OPINION No. 820.
BEFORE THE
Interstate Commerce Commission.
No. 879.
CITY OF SPOKANE, WASH., ET AL.
v.
NORTHERN PACIFIC RAILWAY COMPANY ET AL.
Decided February 9, 1909.
REPORT AND ORDER OF THE COMMISSION.
28411—09 1
-376
INTERSTATE COMMERCE COMMISSION REPORTS.
No. 879.
CITY OF SPOKANE, WASH., ET AL.
v.
NORTHERN PACIFIC RAILWAY COMPANY ET AL.
Submitted October 1, 1907. Decided February 9, 1909.
1. The system of transcontinental rates now in force applies lower transportation
charges from points of origin upon the Missouri River and east to Pacific co^st
cities than are applied to intermediate interior points; Held, That this scheme
of rate making has been forced by water competition between the Atlantic
and the Pacific coasts, and that the maintenance of the lower rate to the more
distant coast point is not of necessity a violation of the third or the fourth
sections, since water competition creates a dissimilarity of circumstance and
condition between the interior and the coast.
2. Water competition may justify a difference in carload minimums and in the right
of combining different commodities at the carload rate, as well as in the rate
itself; but carriers should be prepared to justify such preference.
3. In determining what are reasonable rates between two points neither that railroad
which can afford to handle traffic at the lowest rate nor that whose necessities
might justify the highest rate should be exclusively considered. Rates must
be established with reference to the whole situation.
4. Certificates issued against the ore lands formerly owned by the Great Northern
Railway Company can not be properly considered in determining what are
reasonable earnings for that company at the present day.
-5. The Great Northern Railway Company has in the past distributed its stock issues
among its stockholders at par from time to time, although the market value of
the stock was often much above par. Without expressing any opinion upon
the legality or propriety of this practice, it is held that this fact, at this time,
can have no bearing upon the earnings to which that company is entitled,
ifi. Neither can the capital stock of the Great Northen Railway Company be reduced
for the purpose of determining what its fair earnings should be by the amount of
that stock which was originally issued without money consideration.
7. In determining what will be reasonable rates for the future the Commission may
properly consider that under the rates in effect a large surplus has been accumu¬
lated in the past, but it should not make rates for the purpose of distributing '
that surplus to the public.
8. The importance of the question whether a railway shall be allowed to earn a return
upon the unearned increment represented in the value of its right of way is
illustrated by the facts in this case, but is not discussed or decided.
9. Upon an examination of the history of these properties, the cost of reproducing
them at the present time, the original cost of construction, the present capitaliz¬
ation, and the manner in which that capitalization has been made; Held, That
the earnings of both the Great Northern and the Northern Pacific in recent years
have been excessive.
15 I. C. C. Rep.
city of spokane V. n. p. ry. co.
377
10. The only duty of the Commission in this case is to establish reasonable rates from
eastern points of origin to Spokane, and in so doing it can only act upon those
rates specifically called to its attention, although it must have in mind the
effect upon the revenues of these companies of resulting reductions upon other
commodities and at other points than Spokane.
11. The rates attacked are class rates from St. Paul and Chicago to Spokane, and
commodity rates upon 34 enumerated articles. Class rates are established
from St. Paul to Spokane which are 16f per cent less than those now in effect,
and class rates from Chicago to Spokane are made higher than those from St.
Paul by certain named arbitraries.
12. In case of all commodities except 5 the present rate from Chicago to Seattle is
established as a reasonable local rate from St. Paul to Spokane. Upon 5 articles
somewhat higher rates are fixed. Rates on all these commodities from Chicago
to Spokane are made 16f per cent above those from St. Paul. Neither class
nor commodity rates are named from points east of Chicago.
Brooks Adams, Alex. M. Winston, H. M. Stephens, Lawrence Ham¬
blen, Frank Allen, R. M. Barnhart, and J. M. Geraghty for com¬
plainants.
Charles Donnelly, Edward J. Cannon, and Charles W. Bunn for
Northern Pacific Railway Company.
L. C. Gilman and W. R. Begg for Great Northern Railway Company.
TP. TP. Cotton, P. F. Dunne, and John N. Baldwin for Union Pacific
Railroad Company, Oregon Railroad & Navigation Company, and
Oregon Short Line Railroad Company.
Seth Mann and Joseph N. Teal for Pacific Coast Jobbers' & Manu¬
facturers' Association, and Portland Chamber of Commerce, inter¬
veners.
Report and Order of the Commission.
Prouty, Commissioner:
The complainants in this proceeding are the city of Spokane,
Wash., the Spokane Chamber of Commerce, and the Spokane Jobbers'
Association, of Spokane. Before the hearings began the county of
Spokane was permitted to intervene as a complainant. All interests
of that locality are therefore represented.
One of the allegations in the complaint is that the rates of the
defendants unduly prefer Seattle, Tacoma, Portland, and other
coast points. This allegation affects the commercial interests of
those localities, and, with a view to protecting such interests, the
Pacific Coast Jobbers and Manufacturers' Association, the Portland
Chamber of Commerce, the Merchants' Protective Association of
Seattle, and the Tacoma Traffic Association have become parties
of record by petitions of intervention.
The complaint was originally brought against the Northern
Pacific Railway Company, the Great Northern Railway Company,
Notic.—The rates and rate references in this opinion were made and verified as of
January 1, J908. Unless otherwise stated subsequent changes have not been noted.
15 I. C. C. Rep.
378 INTERSTATE COMMERCE COMMISSION REPORTS.
the Union Pacific Railroad Company, the Oregon Railroad & Navi¬
gation Company, and the Spokane Falls & Northern Railway Com¬
pany. The first four of these defendants form through lines of rail¬
way between the Missouri River and Spokane. The last named
extends north from Spokane to Nelson, where it connects with the
Canadian Pacific Railway, thus affording a possible route from
Spokane to eastern destinations.
The complaint puts in issue not only rates from the Missouri
River to Spokane, but also those from territory east of that basing
line extending as far as the Atlantic seaboard. It seemed to the
Commission upon an examination of the complaint that carriers
participating in these rates east of the Missouri River ought to be
made parties of record as well as the Canadian Pacific, which may
handle traffic in connection with the Spokane Falls & Northern
from Spokane. We accordingly directed that the Canadian Pacific
Railway Company, the Cliicago, Burlington & Quincy Railway
Company, the Chicago & Northwestern Railway Company, the
Lake Shore & Michigan Southern Railway Company, the New York
Central & Hudson River Railroad Company, the Pittsburg, Fort
Wayne & Chicago Railway Company, the Penns3dvania Railroad
Company, the New York, New Haven & Hartford Railroad Com¬
pany, and the Boston & Maine Railroad be made parties to this
proceeding, and they were accordingly brought in as additional
defendants and have answered.
The issues presented are important both from the traffic, the
pecuniary and the economic questions involved. A large amount
of testimony has been taken and the case has been elaborately and
ably argued by counsel representing all phases of the controversy.
These issues, while treated upon the hearing and argument in a great
variety of form, really reduce themselves to three:
First. Do the rates of the defendants unduly discriminate against
Spokane in favor of coast points ? This includes the further inquiry
whether these rates are in violation of the fourth section.
Second. Do the defendants improperly allow certain privileges
to coast traffic which are denied Spokane, like the mixing of carloads,
lighter minimums, etc.?
Third. Are the rates applied by the defendants to Spokane inher¬
ently unjust and unreasonable?
Spokane is situated some 400 miles east of Seattle, and Missoula,
Mont., is upon the line of the Northern Pacific about 250 miles
east of Spokane. For the purpose of indicating the scheme of rate-
making against which this complaint is directed, these three points
are taken as illustrative.
15 I. C. C. Rep.
CITY OF SPOKANE V. N. P. RY. CO.
379
Below are given the class rates, in cents per 100 pounds, from St.
Paul, Chicago, and New York, respectively, to Seattle and Spokane,
Wash., and Missoula, Mont.
TO SEATTLE, WASH.
