people of the State of New York, Major »ymons would prefer to see undertaken. On the other hand, he addressed this Commission, upon its invitation, under date of December 27, 1898, on this subject in part as follows : “ 1st.—In order to realize benefits within a reasonably short time, the Erie Canal should be immediately improved in general acccordance with present plans, to the greatest degree finan- * An estimate for a 1000 ton barge canal based upon surveys including the national government surveys recently made available, amounts to $58 000,000 in round numbers. This commission is indebted to the canal committee appointed by Governor Roosevelt for an opportunity to inspect the data upon which this estimate is based. Of the $6,000,000 dollars already expended upon the Erie Canal improvement, about $4,000,000 dollars was upon that portion proposed to be abandoned for the purpose of constructing the $58,000,000 barge canal. On the other hand, of the $15,000,000 re- quired for completing the canal improvements, authorized by the Act of 1895, approxi- mately $11,000,000 would be expended upon the Erie Canal, and any future enlarge- ment would necessarily involve reconstructing a portion of the work.75 cially and physically attainable, so as to allow passage to boats of the greatest possible size, with locks arranged to permit the passage of these boats in pairs and in the quickest and most convenient manner. “ 2nd.—That ample, convenient and cheap ter- minal facilities devoted exclusively to canal traf- fic should be supplied and maintained at Buffalo. “ 3rd.—That all restrictive legislation upon the use of the canal be annulled, and encourage- ment given to all responsible transportation com- panies by affording them terminal sites upon nominal terms and for sufficient length of time to justify them in improving the same. This would enable transportation companies to form through freight lines by vessels on the lakes and boats on the canal to carry produce and merchandise on through bills of lading between upper lake ports and New York, which has never yet been possi- ble and accounts far more for declining business than any physical defects of the canal. In other words, so amend the laws that business can be conducted upon the canal in connection with lake lines, in the same manner that business is now conducted on lake and rail lines.” * * * 4 4 It is my opinion that under existing circum- stances and prospects, the work undertaken by the State in improving the Erie Canal should be continued until the full result aimed at is accom- plished. That is, until the prism of the canal is deepened for the passage of boats of 8 feet draft, and one tier of locks lengthened so as to permit the passage of boats 115 feet long in pairs, each boat carrying about 400 tons, or about 13,500 bushels of wheat. * * * u But without warring for the completion of the improvements in hand by the State, which will necessarily take several years, it is my opinion that a great deal of good can be accomplished by the canal in its present condition, if the terminal questions are properly looked after, and if all re- stric five legislation be annulled and encourage- ment be given to transportation companies to transact business via the canal under modern 76 business systems. With, such systems of trans- portation inaugurated under existing canal con- ditions, they would grow and be perfected by the time work in hand is completed and the maxi- mum benefits of the improvement would then quickly follow. “It is doubtful if any size canal would com- mand business of great magnitude, or exercise a maximum controlling influence on freight rates, unless these features of terminals and unre- stricted use are broadly looked after.” With some trifling exceptions, this is the view held, and this is the course recommended, by this Commis- sion, that should be undertaken by the State. We be- lieve that the canals have not commanded a commerce of recent years sufficient to convince the people at large that an undertaking so comprehensive, and involving an expenditure of a minimum of $50,000,000 upon the Erie Canal alone, would be justified by the results. To com- plete the improvement already begun would, as stated by Major Symons, effect a saving of two-thirds as much, in the cost of transportation over the Erie Canal, at an expense not to exceed $15,000,000, as could be effected through the enlargement of the Erie Canal to accommo- date barges carrying 1,500 tons, at an expense approxi- mately estimated at about $50,000,000. His expert conclusions regarding the $15,000,000 improvement are supported by surveys thoroughly made, and revised several times by competent engineers. Moreover, the expenditure of $15,000,000 would suffice for the comple- tion of the improvements begun upon the Champlain and Oswego canals, as well as upon the Erie Canal. It is the judgment of this Commission that the Legislature be urged to pass a bill providing for the earliest possible completion of the improvement undertaken in 1895, and that the bill provide for bonding the State in the sum of fifteen million dollars, or as much thereof as may be found necessary, to be applied to the completion of that improvement, the said bill to be submitted to the people for their approval at the next general election.77 Ample justification exists for believing that fifteen million dollars will complete the improvement of the canals authorized by the act of 1895. A thorough, survey of the three canals was made in 1896, upon which survey over eight hundred thousand dollars was ex- pended. The data from these surveys have been of- ficially and minutely examined and calculations verified by a number of expert engineers. The largest estimate of the probable cost of completing the improvement resulting from such examinations has been slightly under fifteen million dollars. These examinations and calcu- lations are a part of the official records of the State. It has been asserted that before the nine million dollar improvement was undertaken, State officials had estimated that that amount would suffice for the entire' work. This commission have been unable to dis- cover that any such estimate was ever submitted by either the Superintendent of Public Works or the State Engineer. It appears that the only estimates made by these officials are those submitted to the Constitutional Convention of 1894, and that the suggestion of nine million dollars to com- plete the work subsequently undertaken by the State, did not appear in those estimates. The commission Understand that that amount was placed in the bill by those who drafted it—members of the several commer- cial bodies acting as a committee to secure legislative authorization for an improvement of the canals. It may have expressed a hope, rather than a knowledge, on the part of the friends of that measure. The bill passed the legislature and received the people’s approval without having been submitted to the State officials for an opinion. It is, moreover, the judgment of this Commission that such an improvement as was then provided for would, supplemented by such facilities at terminals as we shall recommend, suffice for the needs of commerce for a long period of years. We believe that the com- merce of such canals, improved as provided in 1895, would not tax the limit of their capacity until its vol-78 time had increased at least fourfold over that of the present time. If such an improvement, supplemented by terminal improvements essential to the attraction and accommodation of commerce, shall result in taxing the limit of the capacity of the State’s canals, then the people will be disposed to further enlarge them, and the experience thus obtained will much better in- indicate the character and the extent of the improve- ment requisite to the new conditions. The act of 1895 provided that the depth of the Erie and Oswego canals should be increased to not less than nine feet, except over permanent structures, where the depth should not be less than eight feet. It was the intention of the State officials who inagurated that work to make the Erie and Oswego canals nine feet deep uni- formly, throughout, in the prism and over permanent structures as well. Such a depth, and a change in the locks so as to utilize their entire length for the accom- modation of boats would,it was calculated, accommodate boats each capable of carrying cargoes of slightly over 400 tons, which boats could be locked through the canal in pairs without being disconnected. That would mean, in place of the present boats, capable of accom- modating 240 to 250 tons, and which are disconnected several times in passing through the canals, two boats that would be, so far as regards management and navigation, practically one boat, the pair carrying cargoes of more than 800 tons, or approximately 27,000 bushels of wheat and 29,000 bushels of corn. The locks on the Erie Canal that remain to be length- ened, located at Cohoes, Little Falls, Newark and Lockport, present