Relations of the Railways to The Business Interests of St. Louis. ADDRESS BY T. C. PpWELL, Vice-Presdent, Southern Railway. March II, 1908. n beginning my remarks on the relation of the railways to the business interests of St. Louis and in attempting to outline those relations as they were two years ago, I cannot do better than to refer to the last report of the Business Men's League and to quote that part of the report in which it is said that when the Municipal Bridge and Terminals Commission "was authorized by the Municipal As¬ sembly and appointed by Mayor Wells in the Fall of 1905 the eastern lines, for the most part, regarded East St. Louis as their western terminus. Tliey published no freight tariffs to or from St. Louis, issued no St. Louis bills of lading or freight bills, refused all re¬ sponsibility for the receipt or delivery , of freight in St. Louis and for its car¬ riage between St. Louis and East St. Louis, while western and southern lines absorbed in their rates the bridge or ferry charges." 1 You are familiar with the widespread interest which this question has excited in the last three years, but it is only proper to say that a large part of the public in¬ terest in the abolition of the so-called bridge arbitrary and of the discussion by the press was founded on a misapprehen¬ sion of the facts. It was at first assumed by the press and the public that the elimina¬ tion of the difference between the rates to East St. Louis and to St. Louis was within the control of the Terminal Railroad As¬ sociation, and it was because of that er¬ roneous impression that to the Terminal Railroad Association was ascribed far greater power and authority than could possibly be assumed by any terminal com¬ pany. But as prior to the appointment of the Municipal Bridge & Terminals Com¬ mission there was no unbiased medium through which the railroads could present their case to the public, it was not until the Commission began its labors that it be¬ came manifest to the public that the service rendered by the Terminal Rail¬ road Association involved much more than merely crossing the River and that there was included in that service not only the use of the Bridges and Fer¬ ries , but also extensive switching service on the west side, with the use of tracks, buildings and driveways, all of which on certain other traffic, such as that to the Southeast, had for years be¬ come part and parcel of the through rates. 2 such rates being established, not by the Terminal Railroad Association, but by the railroads ser\dng St. Louis. In the History of St. Louis, edited by Professor Woodward, appears the state¬ ment that when in 1839 the first plans for a bridge across the Mississippi River were submitted to Council "there was not even the thought of a railroad to the River, not to speak of one over it," and that when in 1855 Mr. Joshua Dent obtained charters from the States of Missouri and Illinois authorizing the formation of a company for the purpose of erecting a railway suspen¬ sion bridge over the Mississippi River at St. Louis there was only one railroad lead¬ ing into St. Louis at that time, namely: the Missouri Pacific, and which had then been built as far as Washington, Mo., and while it is a matter of history that the Wiggins Ferry Company bitterly fought against the construction of the Eads Bridge, I take this opportunity of saying that neither the railroads separately nor the Terminal Railroad Association and its allied interests by any action whatever have obstructed the Free Bridge legislation or interfered with the building of the Free Bridge across the river. For the purpose of this argument the territory tributary to St. Louis and East St. Louis may be described as follows : (i) The section of country directly west and northwest of St. Louis. 3 (2) The Mississippi Valley territory and the Southern States bordering on the Mississippi River. (3) The Southeastern territory, par¬ ticularly those States bordering on the At¬ lantic Ocean and the Gulf. (4) The territory lying east of the Mississippi River and north of the Ohio and Potomac Rivers, and it is between this last named section of country and St. Louis that the rates have been reduced. Of course, the first commercial develop¬ ment of this city was in connection with the Mississippi River, and the steamboats operating on the River charged the same rates from East St. Louis as from St. Louis ; so that when the railroads first com¬ menced to compete for this particular traffic it was perfectly natural that the same rates should be applied from both cities, and this was not only true as to the points im¬ mediately on the River but also as to the interior points in the south which were reached by means of joint arrangements of the boat and rail lines. In a similar way the same condition ex¬ tended to the Southeastern territory. The first through all-rail route from St. Louis to the Southeast was via the St. Louis, Iron Mountain and Southern through Union City, Tennessee, and when the railroads east of the Mississippi River commenced to com¬ pete for St. Louis traffic they naturally