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ADDRESS
it THE
Korth Dakota Industrial Exposition
BISMARCK, N. D.
September 29,1911
TRANi
..t, y.■*■■'• • •
■ ':■ V
A Mile
Oí Railroad and a
Country Store
BY
HOWARD ELLIOTT
PRESIDENT, NORTHERN PACIFIC RAILWAY
ADDRESS
AT THE
North Dakota Industrial Exposition
BISMARCK, W. D.
September 29, 1911
A Mile
Of Railroad and a
Country Store
Three hundred and one miles of new railroad were built in North
Dakota in 1910, or a larger new mileage than was construeted in
any other Northwestern state. Only two states in the Union
received an equal addition to their transportation facilities, and
in one of these the number of people to the mile of railroad was more
than double, and in the other nearly double the number in this state,
where for each mile of railroad there are only 137 people.
In Minnesota there are 243 people per mile of railroad; in Penn¬
sylvania nearly three times as many or 688 people for each mile of
railroad, while in the New England States there are more than 1,000
people per mile. In Rhode Island, which except for the District
of Columbia, has the densest population per mile of line, there
are 2,550 people for each mile of railroad.
Investing for The area of the Northwestern and Western states
the Future. is great. The population, while growing at a
gratifying rate, is not yet comparable in number
with that of older portions of the country, and the railroad is still,
in a sense, a pioneer. It is investing money against its belief in the
future and is providing needed facilities against a time when it may
hope to handle, through them, a volume of business proportionate
to that enjoyed by older lines in better settled country.
North Dakota occupies a fortunate position. The time is far
off when it will be necessary to turn away the newcomer because
there is no more rich or fertile land for him to use. About 15,000,000
acres are now under the plow. Ten million acres more can
be put into crop profitably and it is probable that in time a total
of 30,000,000 acres will be under the plow, or double the present
total. The farm population is growing rapidly, increasing 67 per
cent during the last census period. The increase in the same
period of 112 per cent in the improved acreage of the state is a
significant indication that banks, business houses and railroads alike
will have to enlarge and prepare to do more business, if they ade¬
quately take care of the demands of the future.
Railroads Help ^ large part of this satisfactory growth is trace-
De velopment. to the fact that the Northern Pacific
Railway, the pioneer line, and other railroads
have always kept ahead of the incoming farmers and have pro¬
vided them with transportation, to open up markets for their
products and make their business successful. This work should
continue or the development of the state will be retarded. New
miles of railroad must be built before the wild prairie that is still
unused, but rich in agricultural possibilities, can be made productive.
It is only a few months since North Dakota had a practical
example of what a new railroad means to a growing agricultural state,
in the opening up of Hettinger county by the construction of the
Northern Pacific's Cannon Ball extension. Lands were worth from
$2 to $5 an acre before the railroad was built, and there was lit¬
tle development of farming. Land is already worth from $6 to $25
an acre and choice sections are worth even more. Settlers arc going
in and thriving towns are growing up. The mere money increment
resulting from the fact that the country has been given an oppor¬
tunity to grow, is not as important to the State at large as the
coming of new population, the beginning of new farm and business
development and the creation of a new district with which business
can be done and new trade built up.
The Value of a ^ farmer and his family are worth to the
Farm Family. market town a great deal of trade each year,
aside from the commerce arising from the pro¬
duction of the farm. Any area that will draw in and support 1,000
new farmers, is an asset to the trade of this State worth $1,000,000
a year, and proportionately valuable to the production and agri¬
cultural prestige of the commonwealth. Vhile placing itself in
4
a position to handle the traffic of the future, the Northern Pacific
Railway has in this instance greatly benefitted the State and its busi¬
ness institutions, and in every instance where rail lines penetrate
new country, the same advantages arise.
Here in the capital of the State, we are on the Eastern edge of
the Missouri Slope Country, full of possibilities, but only just be¬
ginning to grow. West of the Missouri River there are ten counties
with 12,304,414 acres of land, of which 4,587,070 acres are more
than 15 miles from a railroad.
State Needs Liberal Some railroad lines have been built in
Policy. tliis district, but in time there must be
more if the good land out there is to be
used as it should be. It is to the interest of this State that its policy
toward agriculture and transportation should be fair and liberal,
so that these two great primary occupations will go forward hand
in hand.
Without steady improvement in agricultural methods and pro¬
duction, and without patience, fairness and encouragement on the
part of legislatures, executive officers and commissioners in dealing
with the railroads, the best results will not be obtained.