the most difficult engineering features existing upon that canal. It is for this reason, necessarily involving the greater cost, that these locks have been left until the last to be improved. At both Lockport and Cohoes, where series of five and sixteen locks, respectively, are located, the necessity of substituting one lock for each of the series has been generally conceded. This is likewise true of the locks located at Little Falls and at Newark,79 where the locks are not, however, so close to each other as at the first two named places. It is desirable that if improved styles of locks—and the pneumatic lock, we find, receives the most favorable consideration —are constructed to replace the locks at the four places named on the Erie Canal, they should be made of a size greater than that of the other lengthened locks upon the Erie Canal, in order that no possible further improvement of the canal should require reconstruc- tion at those places so difficult of improvement from a topographical and engineering standpoint, and conse- quently so expensive from a financial standpoint. It might, indeed, be desirable to make these locks from 260 to 280 feet in length, and from 80 to 45 feet in width, with a depth of 14 feet. Since the locks at present existing at these localities will, most likely, be entirely superseded by a different style of lock, the ad- ditional expense of constructing them larger than the present locks would not be excessive. This is a detail, however, for which provision could be made at a future date, when the subject has received the critical and expert consideration of the State Engineer, and his recommendations and the reasons therefor are pre- sented for consideration. The general opinion, throughout the State of New York, and in the West, wherever the Commission held public hearings, was that the efficiency of the Erie Canal would be restored if boats capable of carry- ing loads of from 25,000 to 30,000 bushels of grain could be passed through it. This quantity is suggested to be the unit of economy on slow moving waters, approaching the maximum capacity beyond which it would measurably increase the expense of operation to a point where increased speed beyond the possibility of canal transportation would become essential. Public attention is attracted chiefly to the Erie Canal for the reason that it is the largest of the State canals, it does the greater part of the traffic, and it directly connects Lake Erie with the Hudson River, affording80 water transportation for merchandise from Dulutli and Chicago to New York, distant, respectively, 1,500 and 1,300 miles, this merchandise, almost without excep- tion, requiring rehandling at Buffal o from lake vessels into railroad cars or canal boats. Canal Terminals.—No package freight, is now car- ried eastbound over the Erie Canal, a fact due to the lack of terminal facilities at Buffalo and at New York. This class of freight, therefore, is dependent upon rail transportation and is thereby subjected to the cost of lighterage at the port of New York, and to the railroad differential of 3 and 2 cents per hundred pounds. Moreover, the rail rates of transportation between Buffalo and New York are very much higher on tha't class of freight than it would be if terminal facilities permitted its carriage over the canal. Should this package freight, which is not now carried eastbound by canal, because of this lack of adequate terminals at Buffalo and at New York for the handling of canal commerce, be transported over the Erie Canal, thereby creating competition with the rail upon many additional classes of freight, the necessity of reducing rail rates to meet the new competition would make it difficult if not impossible for the New York roads longer to continue parties to the differential agreement. Assuming the construction by the State of the canal terminal facilities, in the way of covered piers in Buffalo and in New York, recommended by this Com- mission, this package freight not now carried by the canal would be benefited more than the difference be- tween the present and the improved canal rate ; it would be saved the difference between the present rail and the improved canal rate. With the exception of the grain business, the control of the great bulk of the merchandise carried from dis- tant lake ports to Buffalo is in the hands of the rail- roads. These railroads own their own lake lines of81 steamers and thereby practically absorb what is known as the package freight carrying. When the railroads shall have obliterated the canal elevators in the manner hereinbefore indicated, they evi- dently hope to equally control the lake traffic on grain. Miles of the most modern docks and sheds, supplied with every approved appliance for the prompt and eco- nomical handling of package freight, are owned by these railroads in Buffalo, and at these docks and in these sheds, the merchandise westbound is received by rail or canal, and destined for western shipment by lake, is handled; and so, too, of the merchandise eastbound. No freight reaching Buffalo via the canal excepting by the railroad company lines, is received at these railroad terminals for shipment, excepting at local rates. There are no public shedded docks at Buffalo where package freight intended for the canals can be received and stored and shipped, and, as a consequence, all merchandise requiring that kind of accommodation must necessarily be consigned to the railroads or their lake lines. At New York, where a certain portion of the East river waterfront near the Battery is still partially re- served for the use of canal boats, freight solicited by the agents of railroads,—bulk freight and package freight—is received and shipped to Buffalo by canal boats under charter to the so-called canal lines, which lines are. owned by the great trunk line railroads. It is the retention of this section of the waterfront of New York for the use of canal boats that has made possible the procurement of canal cargoes westbound, and such cargoes, or partial cargoes, are necessary in order to enable some of the boats to pass under the bridges spanning the canal, and are therefore carried at the lowest possible rates—rates ranging as low as thirty-five cents a ton at times during the season of navigation. But there are no sheds upon the piers in New York where the canal boats obtain their westbound cargoes, such piers as have sheds in the so-called canal district having been leased to the railroads, in violation of the82 spirit if not the letter of the law of the State setting aside that section for the use of canal boats. The lake lines out of Buffalo refuse to receive freight at through rates via canal boats, unless such boats are chartered by the agents of the railroads. Thus it is impossible for the canal boat owners to solicit and receive the full rate paid to the railroad agents for west- bound freight. The canal boat owners are compelled to accept whatever the railroads’ agents are willing to pay. Shippers are debarred from patronizing indepen- dent canal boats, for the reason that through rates to points beyond Buffalo are denied them unless their ship- ments are made by the canal boats chartered by the railroad canal lines. The railroads paralleling the Erie Canal, with termi- nals at Buffalo and at New York deny the competition of the canals, and assert that such competition is disre- garded in the making of rates. Nevertheless, this Com- mission brought before it the agents of the railroads in New York who testified that they solicit freight both for rail and for canal transportation, and thns confessed the potency of the canal. Rates of freight of the first class, via canal and lake to Chicago, were quoted at 35 cents a hundred pounds by these railroad freight solicitors, while the rates on the same class of freight shipped via rail and lake was quoted at 54 cents a hun- dred pounds, and which thus established conclusively, and from the mouths of the railroad agents themselves, the fact that rates by canal are substantially lower than they are by rail, and that the railroads are compelled to take into consideration the competition of the boats navigating the Erie Canal. The lack of ample and shedded piers at New York and at Buffalo of course minimizes the opportunities of the canal boats to seriously compete with the railroads, and especially upon those high classes of freight upon which the highest rates of transportation are paid. The railroads, therefore, have the most lucrative of the traffic wholly under their control, and are enabled to, and do, concentrate their competition with the canal boats wholly83 upon that class of freight upon the transportation of which the canal boats depend for a profit. This, in large degree, accounts for the willingness or ability of the railroads at times to carry grain at rates as low or lower than the canal boats. Thus it is, that the railroads in combinations, having their terminals at Buffalo and at New York, have been able to restrict