adopted the rates which had been estab¬ lished by the Iron Mountain road. 4 Therefore, to the Mississippi Valley and to the Southeast it is not correct to say that St. Louis was given East St. Louis rates, but it will describe the situation more ac¬ curately to state that the East St. Louis rates were made the same as the existing St. Louis figures. It will further illustrate the fact that the Terminal Railroad Association has had no power to make the rates to and from St. Louis to point out that when the rates be¬ tween East St. Louis and the Missouri River were made the same as from St. Louis this was not done through any action taken by the Terminal Railroad Associa¬ tion, but was the result of the competition of the Chicago & Alton Railway, which Company, crossing the Mississippi River over the bridge at Louisiana, Mo., and de¬ siring to compete for traffic between St. Louis and the Missouri River, undertook to handle this traffic from St. Louis across the river to East St. Louis, thence along the east bank of the River to the "Mississippi River Bridge" and thence through Louis¬ iana, Mo., westward to the Missouri River, so that as a matter of policy the Chicago & Alton established from East St. Louis to the west the same rates as the more direct lines quoted from St. Louis. Now, it so happened that as between St. Louis and the territory east of the Missis¬ sippi River and north of the Ohio and Po¬ tomac Rivers none of these conditions pre¬ vailed. There was, as a matter of fact, no 5 competitive influence strong enough to bring about a readjustment of the rates so that St. Louis and East St. Louis vrould be on an exact parity, and therefore, the rates continued to be made as they had been made in the beginning by adding to the East St. Louis rates whatever it cost the railroads to affect delivery on the west bank of the river in St. Louis ; and, therefore, whereas to the territory west of the Mississippi River, to the Mississippi Valley territory and to the Southeast the St. Louis mer¬ chants reaped the benefit of certain condi¬ tions, resulting in the same total rates from East St. Louis as from St. Louis to the territories in question, there were no similar conditions operating between St. Louis and New York and the east generally. From the day the first railroad train crossed the Eads Bridge until the appoint¬ ment of the Municipal Bridge & Terminals Commission the railroads east of the Missis¬ sippi River had not thought it encumbent upon them to assume the cost of making final delivery in St. Louis out of the estab¬ lished East St. Louis rates. There is nothing mysterious about the construction of freight rates. The proper theory on which to make a tariff of rates is to so adjust the figures as to result in the "maximum volume of traffic at the maxi¬ mum rate of freight." No other adjustment can prevail for any length of time, because no other adjustment is logical. If a rate is too low, the traffic is diverted from some 6 other commercial center and a readjust¬ ment follows. If a rate is too high, the busi¬ ness is diverted to some other point, and a similar readjustment takes place. But in addition to the fact that up to two years ago there was no influence powerful enough to reduce the St. Louis rates to the East St. Louis basis, there were other in¬ fluences which were strongly against the plan (which had been discussed from time to time) of establishing a through rate to St. Louis and absorbing out of such through rate the ferry or bridge charges and the terminal charges on the west side of the river. Even if the eastern trunk lines had de¬ cided to establish through rates from New York to St. Louis and to authorize the is¬ suance of through bills of lading and ex¬ pense bills, no control could have been ex¬ ercised by those trunk lines over the vari¬ ous means of transportation across the Mississippi River prior to the passage of the Elkins Bill. There was no certainty that the various charges assessed for that service, which included not only the movement across the river but also the deliveries in St. Louis, would not be used for other pur¬ poses, and I think I am safe in saying that until after the passage of the Elkins Bill, and subsequently the Hepburn Bill, and the strict administration of those laws by the Interstate Commerce Commission and the Department of Justice, the present solu¬ tion of this question would have been im- 7 possible. Withont the assurance of pro¬ tection guaranteed by the enforcement of those laws it is extremely doubtful if the eastern trunk lines would ever have con¬ sented to the publication of through rates to and from St. Louis. I might give in exact figures the popula¬ tion of the various States affected by the recent changes in St. Louis rates, but these figures would not be nearly as expressive as to say that the reduction in St. Louis rates has brought the St. Louis community just that much nearer to more than one-fourth the population of the United States and just that much nearer to the greater bulk of the manufacturing industries of the Union. Based on the census of 1900 