From—
1
2
3
4
/
5
A
B
C
D
E
St. Paul, Minn
Chicago, 111
New York, N. Y
300
300
300
260
260
260
220
220
220
190
190
190
160
165
165
160
160
160
125
125
125
100
100
100
95
100
100
85
95
95
TO SPOKANE, WASH.a
From—
1
2
3
•
4
5
A
B
c
D
E
St. Paul, Minn
Chicago, 111
300
300
260
310
220
260
190
210
150
170
145
170
125
145
100
117
*
95
109
85
98
TO MISSOULA, MONT.a
From—
1
2
3
4
5
A
B
C
D
E
St. Paul, Minn
236
201
165
142
118
118
94
83
59
47
Chicago, 111
296
251
205
167
138
143
114
100
73
60
1
2
3
4
5
6
New York to Chicago
75
65
50
35
30
25
o Rates from New York to Spokane and Missoula are made on combination over Chicago.
From an examination of the above tables it will be seen that class
rates from St. Paul to Seattle and Spokane are the same and that
they are less to Missoula. From Chicago the class rates are higher
to Spokane than to Seattle in all cases, but somewhat lower to Mis¬
soula than to either Spokane or Seattle. There are no joint through
rates from Chicago to Missoula, the above rates being arrived
at by combination upon St. Paul.
From New York class rates are still the same to Seattle as from
Chicago and St. Paul, but are materially higher both to Spokane
and Missoula. No joint through class rates are published from New
York, the through rate above given to Spokane being obtained by
combination on Chicago, while the rate to Missoula is made by com¬
bining the rates from New York to Chicago, from Chicago to St.
Paul, and from St. Paul to Missoula. 1
It will be seen, therefore, that if all trallic moved upon class rates
no discrimination would exist against Spokane when the traffic
originated at the Missouri River, save that the defendants would
charge the same for transporting traffic 1,829 miles to Seattle as for
the 1,490 miles to Spokane. If, however, the traflic originated east
of the Missouri River, it would in all cases pay a somewhat higher
15 I. C. C. Rep.
380 INTERSTATE COMMERCE COMMISSION REPORTS.
rate to Spokane than to Seattle, the difference against Spokane -
increasing with the distance from St. Paul.
Onl}T a comparatively small part of Spokane's traffic, however,
moves upon the class rate. The great bulk of the tonnage from
eastern points of origin to Spokane moves upon commodity rates, and
this is even more true of the Pacific coast. Hence it is necessary in
order to appreciate the force of this discrimination to examine these
commodity tariffs.
The complainants have referred in the complaint to a number of
commodities as illustrative of the general situation, and we have
selected from these ten articles giving below the rates from St. Paul,
Chicago, and New York to Seattle, Spokane, and Missoula. The first
column in the table indicates whether the rate applied is class or com¬
modity; the second column gives the rate for less-than-carload move¬
ments, while the last two columns repeat this information for carload
shipments. In some cases, especially from New York to Spokane
and Missoula, the rate is made by combination upon Chicago, involv¬
ing sometimes both class and commodity rates. This is indicated in
the tables by the abbreviation "comb."
Rates in cents per 100 pounds.
To Seattle, Wash.
Class.
From St. Paul, Minn.
Tin boxes and lard pails, nested in boxes Second.
Shovels, spades, and scoops Comb.
Fruit jars and glasses do..
Canned corn, peas, and beans do.
Drugs and medicines do..
Cotton ducks and denims do..
Glassware, n. o. s do..
Stoves, n. o. s Third.
Twine, in bales, boxes, or barrels Comb.
Copper wire j do..
Wire fencing, in rolls | do.,
From Chicago, III.
Tin boxes and lard pails, nested in boxes : Second.
Shovels, spades, and scoops ! Comb..
Fruit jars and glasses do..
Canned corn, peas, and beans j do..
Drugs and medicines ' do .
Cotton ducks and denims 1 do.,
Glassware, n. o. s j do..
Stoves, n. o. s 1 Third..
Twine, in bales, boxes, or barrels I Comb..
Copper wire j do..
Wiro fencing, in rolls ! do..
From New York, N. Y.
Tin boxes and lard nails, nested in boxes ; Second
Shovels, scoops, and spades ! Comb.
.do.,
.do.,
.do..
.do.,
.do..
.do.,
.do.,
.do.,
Stoves, n. o. s. (not crated or boxed) j Third..
Fruit jars and glasses.
Canned corn, peas, and beans
Drugs and medicines
Cotton ducks and denims
Glassware, n. o. s
Twine, in bales, boxes, or barrols.
Copper wire
Wire lencing, in rolls.
L. C. L.
260
165
150
140
180
135
160
220
125
165
150
260
175
150
145
190
135
160
220
125
165
150
260
175
150
15C
190
135
160
125
165
150
220
Class.
C. L.
Comb.
do.
do.
do.
do.
do.
do.
do.
do.
do.
do.
Comb.
do.
do.
do.
do.
....do.
do.
do.
do.
do.
do.
Comb.
do.
do.
do.
do.
do.
do.
do.
do.
do.
do.
15 I. C. C. Rep.
CITY OF SPOKANE V. N. P. RY. CO.
Rates in cents per 100 pounds.
381
From St. Paul, Minn.
Tin boxes and lard pails, nested in boxes.
Shovels, spades, and scoops
Fruit jars and glasses
Canned corn, peas, and beans
Drugs and medicines
Cotton ducks and denims
Glassware, n. o. s
Stoves, n. o. s
Twine, in bales, boxes, or barrels
Copper wire
Wire fencing, in rolls
From Chicago, 111.
Tin boxes and lard pails, nested in boxes.
Shovels, spades, and scoops
Fruit jars and glasses
Canned corn, peas, and beans
Drugs and medicines
Cotton ducks and denims
Glassware, n. o. s
Stoves, n. o. s
Twine, in bales, boxes, or barrels
Copper wire
Wire fencing, in rolls
From New York, N. Y.
Tin boxes and lard pails, nested in boxes.
Shovels, scoops, and spades
Fruit jars and glasses
Canned corn, peas, and beans
Drugs and medicines
Cotton ducks and denims
Glassware, n. o. s
Twine, in bales, boxes, or barrels
Copper wire
Wire fencing, in rolls
Stoves, n. o. s. (not crated or boxed)
To Spokane, Wash.
Class.
Second..
do..
Third...
Fourth.
First...
do..
Second..
Third...
Second..
do..
Third...
Second..
do..
Third...
Fourth.
First...
do..
Second..
Third...
Second..
do..
Third...
Comb.
do.
do.
do.
do.
do.
do.
do.
do.
do.
do.
L. C. L.
260
260
220
190
300
300
260
220
260
260
220
310
310
260
210
360
360
310
260
310
310
260
365
365
315
250
435
415
365
360
360
300
310
Class.
Fourth.
Comb..
do..
do..
do..
do..
do..
do..
do..
do..
do..
Fourth.
Comb..
do..
do..
do..
do..
do..
do..
do..
do..
do..
Comb.
do.
do.
do.
do.
do.
do.
do.
do.
do.
do.
C. L.
From St. Paul, Minn.
Tin boxes and lard pails, nested in boxes.
Shovels, spades, and scoops
Fruit jars and glasses
Canned corn, peas, and beans
Drugs and medicines
Cotton ducks and denims
Glassware, n. o. s
Stoves, n. o. s
Twine, in bales, boxes, or barrels
Copper wire
Wire fencing, in rolls
From Chicago, III.
Tin boxes and lard pails, nested in boxes.
Shovels, spades, and scoops
Fruit jars and glasses
Canned corn, peas, and beans
Drugs and medicines
Cotton ducks and denims
Glassware, n. o. s
Stoves, n. o. s
Twine, in bales, boxes, or barrels
Copper wire
Wire fencing, in rolls
15 I. C. C. Rep.
To Missoula, Mont.
Class.
Second.
do..
Third..
Fourth.
First..
do..
Second.,
Third..
Second..
do..
Third..
Second..
do..
Third...
Fourth.