the traffic by canal. Imagine either one of the trunk line railways unable through lack of terminal facilities to compete with the other railways for package freight. Imagine the perfect organization of one of our lead- ing railways displaced by conditions where one corpor- ation owns the roadbed, another the rolling stock, and yet another the freight terminals, with each corporation operating at cross purposes with the other. For how long, under such conditions would a railway continue successful competition. Such is the present transportation situation on the Erie Canal. Agents of the great flour mills, who ship annually millions of barrels of flour to Europe, who appeared before this Commission in New York, and the officials of the mills in Minneapolis and in Duluth all united in the statement that lack of canal terminal facilities for package freight alone prevents flour coming to New York by way of the canal, which is now sent to the out- ports. Agents of the great provision merchants of Chicago' have also made clear to this Commission their inability to use the canal for their business because of the lack of canal terminals. No matter what improvement may be made to the Erie Canal, so long as shippers are compelled to have their cargoes transferred at Buffalo, the boats may be entirely at the mercy of the railroads, and will, through the pressure of concentrated railroad competition, and their control of terminals, force the canal boats entirely from the canal unless terminals are likewise provided for the canal.84 It is to rescue the merchandise seeking transporta- tion through the State from these unnecessarily high charges, that the duty of the State to create such ter- minal conditions as will make these high charges impossible, is imperative, for the best interests of the State and the welfare of its people. Once this is done, the canal boats will no longer be depen- dent entirely upon a single class of merchandise for eastbound cargoes, but will, on the contrary, be able to accommodate many classes of freight, and at the lowest possible rates of transportation at which profit is possible, and entirely free from any necessity of “ equalizing ” or sharing with other transportation routes, the transportation of the merchandise offering. Such a result would very greatly reduce transportation rates on all classes of merchandise coming to or going from New York, and this reduction would decrease the cost of living to the people in and about the port of New York where one-half of the State’s population live, besides which the opportunities for manufacturing, as will be shown, would be increased by the inevitable reduction in the cost of the raw materials. Considering the relation of the grain elevators at Buffalo to the railroads, it may also become necessary for the State, eventually, to provide its own elevators at that port for the receipt, storage and shipment of grain, and possibly at New York as well, in order to make it impossible for the grain naturally tributary to the port of New York to be diverted to other ports through ex- cessive transfer and terminal charges. The State of New York has spent considerably more than a hundred million dollars upon the construction, enlargement and maintenance of its canals, in order to cheapen transportation of merchandise. That these canals have made New York State first in commerce, cannot be denied. Their utmost possible utility, there- fore, must be made available to those having merchan- dise to ship, in order that this priceless commercial position may be retained by the State without the least impairment.85 It is the conviction of this Commission that, should the State provide the needed terminal facilities at Buffalo and at New York for the accommodation of merchandise seeking transit from and to the West, rates of transportation on all classes of merchandise will be substantially and permanently reduced. On the other hand, should the State decline to establish these needed terminals, there is serious doubt whether any amount expended upon the improvement of its canals, short of making the boats navigating them independent of terminals, at Buffalo at least, would have the effect of materially increasing canal traffic or of reducing rates of transportation through the State of New York. It is apparent, therefore, that the creation of the terminals for the handling of canal commerce at Buffalo and at New York will effect a saving on package freight carried over the canal, between two and three times as large, through the elimination of the rail- road differential and the lighterage, as the improve- ment of the canal, when wholly completed, would other- wise effect. Whether there is or is not any improve- ment of the canal, the creation of the suggested termin- als at Buffalo and at New York would attract a large and increasing volume of traffic in package freight, east-bound, to the canal, at a net saving, on the present railroad rate including the differential. This Commission, therefore, recommend the creation by the State of ample shedded piers both at New York and at Buffalo, for the accommodation of freight seek- ing transportation over the canal. Iron and Steel.—During the Commission’s hearing in Buffalo, one of the most interesting, if not one of the most important, subjects discussed, was the prob- able future growth of steel manufacture at the port of Buffalo; and the necessity of proceeding with the im- provement of the canal, for this traffic alone, was made very clear. Mr. George H. Raymond, who is a close86 student of water-borne transportation economics, ap- peared before the Commission, and in the course of his testimony stated: “ Let us look at the present course of the iron and steel trade. Millions of tons of Northern ores are brought annually to Lake Erie ports. They are for Pittsburg, unload at Conneaut on to a railroad built by Mr. Carnegie to save the carrying profit before charged to him by the other roads. The rate from Conneaut to Pitts- burg is ninety-six cents a ton. At Pittsburg it is smelted and made into pigs, or structural steel and iron. It is then carried over the mountains to New York and Philadelphia at a cost of $2.90 per ton on steel and steel products. July 1st saw a further advance in freights, which is not herein included, and that amounts to practically twenty- five per cent, on all freight out of Pittsburg. Roughly stated it takes about two tons of ore for a ton of steel. We then have two tons of ore from Conneautto Pittsburg, $1.92; one ton of steel from Pittsburg to New York, $2.90. Total cost of one ton of steel from Conneaut to New York $4.82. Let us now consider the same proposition via Buffalo : The ore rate to Buffalo is the same as to Conneaut. At Buffalo the ore would be dumped into smelters, and the structural steel rolled. This steel could then be freighted from Buffalo to New York in a lock widened and deepened canal for not over fifty cents per ton. “ There must this, however, be considered. Buffalo is at a distance of about $1.00 per ton on coke, as compared with Pittsburg. It requires about three-quarters of a ton of coke for a ton of steel, so that seventy-five cents per ton is added to the cost at Buffalo. In addition, coal costs a trifle more for steam power purposes at Buffalo, but twenty-five cents per ton of steel will cover that. To be safe, consider that the total cost of carriage from Buffalo to New York, including the coke differential, is $1.72, as against $4.82 via Conneaut to Pittsburg and from there to New York. To be very sure, let us suppose that the Pittsburg roads would reduce their rates about 40 %, or $1.10, we would still have an advantage of $2.00 per ton in favor of Buffalo. The output of the Carnegie interests in iron and steel is two87 and one-half million tons. Ten cents per ton saved is $250,000. If two dollars were saved it would be five per cent, on one hundred million dollars. “ With such possibilities, is there any question that Buffalo would make the steel for the navies of the world, and that New York Bay would build them ? Already is there seen the dawn of a new era of prosperity in this direction in the formation at this city of a corporation with twenty million dollars capital to erect at Stoney Point an im- mense steel plant. ’ ’ Mr. Prank B. Baird, an expert in steel manufacture* and a recognized authority in the iron and steel busi- ness, who is located at Buffalo, furnished this Commis- sion with a vast amount of valuable information con- cerning the steel trade in general, and at Buffalo in particular, where he is engaged in its manufacture. We quote as follows from the record of his testimony: “ Q. Prom your knowledge and experience in this business, and the probable future develop ment in the steel industry, what would you pre- dict, in an improved canal, would be the amount of product that would be shipped in five years from now, and then in ten years, from this city ? “ A. I should say, between now and 1915, the time during which the consumption of pig iron will be more than doubled, that the eastern end of Lake Erie will get one-half the increase. That will come naturally, particularly if there are first rate facilities for shipping. Buffalo will get a large portion of it anyway. “ Q. That means a product of seven and a half million tons at that time ? “ A. I think they will be making, by 1915, at the east end of Lake Erie not far from seven to eight million tons. “ Q. Most of which will be destined for what, place ? “A. For New York City and for New England, They manufacture everything there in the way of machinery. They send it to other places and ex- port it to other countries.” • Speaking concerning the importance of Buffalo as a88 shipping port, when before the Commission in Decem- ber, 1898, Mr. R. R. Hefford, of that city, said : “ I have some figures I secured just before I left home, showing the tonnage of the principal ports of the world: for instance London (I will give even figures) 25,422,000 New York.................... .. 