the center of population of the United States is at a point six miles southeast of Columbus, In¬ diana, seventy one miles north of Louis¬ ville, Kentucky. The center of the manufacturing in¬ dustries of the United States is a few miles East of Mansfield, Ohio, on a direct line between Cincinnati and Cleveland. As the point marking the center of popu¬ lation of the United States has moved steadily westward and from 1790 up to the present time has not deviated north or south of the thirty-ninth parallel as much as one degree, and as the center of the manufacturing industries of the United States is also steadily moving westward, it is quite within the bounds of reason to say that in course of time the center of popula- 8 tion and the center of manufacturing in¬ dustries will be within the corporate limits of St. Louis and once there, will continue there for years. The fact that the reduction in rates be¬ tween St. Louis and the territory east of the Mississippi River has been and will continue to be of substantial benefit to this business community will be better appre¬ ciated when I say, that, while the total capital invested in manufacturing in the entire country is something less than thir¬ teen billion dollars, there is invested in the manufacturing industries in the territory to and from which the rates have been re¬ duced, over nine billions, or practically three-fourths of the entire manufacturing capital of the country, and it will afford a further comparison when I add that the manufacturing capital of the State of Mis¬ souri is about four hundred million dollars, so that the change in question has brought closer together the business interests of the State of Missouri and manufacturing in¬ terests of the territory east of the Missis¬ sippi River, which represents more than twenty times the manufacturing capital of this State. I think this is a situation on which the people of St. Louis and the people of Missouri are to be congratulated. It now remains to consider the rates be¬ tween St. Louis and the one hundred mile limit in Illinois, and the rates on coal from Illinois mines to St. Louis. 9 First, with relation to the rates between St. Louis and the one hundred mile zone, probably some of you are aware of the fact that there is in the State of Illinois a body known as the Railroad and Ware¬ house Commission of Illinois, whose duty it is, among other things, to supervise the rates of freight between points in that State. In the exercise of its authority that Commission has within the last two years made material reductions in the Illinois State rates. Through custom, the territory within the radius of one hundred miles of a commer¬ cial center is generally regarded as ter¬ ritory local to that community, assuming that there are no other interests involved. There are in the State of Illinois a number of important jobbing points, in¬ cluding East St. Louis, and it was not thought advisable to attempt to put St. Louis rates to the Illinois territory within one hundred miles, on exactly the same basis as from East St. Louis or on the same mileage basis as the Illinois jobbing points. Such an attempt would simply pro¬ voke antagonism and St. Louis would lose more by incurring the ill-will of the Illinois merchants than it would gain by a reduc¬ tion in the rates. Furthermore, it is not at all certain that such an adjustment of rates could be main¬ tained. It would be entirely within the authority of the Illinois Commission to in¬ vestigate these conditions, and while the 10 result of such investigation could not be foretold with certainty, it most assuredly would not be advantageous to St. Louis. Therefore, the railroads serving both St. Louis and the State of Illinois, have reached the definite conclusion that St. Louis can¬ not properly ask for the same rates as be¬ tween East St. Louis and the communities within one hundred miles of the latter city. The Railroads have, however, carried out in all respects their obligations and have established tariffs of through rates enabling the St. Louis Merchant to secure a St. Louis bill of lading ; and, in the reverse direction, a merchant, a manufacturer or a farmer desiring to ship to St. Louis is able to ob¬ tain a through bill of lading to St. Louis and designate the exact terminal deUvery desired. Now, in regard to the adjustment of coal rates ; this is a question which has given the transportation companies much con¬ cern in past years and is still a subject of earnest consideration at different times. This question can be approached from two different directions : ( i ) from the point of view of the lines having coal mines on their rails in Illinois and at the same time having industries on their rails in St. Louis ; (2) from the point of view of those lines having no preferred interests in St. Louis but undertaking to place as far as possible each consumer in St. Louis on a parity with every other consumer in St. Louis and each 11 coal mine in the separate groups on a parity one with the other. The two most important roads having coal mines in Illinois and at the same time