First
Comb...
Second..
Third...
Second..
do..
Third...
L. C. L.
201
201
165
142
236
236
201
165
201
201
165
251
251
205
167
296
276
251
205
251
251
205
Class.
C. L.
Fourth
Comb...
do..
do..
do..
First...
Fourth.
Comb..
Fourth.
do..
Comb...
Fourth.
Comb..
do..
do..
do..
do..
Fourth.
Comb..
Fourth.
do..
Comb..
382
INTERSTATE COMMERCE COMMISSION REPORTS.
Rates in cents per 100 pounds.
From New Yorl:, N. Y.
Tin boxes and lard pails, nested in boxes.
Shovels, scoops, and spades
Fruit jars and glasses
Canned corn, peas, and beans
Drugs and medicines
Cotton ducks and denims
Glassware, n. o. s
Twine, in bales, boxes, or barrels
Copper wire
Wire fencing, in rolls
Stoves, n. o. s. (not crated or boxed)
To Missoula, Mont.
Class.
Comb.
do.
do.
do.
do.
do.
do.
do.
do.
do.
do.
L.C.L.
316
291
260
207
371
331
306
301
301
245
255
Class.
Comb.
do.
do.
do.
do.
do.
do.
do.
do.
do.
do.
From an inspection of these last tables in comparison with the
class rates previously given it will be seen:
When the article moves under a commodity rate to both Seattle
and Spokane the rate is usually higher to Spokane than to Seattle.
Take the second item '' shovels, spades, and scoops." This takes a com¬
modity rate to Seattle in both carloads and less than carloads; the
second-class rate to Spokane in less than carloads and a commodity
rate in carloads. The carload rate to Seattle is $1.15 per 100 pounds,
while that to Spokane is $1.54 per 100 pounds.
The complainant states in its complaint that these commodity
rates to Spokane are made by adding to the Seattle rate the full
local rate from Seattle to Spokane. This is not correct. In some
instances the Spokane rate is constructed in that manner, and it was
said in testimony that these items embrace 14 per cent of the whole
in number. In other instances the Spokane commodity rate is the
same as the Seattle rate, and the testimony shows that this is true
of about 16 per cent of the different items in number. With the
great bulk of commodities the Spokane rate exceeds materially the
Seattle rate, but not by the full local back. It wTas said that the
Spokane rate was higher than that to Seattle by about 70 per cent
of the local from Seattle to Spokane in the majority of cases.
It often happens, moreover, that an article may move on the com¬
modity rate to Seattle while it takes the class rate to Spokane; thus
the first item, "tin boxes and lard pails, nested," moves in less than
carloads to both Seattle and Spokane under the second-class rate,
which is the same in each case, $2.60 per 100 pounds; hut if this
commodity is shipped in carloads, as it usually is, the rate to Seattle
is a commodity rate of 85 cents, while that to Spokane is a fourth-
class rate of $1.90. This is perhaps the most grievous source of dis¬
crimination against Spokane. The Transcontinental Tariff now in
force carries 1,560 westbound commodity rates, many of these rates
15 I. C. C. Rep.
CITY OF SPOKANE V. N. P. RY. CO.
383
being applicable to more than one article, while the number of such
rates from St. Paul to Spokane is only 636.
It has also been noted that class rates to Seattle apply as blanket
rates for the most part to all territory east of the Missouri River, and
the same is generally true of westbound commodity rates. Now
even those commodity rates which apply from St. Paul do not in all
cases extend to territory east of St. Paul. Of the 636 already re¬
ferred to only 407 apply east of Chicago, and of this number by no
means all extend to New York.
It will be seen, therefore, that Spokane rests, owing to the structure
of its tariffs, under two disabilities. It must, in the first place, pay a
higher rate upon practically everything which reaches that locality
from the Missouri River or east, and it is restricted, in the second
place, in the markets in which it can buy, for while Seattle and other
•coast cities can purchase in all territory east of the Missouri River
upon even terms, this is by no means true of Spokane.
Traffic over the Union Pacific lines for Portland does not touch
Spokane, but all freight transported by the Northern Pacific and
Great Northern companies to the coast of necessity passes through
Spokane, so that with respect to all the coast business of these
two defendants the complainant city is strictly an intermediate
point. The distance from Spokane to Seattle by the Great Northern
is 339 miles, to Tacoma by the Northern Pacific 396 miles, and to
Portland 541 miles. The first claim of the complainants is that
these defendants in thus charging lower rates to the coast points
violate the fourth section by making a higher charge at the inter¬
mediate point, and the third section by unduly discriminating
against Spokane, a nearer point.
The defendants do not deny the fact of the discrimination, but
insist that this scheme of rates is justified by water competition.
Traffic may move from the Atlantic seaboard to these Pacifip coast
points by water. The defendants say that the water rates are much
ljwer than a reasonable all-rail rate from the Atlantic seaboard to
these same Pacific coast destinations; that these water rates abso-
utely limit the rail rates which can be charged; that this creates a
dissimilarity of circumstance and condition which withdraws the
case from the prohibition of the fourth section, and that in view of
these conditions the discrin ination is not undue, and therefore not
unlawful under the thild section.
This Commission has several times examined this claim of the
defendants with respect to other intermediate points, has found that
water competition did exist as now asserted by the defendants, and
has held that this competition did in the main justify the system of
transcontinental tariffs which these defendants have established.
15 I. C. C. Itep.
2S411—09 2
384 INTERSTATE COMMERCE COMMISSION REPORTS.
Kindell v. Atchison, Topeka Ac Santa Fe By. Co., 8 I. C. C. Rep., 608;
Shippers Union of Phoenix v. Atchison, TopeJca Ac Santa Fe By. Co.,
9 ib., 250; Business Men's League of St. Louis v. Atchison, Topeka Ac
Santa Fe By. Co., 9 ib., 318. It also reached substantially the same
conclusion with respect to the city of Spokane in a former proceeding.
Merchants Union of Spokane v. Northern Pacific By. Co., et ah, 5 I. C.
0. Rep., 478.
It might be sufficient to adopt without discussion the conclusions
reached in those investigations, but inasmuch as the whole question
was gone into anew upon this hearing, and since this matter of water
competition between the coasts is one of an ever-var}dng nature, and
especially since there can be no adequate understanding of the diffi¬
culties which beset the making of these transcontinental rates with¬
out a thorough appreciation of this competition, it seems proper to
briefly state those conditions here.
For many years before the construction of any transcontinental line
of railwray the only practicable means of transporting freight in con¬
siderable quantities from the Atlantic to the Pacific coast was by
water, and after the railway became available this same method of
transportation continued to be used. In the early days of the devel¬
opment of the Pacific coast passengers and freight w^ere taken by
water to Colon, carried by stage across the Isthmus of Panama, and
again shipped by wrater to San Francisco or other points upon the
coast. Subsequently the Panama Railroad took the place of the stage
line, and this route is to-day in active operation. It is wTell under¬
stood that for the purpose of preventing competition by this line the
transcontinental railroads for several years purchased a sufficient
amount of the entire space available by the steamships plying in
connection with the Panama Railroad to control the rates. To-day
this line maintains rates somewhat below the all-rail rates and handles
approximately 40,000 tons of traffic annually.
A certain amount of traffic is carried each year between the
coasts by what are termed tramp vessels; that is to say, vessels which
do not ply regularly between these points. If, for example, a steam¬
ship is constructed upon the Atlantic seaboard and is sent to the
Pacific coast for service, it carries out a cargo and is with respect to
that voyage a tramp. It was estimated by a witness familiar wdth
these matters that during the year 1906 this tramp tonnage amounted
to approximately 25,000 tons.
In the past that route carrying the largest amount of traffic and
producing the greatest effect upon transcontinental rates has been
the regular service around Cape Horn or through the Straits. Dowm
to the year 1900 the ships employed on this route were entirely
sailing vessels, and the service was known as the clipper service. The
15 I. C. C. Rep.
CITY OF SPOKANE V. N. P. RY. CO.