19,858,000 Liverpool...................... 17,200,000 Hamburg........................ 12,505,000 Buffalo ...................... 11,581,000 “ That would make Buffalo the fifth port in the world. We are open, on the average, 234 days in the year, as against the other ports named, 365. There are many times in the year that the water-borne commerce of Buffalo equals that of New York for the same time.” Champlain Canal.—The importance, the volume and the value of the commerce of the Champlain Canal has not been sufficiently impressed upon the people of the State. During the last season of navigation the traffic over the Champlain Canal was thirty per cent, of that moved over all of the State’s canals, and was forty per cent, as great as that moved over the Erie Canal, amounting to slightly in excess of one million tons. The locks of this canal are of the same size, through- out, as those of the Erie and Oswego canals, but the prism has never been deepened so as to afford navi- gation for vessels of the size of those locks, although provision for such an improved prism as would admit of the navigation of boats to the full size of the locks was made in the act of 1895, and which improvement, or enlargement, has been in part carried out. This Commission is of the opinion, therefore, that if the improvement thus partially carried out, shall be completed, and which it recommends, it will be ample to fully meet with the necessities of its commerce, so far as they can be now foreseen by those most inter- ested in the transportation over that canal, and as dis-89 closed at the public hearing of the Commission held at Whitehall. At that point, the Commission was in- formed that the rates of transportation, through the Champlain Canal, involving water navigation approxi- mating to 300 miles in length, averaged about $1.00 per gross ton. Mr. Robert H. Cook, of Whitehall, the chief trans- portation man of that section, was one of the witnesses before the Commission. He was asked: “ Q. Suppose the (Champlain) .canal was im- proved so that boats could draw six feet of water; how low would that make the rates on iron ore and pig iron, with increased capacity of the boats ? “A. It would reduce it one-half ; fully that, or nearly fifty cents a ton. “ Q. Can you state what effect that reduction in transportation charged on iron ore, in New York State, at Port Henry, wonld have on the market, where there is competition between this ore and the ore of the Northwest? ‘ ‘ A. Mining facilities, and other things, being- equal, it would enable them to meet anything, in my opinion, that they have in the way of trans- portation on the lakes, Lake Superior and the iron ore regions of the Northwest. ‘ ‘ Q. Return to the lumber. What is the freight rate on lumber now ? “A. From Ottawa to New York, $2.25 per thousand feet. “ Q. Would the increased capacity of the canal, as I suggested in the question regarding, iron ore; would that make a difference in the rate on lumber ? “A. In the same proportion as on ore; I should say 75 cents a thousand feet. “ Q. Is that between here and Albany ? “A. No, sir; between Ottawa and New York. “Q. And you think the interests served by this canal would be well satisfied by having the prism conform to the present size of the Erie Canal, adapted to boats drawing six feet of water ? “A. Yes, sir. “Q. And do you think,, in saying that, that90 you represent the general views of the people along the canal here, forwarding and navigating on it? “A. Ido. “ Q. Will you state what the rates on coal now are, about, from Hew York ports to Lake Cham- plain ports ; to Whitehall ? ‘*A. It is now 90 cents per ton. It will easily be reduced one-half by enlarging the prism.” It was also ascertained that the railroads utilize canal boats for the shipment of coal by way of Lake Champlain, and to Canadian ports, and that shipments thus made, are to places reached by the railroads them- selves. The Champlain canal should be improved by deepening the prism to seven feet, so as to enable boats to carry a draft of six feet, which the locks will accommodate. This would tend to re- duce the cost of transportation via that canal one-half, and, considering that approximately 1,000,000 tons of merchandise is shipped annually over that canal, at an average rate somewhat exceeding one dollar per ton, the effect of deepening its prism to seven feet would effect a saving on transportation rates of approximately half a million dollars a year, on the canal alone, and it is not to be doubted that a corresponding reduction would be inevitable upon the railroads paralleling this canal, or in competition with it, the extent of which can only be conjectured, but which would unquestionably be substantial. Doubtless the amount saved, in reduced transportation rates, in two years, would defray the entire cost of the suggested im- provement of the Champlain Canal. Capitalization op Canal Corporations.—An existing law limits the capitalization of corpora- tions doing business upon the canals to $50,000, a limitation preventive of such organization and busi- ness methods in connection with canal transportation91 as is necessary to its most successful conduct. There is no good reason for the existing limitation of cap- ital, and there are many good reasons why there should not be any limitation. The canal is a free highway of commerce, its purpose being to serve the most economical requirements of transporta- tion. If individual boat owners are unable to success- fully compete with corporations, it will be be ause they will not be able to furnish the facilities, to assume the responsibilities, and to furnish transportation as cheaply as corporations. If, on the other hand, the corporations cannot carry merchandise over the canals as cheaply as the individual boatmen, then the business will remain with the latter. The canals were not created to foster any particular class of boating interests, but to minister to the commercial necessities of the people of the State by at all times keeping rates of transportation at the minimum. To the extent that corporations, un- der reasonable restrictions, can accomplish the purposes sought in the operation of the canals, to that extent their engagement in the business of canal transportation should not be discouraged. We, therefore, recommend the repeal of the law. PORT CHARGES. Complaints are widespread that certain port charges in New York are excessive. The peculiar formation of Manhattan Island, re- stricting the growth of the old New York within nar- row limits extending only in one direction, has had something to do with this situation. The value of real estate, which is the basis of values in a community, has reached enorm- ous proportions, compared to other communities so situated as to enable a growth in every direction. To the elements entering into the greater cost of liv-92 ing inherent in the city itself has been added that much of the cost for the transportation of western products as is represented by the difference between the rate the New York roads under normal conditions would charge and the rate that adherence to the differ- ential agreement compels them to charge. Rapid Transit to all Boroughs.—In so far as this element of cost of living enters into the charge imposed upon commerce at New York, efforts are now making that tend towards a solution of the problem. The consolidation of the several com- munities adjacent to the harbor into one municipality, thereby creating the basis for one systematic plan of development, is a material advantage that few fully appreciate at the present day. The construction of a system of rapid transit for passengers and freight provides not only cheap access to the outlying terri- tory northerly, but also by eliminating, as it does, the separation by water of the several communities within the limits of Greater New York, makes possible the creation of conditions similar to the other large seaports whose surroundings have nob embarrassed their efforts to expand. The completion of a system of cheap transit extending into every part of Greater New York territory, cannot help but create an evolution from existing unfavorable conditions, and every encouragement should be accorded by the State and by the municipality towards the completion of such a system, including extensions thereof to a point measured only by the ultimate possibilities. The One Cent Arbitrary.