having numerous industries on their rails • in St. Louis are the Wabash and the Iron Mountain, but there has not been up to this date enough coal mined on those two roads to supply the industries on their rails in St. Louis, and this fact was clearly dem¬ onstrated when the Wabash Railroad first gave notice of its purpose to waive the switching charge of ten cents per ton and to make no collection of such charge on coal originating on the Wabash rails in Illinois. The information furnished at that time was to the effect that the anticipated reduction of ten cents per ton in the cost of coal did not benefit either the coal operator or the consumer, unless the coal operator and the coal dealer happened to be one and the same company, because, as a matter of fact, this ten cents reduction in the rate, when limited to the coal origi¬ nating on the Wabash Railroad, was simply absorbed by the coal dealer and the delivered price of coal remained the same as before. Now at that time the charge of 30 cents per ton made by the Terminal Railroad Association from East St. Louis across the river to St. Louis included also the charges assessed by all west side roads, so that on two-thirds and possibly seventy-five per cent of the coal handled to St. Louis, the Termi¬ nal Railroad Association paid to the de¬ livering lines in St. Louis ten cents per ton. 12 In readjusting the coal rates the Terminal Railroad Association could go no further than its own revenue. It had no control over the total rates or over the switching charges assessed by the delivering roads in St. Louis. The Terminal Association, how¬ ever, did announce that irrespective of des¬ tination it would require out of any through interstate rate established, only twenty cents per ton whether for delivery to connecting lines in St. Louis or for delivery on Ter¬ minal rails in St. Louis. It then remained for the lines originating the coal to decide what through rate should be made to St. Louis, and before reaching any final con¬ clusion it was necessary to negotiate with the delivering or west side lines, so that, if possible, a uniform rate might be made to all industries in St. Louis from the inner group of mines, whether such mines were located on railroads having tracks in St. Louis or otherwise. The Terminal Railroad Association hav¬ ing announced its purpose of charging only- twenty cents per ton, whether for delivery to industries on Terminal tracks, including necessary switching on the west side and use of team tracks, or for delivery to the junctions with the west side lines, it was decided by the carriers in order to estab¬ lish the same total rates to all industries in St. Louis, to add only twenty cents to the East St. Louis rate, the lines east of the Mississippi River undertaking to absorb the charges made by the west side lines. 13 As already pointed out, this applied to probably seventy-five percent of the in¬ dustries in St. Louis. If this bad not been decided upon, the rates on coal would be today so fixed that with the exception of such coal as may originate on the Wabasb or on the Valley Division of tbd Iron Mountain all industries on the Terminal Railroad Association and Wiggins Ferry Company would be able to purchase coal at ten cents per ton cheaper than industries located on other west side lines, and it may be that the difference would be more than ten cents, because the present arrangement is a joint one between the connecting car¬ riers, whereby the delivering lines in St. Louis agreed to accept ten cents per ton if uniform rates were made to all industries, and on the other hand, the lines originating the coal, declined to establish this uniform total rate, unless the west side delivering lines accepted what was considered under these circumstances a reasonable switching charge. As the situation is today, there¬ fore, the lines east of the Mississippi River are accepting on probably seventy-five per¬ cent of the coal consumed in St. Louis ten cents per ton less than the rate to East St. Louis; that is, the rate to East St. Louis proper is forty-two cents per ton, and the proportion received up to East St. Louis out of the through rate to St. Louis is only thirty-two cents per ton. Furthermore, there is an additional ex¬ pense voluntarily assumed by the east side 14 lines to bring about this equality of con¬ ditions, and that is in the additional delay to cars. It will be remembered that Mr. Moore, in an interview about two years ago, pointed out that very few industries in St. Louis were equipped with facilities for handling coal economically, and he recom¬ mended that such industries construct elevated tracks, so that coal could be un¬ loaded at the minimum cost. It may be in¬ teresting to say that following this inter¬ view an investigation made by one of the railroads developed that out of all the in¬ dustries in St. Louis, except those located on the Terminal Railroad Association or Wiggins Ferry tracks, not more than half a dozen have any facilities for unloading coal except by shoveling it out of cars by hand. The result of these conditions is that