Public Demands the The time when railroads could be built
Best Railroads. cheaply has passed. When these prai¬
ries were unoccupied and the land was
of little value, right-of-way could be acquired at a reasonable figure.
The land has been settled and right-of-way costs from two to ten
times what it did only comparatively few years ago, while damages
to adjacent property have been found in points that were never
thought of before.
The railroads in North Dakota have undergone great changes.
Wfiien they were built the demands of the prospective traffic were
not heavy and a cheap railroad was good enough. Conditions are
very different now.
Traffic has increased greatly and a discriminating public is in¬
sistent upon the best equipment and service. The wants of many
people must be served where formerly there were few. The old kind
of railroad has gone forever and what there was of it that could be
reconstructed to meet modern requirements has been so improved
that its identity is lost, while entire miles have been abandoned,
the rails taken up, and new lines built.
5
Two railroads, virtually, have been built, one representing the
original construction and the other the rebuilding of the original
line, to meet the demands of the present.
One reads in papers and magazines sometimes the statement
that railroads can be built for 610,000, $15,000, or $20,000 a mile,
and so they can, but they are not the kind of railroad that will
handle the lieavily loaded cars of wheat, coal and other products of
a state like North Dakota. It is not the kind of railroad that the
progressive people of this state desire to have.
The Cost of To build the branch lines needed in this state
Branch Lines, and to furnish engines, cars, shop facilities, water
supply and the necessities demanded by present
and future demands of the public, means that about $30,000 a mile
must be provided by someone and in heavy, rolling country, more
than this. An investor will only advance $30,000 under conditions
that make him feel reasonably sure that he will make a return and
7 per cent is a moderate return for business enterprises in this State;
also that his principal is safe, and that he will receive as much en¬
couragement and protection from the State as do other forms of
business.
After he has placed his $30,000 on the ground in the form of a
mile of railroad he must pay taxes, averaging in North Dakota
$300 a mile for main lines and nearly $200 a mile for branch lines.
His 7 per cent interest is $2,100, or $2,300 for these two items. But
he must maintain and operate his railroad so as to perform the duty.
imposed upon him by the public, in the hope that as time passes
buiness will grow sufBciently to justify his investment.
To maintain and operate a mile of branch railroad in good and
bad weather, and giving only a moderate amount of train and station
service, will cost about $1,500 to $2,500 per mile, so that the investor,
before he puts $30,000 or more into a mile of railroad should see in the
not far distant future, earnings from that mile of from $3,800 to $4,800.
Branch Line Earn- On the $80,000 mile of branch railroad the
ingS are Small. business is generally very light and if the
gross earnings are $10 a working day or
$3,120 a year, it means that the branch is above the average. Many
branches in thinly-settled country will not produce as much as this
per mile or average $3,000 gross a mile a year, and some in this
e
State will not produce even $1,500 a year gross, because the rates
on both passenger and freight business are so low that the volume
of business done at those rates will produce no more, and the rail¬
road has very little of earnings except from the handling of prop¬
erty and passengers.
So the owner of a mile of branch line must face a loss year after
year, upon many branch lines in newly settled and undeveloped
country, hoping that the business of the railroad in the aggregate
will enable him to carry such unproductive pieces of property until
they contribute their full share to the sum needed to pay taxes,
interest, and dividends.
Adverse Laws You who live in this country of opportunities
Discourage should understand these things, because you
Construction make the laws which your elected officers must
under their oath of office, carry out. If you
pass laws that make the chance of return on the investment in a
mile of railroad remote, you defer the construction of new lines,
because people will not invest in an unproductive mile of railroad any
more than they will in any other business, unless they can see their
way clear to future profit, and feel sure that the principal is safe.
The margins in the railroad business are very small; how small
can be illustrated by the fact that if a man had owned all the stock
of an average mile of railroad in the United States for the 26 years
ending in 1907, his net profit would have averaged only $1.43 per day.
If he had owned all the stock represented by a mile of railroad
in the Northwest, instead of an average mile of railroad for the
country as a whole, he would have received for the twenty years
"from 1882 to 1901 only 87 cents net profit a day, or about the price
of a bushel of good North Dakota wheat.
New Lines Usually New railroads either operate at a loss or
Unprofitable. barely pay expenses during their early
years. It takes courage, and faith in the
future, to put large sums into railroad extensions. When the directors
and stockholders of railroads, and the investing public, believe that
the attitude of the people toward railroads is unfriendly and harsh,
they cannot be blamed for hesitating.