—This is a term ap- plied to a charge imposed upon grain at railroad elevators at the port of New York. It is one of the port charges severely and justly criticised by exporters of grain. It is another instance of a93 railroad differential, or 4 4 equalization’ ’ charge. Prior to 1882, it was customary for vessels arriving at the port of New York for grain to receive their cargo at the railroad elevators and the grain was subjected only to the usual charge for storage of one-quarter of a cent per bushel for each period of ten days, or part thereof. The regular line steamers require the grain to be lightered to the steamer, and this practice has created in the port of New York, the necessity for floating ele- vators, involving the grain in the further charge for such service. Prior to 1882, the charge for the floating elevator service could be saved on all grain destined for vessels taking grain at the elevator. The railroad com- panies finally imposed a charge of one cent per bushel upon all grain received by a vessel at the elevator, in addition to the regular elevator charge, an amount that made it prohibitory for vessels to receive grain at the railroad elevator. This practice has been continued ever since. When grain is delivered by a railroad company to the side of a vessel, involving an expense to the rail- road company of placing the grain upon a lighter and having it towed to the vessel, the railroad company charges one cent less per bushel than when the vessel offers to receive the grain at the elevator and save the railroad company from such expense. Therefore, the term 44 one cent arbitrary.” This imposition has had the result intended, of driving all vessels away from the railroad elevator and forcing the merchants to the ex- pense of employing the services of the floating elevators. It has also had the effect of driving away from New York full cargo vessels that now secure their cargoes at either Philadelphia, Baltimore or Newport News. It also had the effect, in one instance, of driving from New York to Boston the steamers of a regular line, that formerly docked alongside of the New York Central elevators. Such is the testimony of John C. Seager, a steamship agent, doing business in New York City for twenty-eight years, and who was the agent of the. steamers driven away from the New York Central grain elevator and from New York. He testified as follows:94 “Q. Have you ever been the agent of any steamships that docked regularly at what are known as the New York Central docks at Sixty- fifth street ? A. I have. Q. Do any of them dock there now ? A. No, sir. Q. How long since they have docked there ? A. Since the one cent a bushel charge was put on ; I think it was in 1882. Q. That is what is known as the one cent ar- bitrary charge ? A. Yes. * * * Q. Will you state whether since that arbitrary charge of one cent has been imposed by the New York Central you have had any ships go to those docks ? A. I have never had any for grain. Q. Will you give the names of the ships that did dock there up to the time of the imposition of the one cent arbitrary charge ? A. I used to dock the Beaver line steamers in the winter and the Leland line which runs to Liverpool, and which used to run from Boston to Liverpool. I had some other boats loading here for about six months. I had the Twin Screw line loading regularly for London. I had any quantity of tramp boats. Q. What were the lines that chiefly loaded there ? A. The Leland, the Twin Screw and steamers which we used to put on berth. Q. About what were the sizes of those steamers ? A. Four thousand tons of cargo. Q,. What would be their draft of water ? A. Some twenty-four feet; some twenty-five feet; others twenty-two to twenty-four feet. The Hooper drew twenty-six feet. Q. Was the imposition of the one cent arbi- trary charge the only reason that drove those steamers away from that dock ? A. Yes, sir. It had a very peculiar effect. It had a very strange effect on the steamers loading there. Q. Did you ever have the experience, imme- diately after that one cent charge was imposed,96 of having grain merchants secure the elevation of their grain by a floating elevator being brought from a long distance, instead of by the New York Central? A. I was placed in this ridiculous position. While my steamers were alongside the New York Central elevator “B,” and I required grain for Liverpool and also for London, it was cheaper for the merchants by half a cent a bushel to send their floating elevator from Brook- lyn alongside of my steamer at elevator “B” and have the spouts of elevator “ B ” run to the canal boat and then have the floating elevator transfer it to my steamer than to have the spouts of the elevator going straight into the hold of my steamer. I then withdrew my steamers. Q. Where did the steamers then go ? A. Brooklyn. Q. Did they all go to Brooklyn ? A. No, sir. I have several steamers that go wherever the grain is. Others go to a regular fixed dock. Q. Did any of them leave here and go to other ports? A. The Leland line returned to Boston and has stuck to Boston since. Q. What about the Beaver line ? A. They withdrew coming to New York. They went to Portland in the winter time because the Beaver line only used to run to New York during the winter while the St. Lawrence was closed.” Pull cargo vessels are chartered to receive their car- goes at either New York, Philadelphia, Baltimore or Newport News. It is the practice for them upon arriv- ing from Europe to await for orders at the Delaware breakwater, and from thence proceed to the port indi- cated. Promthe Delaware breakwater they are enabled to proceed to the port at which they can receive a cargo at the least expense. Prior to the imposition of the one cent arbitrary charge New York had an advantage over these outports. Since the imposition of the charge New York has lost practically all of the full cargo busi- ness ; she has not only lost the advantage of the ocean rates found to exist by the Arbitration Oommis-sion, but the evidence recently taken before this com- mission tends to prove that she is now at a disadvan- tage in ocean rates. Elevator Charges.—The subject of elevator char- ges, both at Buffalo and at New York, has on previous occasions claimed the attention of the Legislature. The complaints formerly made that excessive charges were imposed for the elevation of grain, eventually induced the Legislature, in 1888, to pass an act, chapter 581, of the laws of 1888, to regulate such charges. It provided a maximum charge of five-eighths of one cent a bushel, a substantial reduction from the regulation charge of a cent and a quarter a bushel. The act evidently aimed to specify each item of service performed in the eleva- tion of grain, to prevent evasion thereof by a separate charge for some portion of the service. The statute pro- vides that the maximum charge for “elevation, receiv- ing, weighing and discharging ’ ’ grain by means of float- ing and stationary elevators shall not exceed five-eighths of a cent per bushel. The phraseology of this act has not accomplished the purpose intended. After the constitu- tionality of the act had been challenged in the United States Courts and had been declared constitutional by the Supreme Court of the United States, the International Elevating Company, operating floating elevat- ors at the port of New York, adopted a charge of half a cent a bushel for transport ing their elevators to the side of the vessel. This charge is called the “transportation” charge. It was imposed confessedly for the purpose of evading the statute. The charge is made irrespective of whether the elevator happens already to be alongside of shii. An ex- amination of the books of the International Ele- vating Company discloses that they in fact recognize no separate charge for transportation. In the books of account appear only the total charge of one and one- eighth cents, the amount charged prior to the enact- ment of the statute. In recent years, however, rebates97 have been allowed by the floating elevator company to the grain merchant, after deducting which rebate the net total charge has been reduced to from six-eighths to seven-eighths of a cent a bushel. The commission endeavored, through the examination of the books of the floating elevator company in New York City, and through the examination of the books of the grain ele- vator companies in Buffalo, to determine accurately what charge would be proper for elevating grain ; recognizing that any endeavor to regulate rates by stat- ute, however just might be the reason for interference, might