385
nominal time was about 135 days, but this, owing to the means of
propulsion, was often lengthened to 175 or even 200 days. This
route always labored under many inherent disabilities. The date of
arrival was uncertain; the time consumed was usually long; the cost
of insurance was high. Nevertheless it always produced an effect,
in fact a controlling effect, upon railway rates from the Atlantic to
the Pacific coast.
About the year 1900 the American Hawaiian Steamship Company,
which had formerly been interested in these sailing vessels, put into
service a line of steamers via the Straits of Magellan in the place of
these clipper ships. The time by this new line from New York to San
Francisco was 60 days and the date of arrival could be counted upon
with great certainty. This reduced the cost of insurance, eliminated
the element of uncertainty as to time of arrival, and altogether ren¬
dered the route a much more attractive one. It commanded from
the first all the traffic its ships could carry. In the year 1906 the
tonnage via this route between New York and the Pacific coast was
about 115,000 tons.
Beginning early in the year 1907 the American Hawaiian Steamship
Company inaugurated a new route, known as the Tehuantepee Route,
consisting of a ship carriage from New York to Coatzacoalcos, Mexico,
a rail carriage from thence across Mexico, 193 miles via the'Tehuantepee
National Railroad to Salina Cruz, and thence by vessel to destination.
The time by this route is 25 days from New York to San Francisco,
35 days to Portland, and 40 days to Seattle. When the testimony
in this case was taken this route had only just been opened for busi¬
ness, but its traffic manager testified that he expected to carry to
the full capacity of his vessels with ease, and that this capacity
would be at the outset 250,000 tons per annum.
' The ships of this line sail weekly from the port of New York, but
the traffic which they carry comes from the whole eastern part of
the middle and New England sections of the United States, being
transported to New York by rail from the points of origin. The
traffic manager testified that at the present time he did not usually
reach west of the Buffalo-Pittsburg line for his traffic, but that he
had taken starch from Chicago, radiators from Detroit, books and
papers from Milwaukee, farm implements from South Bend, and that
shipments of various kinds from points west of this line were com¬
paratively frequent. lie stated that the rates by his line from New
York were from 20 to 60 per cent lower than via the all-rail route to
San Francisco, and that substantially the San Francisco rate was
applied at Portland, Seattle, and Tacoma. He further said that his
lino carried all kinds of commodities with the exception of high ex¬
plosives. At the present time this line docs not absorb the rail
15 I. C. C. Rep.
386 INTERSTATE COMMERCE COMMISSION REPORTS.
*
rate from the interior point of origin to New York, although in nam¬
ing the rate from New York account is sometimes taken of the point
where the traffic originates. The rates from New York via this line
are not published or maintained, but are varied as may be necessary
to suit the varying necessities of the business, which means that the
steamer makes whatever rate may be necessary to fill its capacity.
Rates are made only to the seaports upon the Pacific coast and the
consignee alwa3^s receives the goods and pays the freight charges at
the port. It frequently happens, however, that shippers at interior
points in the Pacific States avail themselves of this means of trans¬
portation from the East by rebilling at the port to the interior desti¬
nation at the regular local rate. Shipments have been made in this
manner to Spokane itself.
The traffic manager of this line was asked to file a statement which
would show in detail with respect to that one of his steamships which
was then loading at New York the articles which it carried, giving
the character and weight of each consignment, the point of origin and
the destination, together with the rate received for the service; and
such statement has been filed and is a part of this record. It fully
bears out the testimony of the witness. The cargo consisted of a
great variety of commodities. More than half the consignments
originated at New York, but a considerable portion came from inte¬
rior points. The prevailing destination was San Francisco, but ship¬
ments were also made to Seattle, Portland, Tacoma, and Los Angeles.
The rate of freight was in every case materially lower than the pub¬
lished rail schedule from the point of origin. The time involved in
transporting this freight from point of origin to destination was mate¬
rially less than would have been required, in the then congested con¬
dition of traffic, for the same service by rail, and was probably as
short as could be'expected upon the average under normal conditions.
It can not be denied in view of these uncontroverted facts that
water competition does exist and that it does produce a controlling
effect upon rates to the Pacific coast from many eastern destinations.
It is beyond doubt that this competition absolutely limits those rates
from New York and points within a few hundred miles of New York
to Pacific coast terminals. There is no assignable reason why a
shipper should pay from 15 to 50 per cent more money to trans¬
port his goods by rail when the water service is equally reliable and
almost as expeditious. Up to the present time the transportation
facilities by water available have not been sufficient to produce a
demoralization in those rates. These water carriers do not yet need
to offer the inducement which they might profitably. The rail rate
to New York is not absorbed nor are low rates made from New York
even. When this business comes to be solicited by the water routes
15 I. C. C. Rep.
CITY OF SPOKANE V. N. P. EY. CO.
387
in the same way that ocean and rail business is to-day solicited by
water lines for southern and western destinations, transcontinental
carriers will be confronted with a situation much different from that
which they meet to-day; but to-day even they are compelled to fix
their terminal rates in view of this competition.
It is not meant that rail carriers might not at the present time
maintain temporarily higher rates than are now in effect to Pacific
coast terminals. They probably could, certainly on many articles.
In 1904 most transcontinental rates were advanced 10 per cent, and
that advance was followed by corresponding advances in water rates.
But to make these rates materially higher than they now are would
not only result in the immediate loss of some traffic but would invite
certain competition which in the end must result in material reduc¬
tions. This water competition not only limits the rates which are
now in effect from the Atlantic coast to Portland, Seattle, and Tacoma,
but the existence of this competition, especially in view of the ap¬
proaching completion of the Panama Canal, must be a dominant
factor in determining both the present rates and the future policy of
these transcontinental lines.
When once the fact of this competition and its effect upon these
rates have been found, the decisions of the Supreme Court of the
United States foreclose our conclusion. That court has held in
numerous cases that if competition exists at the more distant point
which controls the rate at that point, the charging of a higher rate
at an intermediate point is not necessarily in violation of the third
or fourth section. Interstate Commerce Commission v. Alabama Mid¬
land R. R. Co., 169 U. S., 173; Louisville <& Nashville R. R. Co., v.
Behlmer, 175 U. S., 648; Interstate Commerce Commission v. East
Tennessee, Virginia & Georgia R. R. Co., 181 U. S., 1.
These water rates to Pacific coast terminals apply only from
New York. Shipments are made from various other coast points
and from various interior points, but in such case the shipper must
be to the expense of transporting his goods from the interior to
New York City. This means that the rate by water from the interior
point in the eastern portion of the United States to San Francisco
increases as the distance from New York increases; that is, the rate
which these railroads must meet grows progressively higher as the
seaboard is receded from. The case further shows that as a practical
matter traffic only moves in very small quantities by this water route
from farther west than the Buffalo-Pittsburg line. But the rates
to Spokane, as we have already seen, are higher than to Portland
from all territory east of the Missouri River. Assuming now that
under the decisions of the Supreme Court these defendants may
properl vname a lower rate from New York to Seattle than to Spokane,
15 I. C. C. Kep.
388
INTERSTATE COMMERCE COMMISSION REPORTS.
or possibly that they may properly do the same thing from Buffalo
or from Pittsburg, upon what possible theory can they apply those
rates from an interior point from which traffic never moves by.
water and could not so move owing to the high local rate from the
interior point to New York.
Articles consumed upon the Pacific coast are manufactured both
in New York and in Chicago, using these points as illustrative merely*
If the article is manufactured in New York it may move by water to
San Francisco and the rail carrier, in order to obtain a part of this
business, must name a rate from New York to San Francisco which
is equivalent to the water rate. If the same article is manufactured
in Chicago it can not, generally speaking, move by water but must
move by rail. In this case the rail haul is 1,000 miles shorter and
the cost of service to the railroad company materially less. It is
therefore for the interest of the railway that articles consumed upon
the Pacific coast should be manufactured in Chicago rather than in
New York. The Chicago manufacturer, moreover, demands of the
railway a rate which will enable him to sell in competition with the
manufacturer in New York.