whereas on business handled to and from points on the Terminal, coal cars are occupied for a period of nine or ten days in making the round trip from the mines, two days more are consumed when coal is delivered to connecting lines in St. Louis, so that not only do the east side lines as¬ sume a switching charge of ten cents per ton on the coal destined to seventy-five percent of the industries in St. Louis, but they also incur an additional delay of two days in the use of the cars handling such coal. Now, the counter-proposition is in two parts : ( i ) That the rate on coal to East St. Louis shall not be higher than twenty- is five cents, and (2) that the rate to East St. Louis shall be extended so as to cover all the deliveries in St. Louis, and as the twenty-five cent rate is referred to by the press as a standard rate which should not be deviated from, it is proper to explain the present rate of forty-two cents to East St. Louis. I should first say that twenty-five cents is not a standard rate. It was, as a matter of fact, at one time the result of irregular competition on the part of several carriers, and this competition continued as long as there were no through rates published to St. Louis; that is to say, until the Elkins Law and the Hepburn Law became oper¬ ative. There was a time when the rate to East St. Louis from the mines on some roads was only two dollars per car, but I do not suppose it will be contended that this should be considered as a permanent rate. Eorty-two cents per ton is the rate authorized by the Illinois Commission from the nearest mine to East St. Louis, and although the Illinois Commissioners' tariff authorizes fifty-eight cents per ton for thirty miles, by the voluntary action of the railroads this forty-two cent rate is ex¬ tended so that it covers all mines within a radius of thirty miles of East St. Louis, and so as to include all the mines pro¬ ducing so-called standard coal, and even from the mines further distant than thirty miles the railroads have not taken advan- 16 tage of the Illinois Commissioners' tariff but have established the rates on coal from the mines outside the standard group on a differential basis, resulting in rates much lower than the Illinois scale, and with thei result that there is active and healthy com¬ petition between the several groups of mines and the several grades of coal. To put the matter briefly, the rate of forty-two cents to East St. Louis is the minimum rate authorized by the Illinois Commission from any one of the mines in the inner group. The rate of sixty-two cents to St. Louis is made by adding twenty cents per ton to the Illinois Commissioners' rate, but instead of limiting the sixty-two cent rate to the industries on the Terminal Railroad Association and Wiggins Ferry tracks the east side lines have extended this sixty-two cent rate so as to cover prac¬ tically every industry in St. Louis, so that to seventy-five percent of these industries the net revenue of the east side lines is ten cents below the rate to East St. Louis proper. The present adjustment, in my opinion, is the best adjustment that St. Louis has ever enjoyed. It is true that in times past the rates to East St. Louis and St. Louis have been spasmodically lower than they are today. That condition was the result of ir¬ regular competition and the outgrowth of circumstances which today would be illegal. It is far better for a manufacturer who con¬ tracts for ten thousand tons of coal on a 17 freight rate of sixty-two cents per ton to know that a competitor who consumes fifty thousand tons will get no better rate of freight than it is to get a cut rate with no assurance that his competitor will not re¬ ceive a better one, and the present plan un¬ der which these through rates are con¬ structed and published is the only plan un¬ der which this result can be achieved. Since this adjustment was reached the rates on coal to St. Louis and East St. Louis have been more stable, and therefore more satisfactory to the ship¬ pers and consumers than during any other previous period of similar length. The general plan of the adjustment reacts beneficially upon the whole community. It places every available manufacturing site in St. Louis on an equal basis so far as the fuel supply is concerned, and I think that, upon investigation, it will be found that no other important city in the country enjoys this privilege to the same extent as it is enjoyed by St. Louis. It is to the interest, therefore, of the actual consumers of coal and of the property owners to discourage any attempt to break down the present sat¬ isfactory arrangement, because the break¬ ing down of that arrangement will simply result in inequality and discord. Now, if you will permit me, I want to say a few words upon the railroad situation as it ex¬ ists today. I need hardly tell you that up to and in¬ cluding October of 1907 the volume of 18 traffic was being handled in ever-increasing amounts, so that as to a great many rail¬ roads the gross earnings for the month of October were the maximum earnings of their history. The first effects