inadvertently do an injustice. W hile fully mind- ful of the principles of equity and justice, the com- mission are forced to the conclusion, from an examina- tion of the facts thus secured, that the reasonable profit to which those who invest their capital are entitled, would admit of the elevation of grain at a rate sub- stantially below half a cent a bushel. One-half cent a bushel is the rate now charged at Buffalo by agreement between all the operating elevators, and is also the established charge for the floating elevator service at Montreal the only port other than New York, where floating elevators are extensively used. The State should require that no greater rate than one-half cent per bushel should be charged in any case, for all services involved in the elevation of grain. This amount is sufficiently remunerative to assure no injustice to the interests concerned. In the port of New York there is no competition in elevating grain. The International Elevating Company elevates all the export grain that requires the services of floating elevators. The elevation of grain for export at the port of New York is dependent upon the floating elevator service as a result of the one cent arbitrary charge. Some grain is elevated at the Erie elevator ; some direct to vessels at elevators in Brooklyn ; and none at the New York Central elevator. The Inter- national Elevating Company was organized June 15th, 1891, and is the successor of a number of former elevator companies, consolidated for the purpose of avoiding98 competition. Its issued capital is $2,200,000. The history of its financial transactions, its expenses and earnings, and the dividends paid, are all entered in detail upon the record of this commission. There is no need of exploiting these details in this report. It is sufficient only to state that this evidence discloses that an exces- sive portion of the capital represents good will ; that a very large portion of the capital that was ostensibly issued for property purchased, was also, as a matter of fact, issued for good will; that the capital thus issued for property purchased represented to a considerable ex- tent boats that were worthless, that had not elevated grain for years, and that were sold subsequent to the or- ganization of the consolidated companies, in some cases for prices of old iron; including among others, the “Union” for which $20,000 of stock was issued, but which had been in disuse since January 7th, 1882 ; the “ Somerset ” for which $30,000 of stock was issued, which had been in disuse since January 1st, 1888, and which was dismantled after the consolidation ; the “Metropolitan,” for which $25,000 of stock was issued, and which had not been used since September 12th, 1890, and from which the company secured only two weeks’ service subsequent to consolidation, then selling it for $7,500; the “Manhattan,” for which $28,000 of stock was issued and which had not been used since February 20th, 1884, and, since the consolidation, was used only from December 18th, 1891, to August 16th, 1892, when it was dismantled ; the “ Bolivia,” for which $33,000 of stock was issued, and which had not been used since August 28th, 1890, and was broken up subsequent to consolidation ; also a number of other boats similarly situated; that the company has been enabled from its earnings since its organization in 1891 to secure the construction of new boats at an expense of about a quarter of a million dollars to take the place of the discarded boats purchased in the consolidation, and in addition, has been enabled to pay an average of eleven per cent, on its capital from the date of its organiza- tion to the examination of its books in 1899.99 The testimony before the commission tends to prove that a plant sufficient to transact the business of the International Elevating Company could be duplicated for about $800,000. Neither an in- dividual nor a corporation is culpable for making large profits. No such thought was suggested by the legis- lation of 1888, and none is suggested here. Endeavor deserves success, and achievement receives applause, in the commercial world as well as in the public arena. Ref- erence is made to the exceptional profits earned by the Elevator Company solely to aid a solution of the ques- tion as to what is a fair rate for elevating grain with justice to commerce and without injustice to the busi- ness affected. Buffalo is only second in importance to the city of New York in a discussion of the subject of New York’s commerce. Through Buffalo passes the great bulk of the vast and broadly expending commerce of the great lakes. In the value of shipping and commerce Buffalo ranks second in the United States to the port of New York, and is the fifth largest port in the world. Her grain elevators have a total storage capacity of 20,960,000 bushels. There are a total of more than thirty storage elevators, but competition has been avoided by organizing an elevator association, which association receives all of the receipts for elevating grain and makes distribution in accordance with a prorating agreement, regardless of the amount of grain elevated by each elevator, and including those that have by the decree of the association elevated no grain. The evi- dence tends to prove that one-half cent per bushel, the amount charged for elevating grain at Buffalo, is suffici- ent to pay dividends to a number of unused and dis- mantled elevators, besides according substantial profits to the elevators in use. The elevators in the associa- tion have both rail and canal connections. There are a number of other elevators at Buffalo so located as to have no rail connections and, therefore, able to elevate grain for the canal alone. During the season of 1898, none of these elevators were admitted into100 the association,and the association adopted a rule, rigidly adhered to, of elevating grain for canal boats without charge. This practice necessarily resulted in closing the elevators dependent upon the canal. It is the evident purpose of the railroad elevators to continue this prac- tice for such length of time as will render the canal elevators useless. Elevation of grain at Buffalo for the canal, will then be entirely subject to the mercies of the railroad elevators. This result will be accomplished in a comparatively short period as a grain elevator in disuse deteriorates rapidly. The commission, in Buffalo, examined the accounts of the elevator association showing the receipts for grain elevated and the dividends paid to each elevator in the association, and procured evidence from the accounts of each elevator, showing the expenses of operation. These accounts of the elevators in Buffalo, and the books of the Floating Elevator Company of New York, also examined by the commission, admit of no other conclusion than that one-half cent per bushel is ample for all services performed in connection with elevating grain, and any greater charge is an undue tax upon New York’s commerce. To this end, the Commission will submit for the action of the Legislature a proposed amendment of the act of 1888, reducing the maximum rate to one- half cent per bushel, and so phrased as to make it difficult of evasion and providing a penalty for its violation. Lighterage Charge.—Under present conditions lighterage is a necessity in the port of New York. Sur- rounded as New York is by water, the facilities affor- ded in other ports of transferring directly from car to ship, have not yet been secured in the city of New York. The charge has been made and the evidence tends to prove that the amount apportioned to the New York roads for the lighterage service performed by them is ex- cessive. It may be a mere coincidence that the lighterage101 charge allowed to the New York roads is three cents per hundred pounds, the exact amount of the dif- ferential. The railroad companies claim that the ship- per does not pay for lighterage, because it is a part of the through railroad rate ; that the payment of three cents per hundred pounds to the New York roads on freight is a mere matter of agreement between the rail- roads in dividing among themselves the through rate, with which the shipper has nothing to do. In such cases the freight bills are marked lighterage free. The fact remains, however, that there is deducted from the through rate and paid to the New York railroads three cents per hundred pounds before prorating, and they then receive their pro rata share of the balance. If the lighterage charge is excessive, to that extent the through rate is excessive. If the lighterage charge is included in the through rate, then no charge for such terminal services performed by the railroad companies would permit a reduction of the through rate to the extent of the three cents, but for the fact that the differential agreement requires the New York road that receives that three cents for lighterage to charge just that amount in excess of the rate to Baltimore, Norfolk or Newport News. Assuming that the cost to the rail- road for