Although the railroad offers a solid and substantial kind of in¬
vestment, the returns are very moderate. In 1909 three-tenths
7
of all the railroad stock of the country paid no dividends whatever.
The average dividend rate on the stock of the railroads of the
country was only 4.2 per cent. Investors in railroads want a rea¬
sonable return on their money and they will invest further in railroad
securities, if they believe that the public's attitude is friendly. In
a state sucli as this, much encouragement can be given them by
demonstrating that the attitude of the people of the state is fair and
cordial.
Texas did much for herself with railroad investors, when last
year the legislature refused to pass a single anti-railroad law. Other
states could do the same with profit.
Railroading and Wiat will $30,000 invested in a general
Merchandising. merchandise store in this state produce.''
I have recently received the annual state¬
ments of two representative business firms located in the Missouri
Slope country. The first is engaged in the hardware business and
carried a stock last year of $30,000, or about the cost of a mile of
branch railroad. The yearly business was $90,000, $273.96 a day and
the net profits were 10 per cent or $9,000, or 30 per cent on the
$30,000 stock.
A second firm is engaged in the dry goods business and carried
a stock of $60,000 or value of two miles of branch railroad. Its
business was $150,000 or $410.95 a day, and its net profits were 8
per cent or $12,000, or 20 per cent on the $60,000 stock. In the
first instance the,return to the investors was more than four times
the return to the holders of dividend-paying railroad stocks of
North Dakota railroads, and in the latter case, nearly three times
as much. In the first case the return was seven times as much
as the average returns on railroad stocks in the United States in
1909, and in the second case nearly five times.
I have the figures on the business of two firms carrying a smaller
stock, one of which did a business of $60,000 and made nearly 8
per cent, the other doing a business of $48,000, making 13j^ PC"
cent. In neither case was the stock more than $10,000. In the
first case the return was 48 per cent on the average investment in
the stock of goods, and in the latter case, 65 per cent.
The results on the entire Northern Pacific main lines with heavy
business and branch lines with light business, show that for the year
ending June 30, 1911, the gross receipts per day for each mile were
only $30.08 and the Northern Pacific is above the average in earnings
per mile among the roads west of the Mississippi River. Compare
these daily returns from a mile of railroad, generally called success¬
ful in the last few years of its history, with the daily earnings
of successful stores.
Farm and There is very little data available to show how the
Railroad farmer would stand if he conducted his business on
Profits. scientific business lines, but such figures as have
resulted from recent investigations are very inter¬
esting and significant.
In both North Dakota and Minnesota this matter has been
studied, for a longer time in the latter state than in the former. In
this state the investigation is not yet complete and the figures can
hardly be taken as indicating the real conditions. In hlinne-
sota the dean of the state agricultural college states that he believes
well-managed farms will pay from 12 to 15 per cent.
The statistics which have been gathered show that there is a
very wide variation of profits in farming. Eight Minnesota fanns
in the same general district, with no attempt to eliminate the poorly-
managed, paid in 1908 a return of G.49 per cent. In 1910 a group
of eight farms in the southeastern part of the state paid 7.17 per cent.
It should be said as well, that the same investigation shows many
farms operating at an actual loss, when their value is computed on
the basis of the going price of adjacent farm land. In 1909 the
average dividend on railroad stock in this country was 4.2 ])er cent.
Business Methods The idea of placing the farm upon a busi-
On the Farm. ness basis has been very slow of adoption.
The study of farm expenses and profits has
already proven that there are almost as many degrees of efficiency
in farm management as there are farms, and that in the same dis¬
tricts where some farms are losing money, there are otliers which
are making an excellent profit.
It is a fair conclusion from the result of such investigations as
have been made that well-selected and well-managed farms in North
Dakota will pay considerably more than the returns made upon
railroad investments. If farming were uj)on the same basis of
efficiency as railroading, and farmers exercised the same rigid care
in all their operations that a railroad is forced to exercise because
9
of its narrow profits, farming would pay a higher average return
and the result would bo a very large increase in production as well
as better profits to the individual and to the state.
The work done by the agricultural schools in encouraging the
adoption of practical business methods on the farm, and in investi¬
gating the facts about farm profits and expenses is excellent, and
points out several interesting facts.