of the ap¬ proaching depression in business were felt in November. In the months of December and January it appears that nearly every¬ thing was at a standstill, but in the month of February on a great many railroads the situation was even worse than in January, and we are now well into the month of March with only a slight increase in the volume of traffic as compared with the pre¬ ceding months. A railroad is nothing more or less than an improved means of communication, but the means of communication can be of no value whatever if the people are not able to travel or if they have nothing to ship. We are told that within the last two weeks the amount of coin and bullion in the United States Treasury reached the unpre¬ cedented figure of one billion dollars, and yet during the latter days and weeks in which this enormous amount was being ac¬ cumulated the business conditions remained stagnant. Every effort is being exerted by railroad managers to reduce expenses, but the de¬ crease in earnings has been so sudden and radical that in many cases, and, in fact, in most cases, it has been impossible to reduce the expenses of operation to the same amount that the revenue has decreased. 19 There has been, unfortunately, a pre¬ vailing impression that the volume of ton¬ nage to be moved and the number of peo¬ ple desiring to travel could be limited only by the capacity of the railroads to furnish freight and passenger cars in which to han¬ dle the traffic. The situation today demon¬ strates the error of such an impression. A little over a year ago the Interstate Commerce Commission held a session in this city in order to obtain information on the prevailing car shortage. Today there are over three hundred thousand freight cars standing idle. I do not refer to this situa¬ tion now for the purpose of explaining the causes. You know them better than I do, but I do refer to these present conditions for a specific purpose and that purpose is to say that the time has arrived for the business men of the United States to re¬ gard the railroads as one of the essential parts of their business equipment, and guarantee to the carriers a reasonable re¬ turn for work performed. The freight rates in this country are un¬ necessarily low. For years it has been our boast that the American railways have been handling cheaper than the railways of any other country vast volumes of freight traffic committed to their care. In all these years in which the freight rates have been steadily going down, the expenses of or¬ ganization, maintenance, equipment, and the prices in practically every detail connected with the operation and development of a 20 railroad have advanced. The present period marks the turning point. Regardless of the views of any individual shipper, and re¬ gardless of the so-called revelations as to large railroad profits of which we have been told, it is the duty of the business com¬ munities of this country to co-operate in ad¬ vancing the rates of freight practically throughout the entire country. It may be that in isolated cases there are inequalities in rates, but, generally speaking, the rates are too low, and such inequalities when re¬ moved, must be removed by advancing the lower scale instead of reducing the higher scale. The rates of freight are more fre¬ quently too low than too high. The country will be most prosperous when the employes are receiving fair wages, the merchants are making fair profits, and the railroads are charging rates which bring in a reasonable remuneration and which allow a fair margin between profit and loss. The methods of construction and the character of equipment which were formerly prevalent are no longer satisfactory. The expenditures for rails, ties, ballast and other parts of the roadbed, for bridges and for freight and passenger stations, and for engines and cars have been increasing from year to year in much greater proportion than the revenues from the freight or pas¬ senger traffic, and it is for this reason that at this time, when carriers should be in posi¬ tion to cut down their expenses to the same extent as the falling off in traffic, that we 21 find ourselves confronted with an almost irreducible scale of expenses and a materi¬ ally reduced volume of revenue. This country cannot afford to have a repetition of the transportation conditions of the last few years and the last few months. No sensible manufacturer would overtax his facilities to the extent to which the railroad facilities of this country have been overtaxed. The only means by which the railroads can support themselves is from the freight and passenger revenue. There is no mysterious source from which to draw funds, and I repeat that it is one of the responsibilities of every business man in this country to take the railroads into partnership, to see that they are not un¬ duly burdened with expenses, and to co-op¬ erate in establishing a scale of freight charges throughout the country which will afford ample revenue to the carrier and at the same time result in doing full justice to the shipper and receiver and to the employe. 22