performing the terminal services at New York by water is greater than the saving in cost involved in land terminals, the evidence the commission have been enabled to secure from such of the railroad com- panies as keep separate accounts for their lighterage business, substantiates the claim that the amount of three cents is an excessive charge. Suggestions have been made that the method largely developed in re- cent years of sending the freight cars on floats accom- modating a train load incurs no greater, if it be not a less, expense to the railway than is incurred where the distribution requires the operation of a complex system of trackage. The commission, within the limited time at their disposal, have not been enabled to make an ac- curate comparison of the cost to the railroad of the two systems of terminals. But whether or not there102 be any justification for treating the lighterage terminal service upon any different basis than any other terminal service, the through rate to New York does include a charge for such service and is, therefore, one of the elements differentiating the port of New York from her rival seaports to the disadvantage of New York. DOCKS. Adequate dock facilities are essential to a seaport. No one thing has received more adverse and deserved criticism than the inadequate dock facilities at New York. They are two-fold: First.—Inadequate accommodations for modern sized vessels, resulting in high charges, under the laws of supply and demand, for the comparatively few modern piers that have been provided ; and Second.—Inadequate facilities for handling cargoes, due to the configuration of the Borough of Manhattan, thus far preventing juxtaposition of warehouse and steamship. Definite suggestions regarding the second disadvan- tage will not be ventured with the data at hand. The first evil is easy to remedy. That the remedy has not already been applied, is the fault of the State and city alone. There has been, however, a marked improvement in this respect within the past few years. A number of new piers have been constructed with re- sults highly beneficial, in the large financial returns to the city derived from net earnings upon the investment made by the city, as well as in the increased facilities afforded to commerce. At the present time the Dock Board of New York City have under consideration the improvement of the water front between West Twelfth and West Twenty-third streets, North River, which im- provements will include the building of ten piers, of an103 average length of about 800 feet and a width varying from 60 to 125 feet. On the East River the Dock Board has now, in course of construction, an improvement be- tween Whitehall and Wall streets, including the build- ing of ten new piers of about 580 feet in length, and vary- ing in width from 50 to 80 feet. Also on the East River there is in course of construction an improvement invol- ving the building of thirteen new piers, varying in width from 40 to 80 feet, and averaging in length about 425 feet; and between Seventeenth and Twenty-fourth streets, one new pier is in course of construction and three more are in contemplation by the Board, these piers being about 60 feet in width, and averaging about 580 feet in length. The dock improvements now being prosecuted exceed those of any former time within the history of the Dock Board. The rentals from dock property not only pay the interest upon the bonds representing the cost of the improvements, made by the city ; they also provide a sinking fund sufficient to pay the principal of the bonds before they become due. The high rentals that New York has been enabled to receive by reason of an insufficient supply of docks to meet the demand have been as much a burden to commerce as they have been a source of revenue to the city. Therein lies a present double injury to New York’s commercial prosperity. She suffers from inabil- ity to accommodate ships by reason of an inadequate number of modern piers, and she suffers from the addi- tional tax imposed upon ocean transportation by rentals disproportionate to the cost of the improve- ment ; which high rentals when paid by the ocean steamer must necessarily enter into the question of the rates charged by them. Evidence has been presented to the Commission that steamships have been forced away from New York by inability to secure dock accommodations. The experi- ence of the President of the Dock Board regarding his inability to supply the demand, is of value to quote in this connection. He testified as follows:104 “ Q. Is there not a continuous general demand lor better pier berths ? A. Yes, sir. Q. There is a demand you cannot fill without some delay? A. Yes sir. You cannot fill it at all. I berthed two vessels for the Suez Canal. There were only two places in the Borough of Manhattan. Q. That is one of the things the shipping trade is suffering from ? A. Undoubtedly, and it will continue to suffer until the city has one or two piers with sheds on which I have always advocated to set aside simply for temporary use. Q. One or two ? A. At a minimum ; that is better than nothing. We should have one on South street and Ganse- voort Market. Q. Don’t you know that vessels are coming here continually seeking for berths to discharge their cargoes ? A. That is the case, but there are not docks enough for them. Q. Vessels prefer not to come here for that reason ? A. Yes sir. They would pay for them, but they cannot even get them. * * * Q. I cannot agree with you that one or two piers are enough. A. It is better than none. Q. You only suggest that as a minimum ? A. Yes sir. I say it is disgraceful. Q. One of the principal things we suffer from is the discrimination against vessels as against other ports in the matter of port charges. The moment she comes in there are charges for pilot- age, and lighterage and accommodation ; does not that militate very much against us ? A. That is quite true, but what are you going to do ? The Dock Department can do nothing in the matter. The ship owner comes in and wants a berth ; they are willing to pay for a berth when they can get it, $50 a day. The largest" ship we have got in the dock now is the New York. The ordinary price should be $35 a day. We are getting $50 a day for smaller ships, which is ex-105 cessive, but I presume it is our duty to take it if they are willing to pay it. Q. You think there will be a demand for all of the wharves you might build between the point you locate downtown and Corlear’s Hook, if you are authorized to continuously con- struct it ? A. I believe so. Q. How rapidly would you go ahead on them ? A. I think it would take two years to make the whole improvement. Q. You think it might be done in two years if the money was available ? A. Yes, sir. Q. Would you advise that it should be available ? A. Yes, sir. Q. You feel sure of the rentals of the nine piers ? A. Yes, sir. Q. I am speaking now of the East River ? A. The East River is easier because the piers there are smaller. The piers would be built by contract and the walls by the Dock Department. The piers could be built in from sixty to ninety days. The wall is slow work and requires time. * * * Q. You spoke of a million dollars in connec- tion with the improvements in South street. How far would that go ? A. I think that would go about eighteen hun- dred feet, build five piers and extinguish all pri- vate rights. The piers could be leased for one hundred and twenty-five thousand dollars annu- ally, not less than one hundred thousand dollars on the basis of present rentals. I suggested that the improvement cover not less than fifteen hun- dred feet, but preferably five thousand feet, if possible. We have got on West street practically a continuous improvement from Gansevoort Mar- ket to Cortlandt Street Ferry of the Pennsylvania Railroad. The Desbrosses Street work is now under way and it is almost as continuous a move- ment as there is in the New World. Q. You think whatever might be authorized by the Legislature in the way of expenditure for such a work would never cost the city of New York a penny in taxes ?106 A. I know it would not. We have applications now ; the Hamburg-American Line have two ap- plications before us; they are willing to get in anywhere; they cannot hold their passenger trade, but we have no place to put them. They have agreed to take the first of the Gansevoort Market piers and pay a percentage, but we have no money and are not in a position to do it. Q. A pretty serious state of affairs ? A. Yes, sir. We had eight applications from different English Companies. The Bristol Line sent their President over, and they have got some small steamers running here; they were very anxious to get piers. Q. They have gone to other ports since ? A. Yes, sir. I think they have taken one pier in Jersey City. Q. Bo you know of any other instances where companies have gone to other ports than the port of New York ? A. The Leland and Warren Line would have come here if they could have gotten