For this reason railways have applied from all eastern territory
the same rate which water competition forces them to make from the
Atlantic seaboard and territory immediately contiguous. The Com¬
mission has previously examined this phase of the question, has held
that carriers need not make a lower rate from the Middle West than
\
from the Atlantic seaboard, and has virtually approved the present
i
system of blanket rates. Business Men's League of St. Louis v.
Atchison, Topeka and Santa Fe Ry. Co., 9 I. C. C. Rep., 318. .
It is suggested that the Commission possesses to-day, under the
amended law, a more extensive authority than it formerly had and
that for this reason we should declare this discrimination against
Spokane in favor of the coast towns to be unlawful. The amend¬
ments of June 29, 1906, which conferred these enlarged powers did
not in any respect change the third and fourth sections. The inter¬
pretation which had been put upon those sections by the court was
well known to Congress, and the alleged discriminations and hardships
resulting from that interpretation were called forcibly to the atten¬
tion of the committees having that legislation in charge. That Con¬
gress did not, in making the extensive revision of the act which was
effected by these amendments, see fit to alter the third and fourth
sections in this particular, is highly persuasive that it was the inten¬
tion of that body to leave the law and its practical working, a,s applied
to the case before us, exactly as it had been.
We are constrained to hold that the defendants do not by the
scheme of rates under consideration violate the third and fourth
sections.
15 I. C. C. Rep.
CITY OF SPOKANE V. N. P. RY. CO.
389
The complaint also alleges that the defendants grant to the coast
terminals more favorable minimums and permit, in certain cases, the
mixing of carload shipments to the prejudice of Spokane, in addition
to the charging of the higher rate. Very little was said upon this
branch of the case in the testimony and it has scarcely been referred
to in the argument. It does appear from an examination of the
tariffs that in the instance referred to in the complaint a better
minimum is accorded upon shipments to the coast than would be
available upon similar shipments to Spokane and also that, notably
in the handling of various kinds of cotton fabrics, the right to mix
carloads is accorded coast shipments and not to shipments to Spokane.
Water competition may justify a difference in minimums or in the
privilege of mixing carloads exactly as it justifies a lower rate. This
Commission held in Kindel v. Boston <& Albany Railroad Co., 11
I. C. C. Rep., 495, that carriers need not accord a carload rate to
shipments of cotton piece goods to Denver, although they did apply
such rates on shipments to San Francisco. It was also held in the
same case that a refusal to allow the mixing of different kinds of
cotton fabrics in case of Denver traffic while permitted upon trans¬
continental business was not in violation of law.
The presumption is that whatever privilege of this sort is accorded
one locality should be accorded the other, both being served under
the same circumstances by the same carrier. It would fairly be
incumbent upon the defendants to show in this case the circum¬
stances which require the more favorable rule at the coast terminal.
So little attention has been paid to this matter, however, that we
shall undertake to make no order on this branch of the case. If
there is any discrimination of the kind against Spokane which does
not rest upon a substantial basis and which the defendants are not
prepared to justify, they will undoubtedly correct it without further
proceedings. If the complainants conceive that discrimination of
this kind is unduly continued the better way is to file a new petition
and bring this matter specifically to the attention of the Commission.
One other matter which was gone into at some length upon the
hearing may be referred to in this connection. The report of the
Commission in the original Spokane case, 5 I. C. C. Rep., 478, found
that Spokane was discriminated against not only in comparison with
the coast towns farther west, but also as compared with Missoula and
other towns upon the east. There is some suggestion in the com¬
plaint that Missoula still enjoys the benefit of more favorable rates
in a few instances.
The original case was decided in the winter of 1892, and soon after
the Northern Pacific Railway Company, which was the defendant
in that proceeding, attempted to comply in substance with the order
15 I. C. C. Rep.
390 INTERSTATE COMMERCE COMMISSION REPORTS.
of the Commission which had directed certain changes in rates to
Spokane, principally the charging of a lower class rate from St. Paul
than was made to the Pacific coast. The advent of the Great North¬
ern Railroad as a transcontinental competitor at about the same
time still further complicated the situation, and the result was a
period of very unsettled and unsatisfactory transcontinental rate
conditions lasting from 1893 down to 1898. The jobbers upon the
Pacific coast, notably those of San Francisco, insisted that the rates
were too favorable to their competitors in the middle west, and they
were aggressive in their insistence upon a readjustment of these
tariffs. Finally an understanding was reached between the jobbers
of the Pacific coast and the transcontinental lines bv which rates
were restored, the difference between carloads and less than carloads
being materially widened. The adjustment of rates then put into
effect was subsequently in the main approved by this Commission
in Business Men's League of St. Louis v. Atchison, Topeka Ac Santa
Fe Ry. Co., 9 I. C. C. Rep., 318, and has remained in effect ever since.
By this restoration of rates in 1898 the original discrimination
against Spokane was restored, all attempts to comply with the order
of the Commission being abandoned and rates reestablished upon the
original basis. We have seen that in 1900 the American Hawaiian
Steamship Company put into service a line of steamships via the
Straits of Magellan, and by the year 1902 this com]: an/ had
extended its operations as far north as Tacoma and Seattle. Traffic
had also begun to move to some extent via this line and these Sound
ports to Spokane. For the purpose of meeting this competition the
defendants put into effect, about 1902, certain additional commodity
rates to Spokane, but the general situation was not changed.
' Certain rights of way through the city of Spokane were needed
by the Great Northern Railway in the course of its construction
from the east to the coast, and that company applied to the citizens
of Spokane for a donation of the necessary land. The president of
that company held several meetings with the citizens and with
various committees on this subject, during which he either expressly
said or left a very strong impression that if this right of way was
granted the Great Northern Railway would apply terminal rates at
Spokane. At about the time that railroad was opened for operation
to Spokane a certain tariff was printed but apparently never put
into effect, which named rates to Spokane not quite as low as those
to Seattlo, but very much lower than any which were ever actually
applied. The alleged failure of Mr. Hill to keep his promises and
the inability of Spokane to procure in any way what jobbers con¬
ceived to bo fair rates, finally led in 1904 to the organization of a
boycott by the jobbers of Spokane against the Great Northern and
15 I. C. C. Rep.
CITY OF SPOKANE V. N. P. RY. CO.
391
Northern Pacific lines. These shippers by concerted action diverted
their entire shipments to the Union Pacific line, of which the Oregon
Railway & Navigation Company is the delivering carrier. The
result was a conference between the railways and the jobbing inter¬
ests of Spokane at which coast jobbers were also represented, the
outcome being an understanding that Spokane was to be accorded a
certain defined territory.
It was said upon this hearing that this territory was turned over
to the Spokane jobbers by reducing the distributing rates from
Spokane, which were declared to be very much lower than the cor¬
responding distributing rates from coast towns. Whether those
rates are or are not more favorable to Spokane we have not consid¬
ered, but it seems certain that no change was made in these rates at
this time. The purpose was effected by according to Spokane cer¬
tain carload commodity rates from eastern points of supply. The
railways inquired where the various jobbers obtained their supplies
and put into effect such rates from those points as would, in com¬
parison with rates to terminal points, enable Spokane to undersell
the terminal jobber. Previous to this time the commodity rates
accorded to Spokane had been few in number. They were now
very much increased. Previous to this they had seldom extended
farther east than St. Paul and never beyond Chicago. Now many
of them were applied as far as the Buffalo-Pittsburg line and some
were extended even to the Atlantic seaboard. The conceded effect
was to pass over to the jobber of Spokane a territory about 100 miles
in extent to the east and to the south, including the Palouse country
upon the north of the Snake River.
While, therefore, Spokane rests under the rate disabilities and
discriminations stated in the opening of this report, it enjoys, in so far
as it can under that scheme of rate-making, exceptional freight
rates. Spokane is probably more favored in this respect than any
^other interior jobbing point.
The real question which this Commission has, therefore, to con¬
sider arises upon the third claim of the complainant, that these rates
to Spokane from the east are unjust and unreasonable, under the
first section of the act.