Defects in Farm The farmer who homesteaded or otherwise
Managment. acquired land in early days at low prices
and still holds the land, may be riding in an
automobile, while his farm is actually losing money. This is
because land values have advanced so much that the farm will not
pay, under ordinary methods, a profit on what it is worth today,
although it yields what the owner considers very good money. But
it could be made to earn very much more.
Farms may lie side by side, the one making and the other losing
money, although soil conditions are the same. There is a difference
in the skill of management.
Too much money is going into farm expenses and it is evident
that better management would often change the relations be¬
tween income and outgo.
Rail Ratés So long as the farmer engages in the production of
Steadily w^hat is needed to feed the people, he will require
Decline. the railroad as a large factor in his business. The
distribution of things he produces is quite as im¬
portant to him as the successful growing of a crop, because his crop
must be moved away from the farm to find a purchaser. It costs
him 25 cents a ton a mile to haul his products, the Department of
Agriculture says, or $3 to haul a two-ton load from his farm six
miles to a railroad. The railroad picks up a ton of grain here at
Bismarck and for $3.20 hauls it 435 miles to Minneapolis, or at a
rate of less than three-fourths of a cent a ton a mile.
For the past ten years grain rates have been going dowm steadily,
although the cost of living to the railroad has been going up. Rail¬
road rates on grain average about one-fifth lower than ten years ago.
If the farmer ships from Bismarck, the rate is nearly one-fourth
lower than it was ten years ago. Transportation that cost $4 then
can be purchased now for $3.
10
The sa-vhng in rates on 12-busheI wheat from 1,000 acres, shipped
from Bismarck to the Twin Cities or Duluth, amounts to $1.00 on
each ton, and would be equal this year to the cost of a farm team
and two first class mowers, or would save the farmer more than
enough to pay for two of the best eight-foot grain binders, with
a couple of hay-rakes tin-own in.
Reductions in rate increase the farmer's ability to market crops,
but the railroad has done many other things which help him in¬
directly and which he does not see unless they are pointed out.
The number of grain-carrying cars in service has largely increased
and with more powerful engines and better track, the farmer is
getting better service than before. At Duluth and Minneapolis
such terminal improvements have been made that it is possible to
move a car loaded with grain to the market and return it empty to the
grain-growing territory in from five to eight days. This helps the
car supply and tends toward better and more prompt movement of
loaded cars. Local service and facilities are better than they were.
How Shippers are The farmer sees much activity along the
Saving Money. railroad and naturally infers that business,
in a favorable year, is very good and profits
hea%'y. The annual earnings of a representative railroad strike him
as a huge sum, and they are very large. He hears much criticism
of railroads, and while I believe he himself is well satisfied with ser¬
vice and rates, he is not infrequently led to think that with a large
business and income, the railroad's profits are excessive and that
the railroad business is unduly enriching those engaged in it.
The Northwest is a big country, and this State, with nearly 81
per cent more people than it had ten years ago, requires larger rail¬
road equipment, more miles of line and more powerful transporta¬
tion companies than were necessary when the population was small.
As the size of the tran.sportation machine has increased, the gross
earnings have increased, but not without a steady fall in the rates
the public pays.
The average ton-mile rate in the United States has gone down
nearly one-fourth since 1888. The amount of the decrease in the
rate per ton per mile is 2.4C mills, an insignificant sum applied to
one ton but it i.g a saving of $1.00 out of $4.00, and on the tons
handled by the railroads in 1910 it meant a saving to the shippers
of $015,928,000.
11
The Cost of A good half-section of $40 North Dakota land
Railroad would cost $12,800. Add a good barn at $4,000,
Operation. a $3,000 house, $2,000 for outbuildings and im¬
provements, and $1,050 for teams, stock and
equipment and one would have a pretty good farm and equipment
at an investment of $23,450.
What the Northern Pacific Railway pays out for wages in a
single day, would buy and pay for three such farms.
To keep roadway and structures in such condition that they will
handle tlie business and will not deteriorate, costs the Northern
Pacific $22,097 a day, or nearly the cost of such a farm.
To maintain equipment in good condition costs each day $21,674.
Fuel for road engines averages $16,231 a day and the total
operating expenses of the railroad amount to an average daily drain
on what comes in of $108,848, or enough to buy 435 of the best farm
teams, or buy one of the best grain binders for each of 726 farmers.
Railroad "Readiness In times of poor business the expenses
to Serve." do not drop in proportion to the fall in
earnings. Whether the business is good
or bad, the railroad must be kept in shape to move trains regularly
and light business requires that almost as much machinery be kept
regularly in motion as when the volume of business is good and
the transportation machine is carrying a full load.