berths. Q. Can you give me any others ? A. I could if you would give me time. I would have to get them at my house.” The total expenditures of the Dock Department of the City of New York from the organization of the de- partment to and including the year ending December 31st, 1898, including the cost of land approaches, the construction of piers, repairs, and all the expenses of the department, amounted to $87,833,128.57, and the total revenue from leased wharves and wharfage, in- cluding ferry leases and franchises, amounted to $41,062,787.95. The annual revenue steadily increased from $315,524.54, in the first year, ending with 1871, to $2,027,126.20 for the year [ending December 31st, 1898. To this enormous extent have expenditures made for the benefit of commerce proven a valuable asset to the city instead of a liability ; producing an income instead of imposing a tax. In addition, as the President of the Dock Board further testified : “ The city to-day is in the possession of property worth $150,000,000, but the Legislature107 is giving a city four times as large, the same appropriation that was given a generation ago, when there were no public docks at all.” No doubt, the high charges for the use of the docks are a substantial disadvantage to New York’s commerce. To the extent that they are an injury, the rentals should be reduced. While complaining against discrimina- tion imposed by others, New York should not continue to impose a discrimination against herself. The policy of the law always has been directed towards relieving commerce as much as possible from charges imposed by the State. There is a law now on the statute books limiting the amount of wharfage that may be charged. The principle suggested by that law should be applied to the fullest extent practicable, but is rendered nuga- tory by requiring the lessee to build a shed upon the pier and then charging him for the shed. The best regulator of dock rentals, however, is an in- crease of the supply to the point where the tax on com- merce amounts to no more than enough to make the docks self-supporting. Thirty years ago vessels of twenty-five hundred tons gross register were believed to be the largest that could be economically and safely operated. At the present time steamers of twelve thousand tons are regularly em- ployed in the transportation of freight. The National Government having authorized the expenditure of four million dollars to provide an adequate channel for these modern steamships, the State and the city can do no less than to rapidly provide proper dock facilities. In view of the provisions of the New York City Charter, limiting the amount to be expended annually in dock improvements, the Legislature should confer such authorization as may be requested from time to time by the City of New York to enable it to carry out plans for improvements as rapidly as they may be needed. An important item entering into the total cost of re- cent improvements of the city waterfront has been the cost of a masonry sea wall along the outer edge of the street, wharf or place. This wall is costing on the average108 about $300 per running foot. The piers being con- structed in front of this sea wall, without sheds, are costing on an average about $1.25 per square foot of surface area on the East River, and about $1.50 per square foot of surface area on the North River. For example : In order that the total receipts from dock facilities may exceed the total cost of the im- provements, a pier upon the East River 80 ft. wide and 425 ft. long should yield a return not only upon its cost, which at $1.25 per sq. ft- would be $42,- 500.00, but also upon the cost of construction of the 225 ft. of sea wall adjacent to it, which at $300 per run- ning ft. would be $67,500.00, or in other words the pier should yield a revenue upon $110,000.00, although the pier itself cost the city only $42,500.00. In the above calculation, 225 running ft. of sea wall is taken as the length of the sea wall that would be re- quired to cover the bulkhead along the end of an 80 ft. pier and along half the slip on each side of the same. The vessel owner who rents the pier from the city has perhaps but little interest in having a masonry sea wall along the bulkhead, and an inexpensive platform or piling or a timber crib might answer his purpose as well as the costly masonry wall which is con- structed and maintained as a public improvement in order to make a permanent and substantial finish to the marginal way around the city. Other cities, notably Philadelphia, regard the masonry sea walls constructed along their water fronts purely as a part of their public street improvements, made for the benefit of the city as a whole and for its adornment, and do not charge its cost in any way upon the piers in front of it or upon the commerce using said piers. The importance of this matter and the injustice and short-sightedness of compelling our commerce alone to bear the entire cost of the masonry sea wall has been heretofore lost sight of to a large extent by reason of the inadequacy of the pier accommodations, result- ing in rentals being raised to a plane far above the109 point where it matters little to the lessees of the piers what the elements are that enter into the rentals as figured by the city. It is now of the utmost importance, however, that a fair and just principle should be established for the valuing of city piers for purposes of rental, it being obvious that the city must in the near future furnish to its commerce a sufficient number of piers to materially increase the supply, thus reducing the competitive de- mand and bringing about a condition in which pier rentals will be determined, not as now, by the highest price a tenant will pay rather than be driven away from the city, but rather by the price that it is fair and reasonable for the city to exact from its commerce for the pier facilities furnished. The cost of the masonry sea wall should not in theory be assessed upon our commerce alone, but upon all taxpayers alike, the same as the cost of any other public improvement made for the benefit of all. It has been and is the custom of the city to oblige lessees of unshedded city piers to construct at their own expense the sheds required upon said piers and to keep the same in good repair, it being conditioned, however, that at the expiration of the leases the said sheds are to revert to the city without compensation to the lessees. These sheds have to be constructed under plans ap- proved by the Department of Docks, and many of them cost far more than the piers on which they are built. At the expiration of a lease the city thus secures possession of a shed upon any one of its piers, which shed has cost the city nothing. It then proceeds to rent the property to a new tenant, charg- ing him a rental, which includes the actual value of the shed which the city has practically required a former tenant to forfeit to it. It should be established as a fixed principle that the city should charge its commerce rentals for piers based, not upon the entire cost of a masonry sea wall,110 which is a public improvement, not upon an arbitrary valuation of sheds which cost the city nothing, but simply upon a fair cost to the city of the water front and of the improvements pro- posed to be leased. Then whenever sufficient money could be appropriated to acquire and im- prove enough water front to make the supply of piers proportionate to the demand, the rentals could be readily adjusted on a basis fair to the lessees, while at the same time yielding the city an ample re- turn upon all moneys expended by it for the benefit of its commerce. It may be well to mention that as the leases of city piers are now drawn, the lessee is obliged to keep the piers in repair and if they are destroyed in any way whether through fault of the lessee or not, the lessee is obliged to replace them. Under these condi- tions the depreciation in the city’s water front property is very slight and would be amply covered by a very small charge to be included in the rental. Insufficient North River Water Frontage.— The valuable water frontage of the North River is inadequate to the demand. With the completion of the projected improvements, the lack of available water front in this congested harbor, will become more no- ticeable. The total available water front from the Battery to Manhattanville is a very little over 9.1 miles, say 47,950 feet. From this must be deducted the length of Riverside Park, about 13,162 feet, leaving a net total of 34,863 feet. As to the present facilities, there should be further deducted : In use for city purposes, Dock, Health, Public Works, &c............... 1044 feet In process of improvement............ 1940 “ Total........................... 2984 “Ill This would leave in present use 31,834 feet. This is occupied as follows : Railroads 10,808 feet or 34 per cent. Ferries 2,205 66 “ 7 66 66 Foreign steamships... 2,900 66 “ 9 66 66 Coastwise, river and sound steamships 2,619