Before proceeding to the main question there is one preliminary
matter raised both by the pleadings and upon the argument which
should be noticed, namely, with reference to what line of railroad
is the reasonableness of these rates to be determined ?
The Great Northern Railway was the last of these transcontinental
lines to be constructed. It was built at a time when the cost of
construction was exceedingly low. It seems to have been honestly
built. The cost per mile was much less probably than the cost of
15 I. C. C. Rep.
28411—09 3
392 INTERSTATE COMMERCE COMMISSION REPORTS.
either of the other routes. Its location in the matter of grades and
curves is favorable, so that the expense of operation by this line is
perhaps lower than by either of the other routes. Upon the other
hand, the Northern Pacific and the Union Pacific were built at a
much earlier date than most of the Great Northern. They involved
much of what may be termed experimental outlay. If from the
first the best of judgment and the greatest of economy had been em¬
ployed in constructing and developing those systems, the actual
amount of money invested to-day would have been greater than in case
of the Great Northern. In fact in the earlier days of both these
properties there was waste and poor judgment and dishonesty, so
that both the cost of construction and the amount of the original
investment are probably much greater than with the Great Northern.
Now the complainants say that it is the business of the Commis¬
sion to take the least expensive of these routes and to determine
these rates upon the basis of the investment in that route. We
should allow the Great Northern Company, if that be the least
expensive, what will be a fair return upon its property considering
the financial history of that company, and no more, even though
the rates thus established when applied to the business of its com¬
petitors would deprive them of a fair return upon their investment.
The defendants insist that exactly the opposite course should be
followed. They urge that a railroad is entitled to a fair return upon
its investment, and that this rule applies to all railroads alike. This
is the right of the railroad laboring under disadvantages of location
and operation, as well as of that one more favorably circumstanced.
Hence the Commission must consider that railroad whose net earnings
will be least, for if it establishes rates which only yield fair returns
to the road most favorably situated, it of necessity knowingly and
intentionally deprives every other road of a fair return upon the
value of its property.
In support of these propositions counsel for the complainants
relies upon the well-known case Proprietors of Charles River Bridge
Company v. Proprietors of Warren Bridge Company, 11 Peters, 420.
In 1785 the legislature of Massachusetts granted a charter for the
construction of a toll bridge across the Charles River. The charter
provided that the proprietors of the bridge might exact tolls for its
use for a certain period, after which it should become free, and this
time, according to an amended charter, would expire about 1850.
In 1827 the Massachusetts legislature granted authority for the
construction of a second bridge parallel to and in close proximity
with the Charles River bridge. This bridge was to be used as a toll
bridge for six years, and after the expiration of that time was to be
free. It was erected, maintained as a toll bridge for the specified
15 I. C. C. Rep,
CITY OF SPOKANE V. N. P. RY. CO.
393
years, and became a free bridge in 1837. This, of course, virtually
confiscated the Charles River bridge, since no one would pay toll
when he could go for nothing upon the TV arren bridge.
Thereupon, the proprietors of the Charles River Bridge brought
suit, claiming that their charter was virtually a contract allowing
them to maintain their bridge at a profit, and that the legislature by
granting the second charter had taken their property without warrant
of law. The court held, however, that the granting of the first charter
did not prevent the granting of the second, even though the practical
effect of it was to render valueless the property which the plaintiffs
had constructed under that charter.
The city of Spokane, argue the complainants, is entitled to the
cheapest means of transportation between St. Paul and Spokane.
The Government may construct a railway or it may delegate that
duty to an agent. If it elects to employ an agent it may require it,
and indeed must require it, to establish reasonable rates with respect
to its own line, even though this should bankrupt other lines already
in existence.
This claim finds some support in Brunswick <&, Topsham. Water
District v. Maine Water Company, 99 Maine, 371, a well-considered
case, decided in 1904. That proceeding was for the condemnation
by the water district of a portion of the plant of the Maine Water
Company, the question being the basis upon which damages should
be assessed. The water district claimed that the cost of construc¬
tion furnished the true measure of damages, but the court held that
the defendant was entitled to whatever its property was fairly worth
as a going concern furnishing water to the people of that community
at reasonable rates. Being inquired of what was meant by a reason¬
able rate, it answered that the cost to the community of supplying
itself by the cheapest means would be a very important element in
determining that rate.
These cases show, what indeed must be evident upon general
principle, that the charter of a public service corporation does not
guarantee to it any return upon its investment. The public may
perform the same service or it may charter another corporation for
that purpose without reference to the effect upon the revenues of
the existing company.
While, however, this is the law, we do not think that the result
contended for by the complainant of necessity follows.when these
principles are applied to the railways of this country. There is a
wide difference between a water system which supplies a single
community and a railroad which is part of a commercial and indus¬
trial whole supplying many communities. The city of Spokane
could not develop if served by the Great Northern Railway alone;
nor can we look wholly to the interest of Spokane. The whole ter-
15 I. C. C. Iiep.
394 INTERSTATE COMMERCE COMMISSION REPORTS.
ritory served by these defendant lines must be considered and the
existence of all these railroads to that territory is absolutely essen¬
tial. These railroads can not exist unless rates are established
which will yield a fair return upon their property. We must there¬
fore, in fixing these rates, have regard not altogether to any one
particular railroad, but to the whole situation, and must consider
the effect of whatever order we make upon all these defendants.
Such was the opinion formerly expressed by this Commission in 9
I. C. C. Rep., 382, and to that opinion we adhere.
It does seem, however, that in this case the Great Northern and
the Northern Pacific are the two defendants which should be mainly
considered. The rates involved are those from St. Paul. The dis¬
tance from St. Paul to Spokane over both these lines is much shorter
than by the Union Pacific. Spokane is upon the main line of both
these roads, wdiile it is upon a branch of the Union Pacific. The
business of Spokane is much more an incident in case of the Union
Pacific. It is undoubtedly true that the rates from St. Paul to
Spokane materially affect other^rates of the Union Pacific lines and
of other transcontinental lines, and that this probable effect must
be considered by us owing to the relation which exists between
rates from all eastern destinations to these various Pacific coast
points. But still in examining the claim of these complainants
that the rates from St. Paul are excessive, we are inclined to think
that we should mainly have reference to the two lines which most
directly handle this traffic.
What, then, are reasonable rates to be charged over the lines of the
defendants to Spokane from various eastern destinations, principally
from St. Paul and corresponding territory, having reference mainly
to the Northern Pacific and the Great Northern companies?
In that oft-quoted excerpt from Smyth v. Ames, 169 U. S., 466,
the Supreme Court of the United States said:
We hold, however, that the basis of all calculations as to the reasonableness of rates
to be charged by a corporation maintaining a highway under legislative sanction must
be the fair valuation of the property being used by it for the convenience of the public.
And in order to ascertain that value, the original cost of construction, the amount
expended in permanent improvements, the amount and value of its bonds and stock,
the present as compared with the original cost of construction, the probable earning
capacity of the property under particular rates prescribed by the statute, and the sum
required to meet operating expenses are all matters for consideration, and are to be
given such weight as may be just and right in each case. We do not say that there
may not be other matters to be regarded in estimating the value of the property. What
the company is entitled to ask is a fair return upon the value of that which it employs
for the public convenience.
What of tho elements above enumerated have we before us in the
present ease? We have, first, an estimate of the cost of reproducing
at the present time both these properties. Second, some information
as to the money which has actually gone into their construction.
15 I. C. C. Rep
CITY OF SPOKANE V. N. P. RY. CO. 395
I
Third, the present capitalization. Fourth, their earnings both gross
and net for recent years under the present schedule of rates. We
have also a statement showing the reduction in revenue which would
result from certain changes in these rates to Spokane. We will
briefly state the facts upon the first four headings with respect to
each of these two defendants, beginning with the Northern Pacific.
COST OF REPRODUCTION NORTHERN PACIFIC.