The owners of well-managed farms may expect to have left from
12 to 15 per cent on the value of their business. In merchandising in
this territory the storekeeper is making a good profit, ranging from
8 to 133^ per cent on his gross business and very much higher on the
average value of his investment in stocks of goods. The railroad
owner rarely receives seven per cent and the average return in
1909 on railroad stocks was only a little more than four per cent.
Mutual Relations of The railroad is necessary to the farmer
Farm and Railroad. and the farmer to the railroad. Neither
can live and profit without the other
The best condition will exist when the treatment each by the other
is fair, considerate and friendly. Agriculture has gone forward m
North Dakota by leaps and bounds, and the railroads have grown
large at the same time. If they were not big they would not give
12
the service this State demands, and no one would for a moment
think of returning to the railroad facilities of twenty or even ten
years ago.
There is a growing appreciation among our solid business men
and farmers, of the great future before these Northwestern states.
Their richness of soil and productiveness, their excellent climate
and natural attractions, their undeveloped resources and the large
areas of good land yet unused, promise to many a man in coming
years a sure and satisfactory opportunity to engage profitably in
agriculture or business.
Building for These states are much favored, and the belief that
the Future. there should be joint work for the future upbuild¬
ing of this region is obtaining a firm hold. The
North Dakota Industrial Exposition, now established in Bismarck
under the supervision of the Commissioner of Agriculture, Mr. W.
C. Gilbreath, will carry much good news of the wealth and resources
of North Dakota to the world and is an expression of the feeling
which is common among all business and professional men, agri¬
culturalists and others interested in the future of this State, that
what North Dakota has to offer, should be told the world in unmis¬
takable terms.
The exposition of the land products of the Northwest, to be held
in Saint Paul in December, is another expression of the same feeling
in a little larger circle of progressive men, and promises to do a great
work in advertising the Northwest to the country at large.
The railroads have been pioneers in development work, and will
go forward along the same line as fast as circumstances will permit,
if they can feel sure that they have the cordial co-oj)cration of the
people of this State. The owner of the mile of railroad needs en¬
couragement at this time, for constructive work in the furthering
of new enterprises has halted because investors do not know what
to look forward to in the future.
Railroad, Farm and Even with the moderate returns of 7 per
Manufacturing cent earned only by the railroads classed
Profits. as the most successful, the reward to the
man who risks his money in owning a mile
of railroad is small compared with the returns made by the successful
farmers of this State, the successful merchant who would think his
13
business was a failure if in a good year he received only 7 per cent—
witli the successful banker, wlio makes a higher rate of profit even
in an ordinary year.
The Industrial Census of 1905 showed the average net return on
$1,000 invested, for the country as a whole, as $151 in the case of
Manufactures, $98 in the case of Agriculture and only $44 in the
case of Railroads. The $1,000 invested in a manufacturing busi¬
ness therefore makes for its owner nearly three and a half times
the net return from $1,000 invested in railroads. The $1,000
invested in agriculture makes two and a quarter times the net
return that the $1,000 invested in railroads makes. Compare this
with the profits in merchandising and banking and see how much
incentive there is for the investor to put his money into a $30,000
mile of railroad, with its small chances of making a profit and all
the risks of ordinary business, in addition to numerous restrictive
rules and regulations imposed by the State and Nation.
The Progress of Lewis and Clark spent the winter of 1804-5
North Dakota. on the Missouri River above this city. Here
occurred that fortunate incident of obtaining
Charbonneau as their interpreter, and through him the heroic
Sacajawea, his wife, as members of their exploring party. But for
her knowledge of the Western Montana regions, her wit and re¬
source and her faithfulness, their explorations might have had a
very different end and it was fitting that you recently unveiled her
statue here, as a monument to the services of one who though not
born in what is now this State was one of the earliest and most
notable of the many brave and heroic North Dakota women who
have contributed to the upbuilding not alone of this commonwealth,
but of the West.
North Dakota was a wilderness then, but now it is the home of
many prosperous farmers. It is dotted with good towns and the
happy homes of a contented and thriving people who are enjoying,
even though they are of moderate means, luxuries that the early
pioneers never dreamed of. One hundred years is not a great
period in the life of a country like the United States, and the fu¬
ture should hold much in store for all, if they work, have self-
reliance and are fair to all interests—the Farm, the Country Store
and the Railroads.
14