The Northern Pacific Company with a view to showing the cost of
reproducing that property, gave evidence upon the hearing to the
following import:
In 1898, after the conclusion of the last receivership and after the
present company had entered into the operation of the property, an
estimate was made showing the quantities of earth and rock work of
various kinds involved in the construction of the system as it then
existed. Since that date the embankments have been widened, cur¬
vatures have been reduced, and many improvements requiring the
movement of earth and rock have been made. The engineer of the
company started with this estimate of 1898, which he said had been
carefully made and was, in his opinion, reliable, added to this a certain
per cent for improvements, and thereby determined the quantities of
earth and rock work which would be required to regrade the present
road.
A statement was furnished showing the length and character of all
tunnels, the length and character of all bridges, the number of cul¬
verts, etc. The amount and weight of the rails both in branch lines
and in sidings were given, together with the number of ties per mile.
To these items, worked out in elaborate detail, were applied the
contract prices then prevailing for the various kinds of work and the
prices at which materials of different kinds could then be bought in
the open market. Without attempting to examine these details or
to restate the computations, it may be said that, speaking always in
round numbers, the cost of constructing the roadway of the Northern
Pacific Railway as at present existing was estimated by its engineer
at $250,000,000, which included an item of $20,000,000 for contin¬
gencies and of $23,000,000 for interest. This was stated by the wit¬
ness to be the cost of reproducing the property at the time he gave
his testimony, in March, 1907. He further said that certain items
upon the system as they then existed, like buildings, water tanks, etc.,
were worth less than the cost of new structures of the same kind, and
he subtracted an item of $6,000,000 on account of depreciation,
leaving the present value of the roadway, upon the basis of what it
would cost to reproduce the same, at $244,000,000.
He further stated that to purchase the equipment of the company
new at that time would have cost $53,000,000, but that this equip-
15 I. C. C. liep.
396 INTERSTATE COMMERCE COMMISSION REPORTS.
ment, owing to depreciation, was only fairly worth $45,000,000.
This would give $289,000,000 as the fair value of roadway and
equipment estimated upon the basis of reproducing it in March, 1907.
To this cost of construction was added an item of $107,000,000
for right of way and terminal grounds and still another item for coal
properties of $50,000,000, making a grand total of $446,000,000 as
the fair value of the property of the Northern Pacific Railway Com¬
pany upon which it was entitled to earn a suitable return.
This valuation is by no means a guess. The detailed manner in
which it was made has already been given. The prices applied were
corroborated by several witnesses of knowledge and standing. The
figures were submitted to the engineer of the. railroad commission
of the state of Washington, who was engaged in making a valuation
of the properties of these defendants in that state and who had come
to have an accurate acquaintance with the physical characteristics
of these railroads in Washington and a considerable knowledge of
their history. He declined to express an opinion with respect to the
value of the right of way or the coal properties. He estimated at
$220,000,000 the fair value of what was embraced in the $289,000,000
given by the engineer of the defendant, thus reducing the value of
roadway and equipment $69,000,000. This witness also filed a
detailed statement showing the reductions made by him.
We have carefully examined the statements of the defendant and
of Mr. Gillette, but it would not be profitable to attempt here any
analysis or criticism of them. As usual, the truth undoubtedly lies
somewhere between these rather wide limits. 1
The value of the right of way and terminal grounds was reached by
the same detailed process as the cost of construction. The land
agent of the Northern Pacific Company furnished a statement show¬
ing the quantity of land taken in each State and in case of the larger
terminals for each city and gave the value.
He proceeded upon the assumption that a new road was to
be located where this road is and the right of way purchased or
condemned.
v In giving his estimate of the cost of condemning this right of way
the land agent separates his estimate into two divisions, styling one
"large terminals" and the second "other right of way and station
grounds." The so-called large terminals are 13 in number; the
amount of land used in these terminal grounds is 4,638 acres, and the
estimated value $75,000,000. The quantity of land used in other
right of way is 152,185 acres, the estimated value being $31,889,587.
Subtracting from the large terminals those in which the estimated
value is less than $1,000,000 each, we have left eight cities in which the
estimated cost of condemning the land used by the Northern Pacific
Company for terminal facilities is $73,000,000, as against $34,000,000
tor the balance of its right of way.
35 1. C. C. Rop.
CITY OF SPOKANE V. N. P. RY. CO.
397
The complainants attempted to show by cross-examination and
by the introduction of some witnesses that this estimate for cost
of right of way was grossly excessive, but there is nothing in this
record upon which the Commission can intelligently criticise that
estimate. It is doubtless somewhat high, but it is by no means
certain that upon the basis upon which it was estimated it is extrav¬
agantly high. The main item is for terminal facilities in a half dozen
cities, and the values in these cases were estimated by independent
witnesses, many of whom appeared before the Commission.
It seems altogether probable to us that the money value of this
property, not including coal properties, based on the cost of repro¬
duction estimated in the manner above stated, would, in the spring
of 1907, have equaled at least $325,000,000. The operated mileage
of this system, as reported in its statistical return to the Commission
for the year ending June 30, 1907, was 5,810 miles, and the ^above
valuation would therefore mean a total of about $56,000 per mile.
This estimate seems to cover slightly more miles than are reported
to the Commission, but this would not materially change the result.
In estimating the present money value of its property the Northern
Pacific puts upon its coal lands a valuation of $50,000,000. These
properties are certainly of great importance to that company. East¬
ern coal is used upon its lines east of the Missouri River, which are
about 2,300 miles in extent; but for the 3,500 miles west of the river
practically the entire supply comes from the Northern Pacific mines.
The location of these mines was given, but need not be stated here.
It is sufficient to say that the location is such as to make them almost
indispensable to the operation of the railroad. The title to these coal
properties is not in the Northern Pacific Company directly, but in the
Northwestern Improvement Company, a subsidiary corporation of
which the! Northern Pacific Railway Company owns the entire bond
issue and practically 'all the stock. The Improvement Company
mines this coal and sells it to the railroad company, at so much per ton,
in addition to doing a certain amount of commercial'business. The
cost of producing the coal at the different mines and the price paid
by the Northern Pacific were both given, showing a handsome margin
of profit to the Improvement Company.
The bonds of the Improvement Company are $7,000,000 in amount
and pay 4 per cent interest; the stock was said to be $2,775,000.
It did not appear upon the hearing what dividends, if any, had been
paid upon this stock; nor what the result of the financial operations
of the Improvement Company had been, but since the hearing and
since the preparation of this report the Improvement Company has
paid a dividend of 629 per cent, and the Northern Pacific Company,
from the proceeds of this dividend, has distributed to its own stock¬
holders a dividend of $11.26 per share.
15 I. C. C. Rep.
398
INTERSTATE COMMERCE COMMISSION REPORTS.
COST OF ORIGINAL CONSTRUCTION NORTHERN PACIFIC.
The construction of the Northern Pacific Railway was begun in
1870, and the first receivership occurred in 1875. The present audi¬
tor of the company testified that at the end of that receivership the
books of the company showed cost of construction up to that time
to have been, in round numbers, $65,000,000, and that the mileage
then in operation was 550 miles. Considerable work had been done
in surveying and possibly some uncompleted construction may have
been under way.
The second receivership began in 1893 and ended in the summer
of 1896. The same wdtness testified that the books of the com¬
pany were better kept during this period than during the first period.
He had, however, made no personal examination and had no per¬
sonal knowledge of the accounts and could give no idea of the mean¬
ing of the figures. He said that for him the Northern Pacific Rail¬
way Company began September 1, 1896. The books showed that
up to that date $219,000,000 had been expended upon roadbed and
structures and $22,000,000 upon equipment, making a total of
$241,000,000. The mileage had increased to 4,500 miles, giving
an average cost, therefore, of about $53,575 per mile.
The testimony of this witness really amounts to nothing more than
a statement of the figures which appear in the annual reports of the
Northern Pacific Railway to this Commission. We have no infor¬
mation as to the manner in which this construction went on, nor
as to the means of payment, nor as to the amount of cash which
this book outlay represented. It is reasonably certain that the
road at that time could not have cost, upon any economical basis
of construction, anything like the amount shown by these figures.
They include the $65,000,000 which had been expended in con¬
structing 550 miles of road under the first .administration of the
Northern Pacific Company. They include the purchase of many
branch lines. The period over which these transactions extended was
one in which railway construction represented almost universally,
especially in new sections of the country, extravagance and jobbery.
The condition of the road then was in no respect as good as to-day.
The cost of constructing the Great Northern, which was completed
in 1892, and which was probably a better road then than the Northern
Pacific in 1896, was stated by its vice-president to have been $27,000
per mile.
Upon the other hand, the money invested in this enterprise up to
September 1, 1896, had not received, in all cases, regular returns, and
possibly some of it had received no returns. Rates of interest upon
the mortgages were high, but that interest was not in all cases paid.
15 I. C. C. Rep.
CITY OF SPOKANE V. N. P. EY. CO.
399
The auditor testified that on the average only sixty-four one-hun¬
dred ths of 1 per cent was paid in the way of dividends upon the capital
stock of the Northern Pacific Company between the end of the first
receivership and September 1, 1896.
Beginning with September 1, 1896, we have a more intelligent and
reliable account of the financial operations of this company, and one
which may fairly be said to be satisfactory. Since that date the
company has expended something over $83,000,000, making a total
expenditure of $324,000,000. The mileage has in the meantime
increased from 4,500 to 6,097 miles, as stated by the auditor; 5,810
miles as given in the annual report to this Commission. This makes
the cost of construction, including equipment, something over
$50,000 per mile.
It will be seen from the above statement that it is utterly impos¬
sible-to know what amount of money has been actually expended in
constructing the Northern Pacific properties up to the present time.
Previous to September 1, 1896, the account which we have is entirely
unreliable. It is impossible to say either what cash was invested or
what return has been paid upon the investment.
CAPITALIZATION—NORTHERN PACIFIC.
The so-called "Northern Pacific System" at the time of the last receiv¬
ership consisted of some thirty independent properties operated under
one management. The purpose of the reorganization plan by which
that receivership was terminated was to transform this heterogeneous
mass into a homogeneous whole, and the effect of it has been to con¬
solidate all these properties into one compact system. Under this
reorganization scheme $130,000,000 of 4 per cent bonds, known as
"prior lien" bonds, were secured by a first lien upon the entire
property, and $60,000,000 of 3 per cent bonds, known as "general
lien" bonds, were secured by a second mortgage upon the same
property. Of these two issues $25,000,000 of the prior lien bonds
and $4,000,000 of the general lien bonds were reserved in the treasury
of the company for the future development of the property. The
balance was either issued in payment of various mortgages previously
existing against the properties, at prices named in the plan of reor¬
ganization, or held by the company as security for the payment of
such mortgages when they fell due.
In 1900 a mortgage of $20,000,000 was placed upon the St. Paul
& Duluth division of the Northern Pacific Company, to be used in
payment for the St. Paul & Duluth Railroad, which was purchased
by the Northern Pacific at about this time. Of these bonds $8,000,000
are outstanding. Certain of the prior lien bonds have been retired
35 I. C. C. Rep.
28411—09 4
400 INTERSTATE COMMERCE COMMISSION REPORTS.
so that the total bonded indebtedness of the Northern Pacific at the
present time is $187,000,000, bearing an average rate of interest
of something less than 4 per cent and carrying fixed charges of sub¬
stantially $7,000,000.
As a part of this same reorganization plan $75,000,000 of pre¬
ferred stock and $80,000,000 of common stock were issued. By the
terms of the issue the preferred stock might, at certain intervals
during the next twenty years be retired at par. This privilege
was subsequently taken advantage of, and for the purpose of securing
funds with which to make the payment a corresponding amount of
common stock was issued. The only stock of the company to-day
is therefore common stock and the total issue is $155,000,000.
It appears from the record that the old Northern Pacific Company
had both a preferred stock and a common stock and counsel for
that company states in his brief that the amount of the preferred
was $51,000,000 and of the common $49,000,000. Of the new
stocks $2,500,000 of preferred and the same amount of common
were reserved as a treasury stock and for reorganization purposes.
Of the balance a certain amount of preferred seems to have been used
in the satisfaction of mortgage liens. The balance was exchange¬
able upon the following terms: Upon payment of $10 a share of pre¬
ferred stock was issued to stockholders having $50 of old preferred
stock and $50 of old common stock, and a share of new common
stock was issued in exchange for a share of old common stock upon
payment of $15 in cash. The new preferred stock seems to have
been practically all taken up under the plan of reorganization, but
a large number of shares of common stock was not subscribed for
by the holders of the old common stock and this was subsequently
sold to Mr. James J. Hill and his associates for $15 per share.
The capitalization of the Northern Pacific Railway at the present
time, therefore, is about $342,000,000, or substantially $57,800 per
mile of line. It was said that the capitalization of the old companies
embraced in the present system was approximately $380,000,000.
The statistical report of the Northern Pacific for the year ended
June 30, 1907, shows that this company has voted an additional
issue of $95,000,000 of common stock, none of which was at the
time of the filing of that report outstanding. There is nothing in
this case to show the necessity for or purpose of this stock issue.
' The Northern Pacific and the Great Northern companies own
jointly the Burlington system and have each issued their obligations
in the sum of $107,000,000 in payment for that property. We have
treated the property as worth the indebtedness and have made no
account of this $107,000,000 of obligations upon the part of the
Northern Pacific Company.
15 I. C. C. Hep.
CITY OF SPOKANE V. N. P. RY. CO.
401
EARNINGS NORTHERN PACIFIC.
The preferred stock issued in accordance with the plan of reorgan¬
ization was entitled to a dividend of 4 per cent before anything
was paid upon the common stock, and this dividend was regularly
paid down to the time when that stock was retired by the issue of
an equal amount of common stock. No dividends were paid on the
common stock until 1899, when a dividend of 2 per cent was declared.
In 1900 this was increased to 3 per cent, in 1901 to 4 per cent, in
1902 to 6 per cent. In 1903 the conversion of preferred into common
stock occurred and the dividend of that year was equivalent to about
61 per cent upon the entire stock issue. Beginning with 1904 7 per
cent dividends have been regularly declared.
The first full year in which this property was operated under the
new management after the receivership was that ended June 30,
1898. Beginning with that year the company has, in addition to the
payment of its fixed charges, interest, and dividends, as above stated,
shown each year the following amounts invested in permanent
improvements and remaining as surplus. By "surplus" is meant
what is left after all expenses have been deducted and the appro¬
priation for permanent improvements made.
Year.
Surplus.
Permanent
improvements.
1898
82,897,874.60
1,033,282.59
1,083,818.76
1,002,618. 54
1,547,286.18
1,649,130.81
1,379,321.96
3,016,931.85
5,542,519.69
12,623,929.43
$811,709.35
2,176,619.26
3,000,000.00
2,011,285.00
3,000,000.00
3,000,000.00
3,000,000.00
3,000,000.00
3,000,000.00
1899
1900
1901
1902
1903
1904
1905
1906
1907 .
<1
31,776,714. 41
22,999,613.61
In the year 1906 this company, in addition to the permanent im¬
provements and surplus above stated, charged off an item of $3,081,-
980.16 as depreciation of equipment. The roadbed and structures
of the Northern Pacific have undoubtedly been fully maintained
out of operating expenses; indeed, the complainants insist that
very extensive betterments to the property have been charged
against the cost of operation. It is probable that the equipment of
the company has also been maintained as a part of the operating
expenses, but it might easily happen that this would not be true, and
we have therefore made no account whatever of this item in statins:
the net results of the financial operations of that company.
COST OF REPRODUCTION GREAT NORTHERN.
The Great Northern Railway gave evidence tending to show the
cost of reproducing its properties estimated upon the same basis as
already explained in case of the Northern Pacific. In some respects
15 I. O. O. Rep.
402
INTERSTATE COMMERCE COMMISSION REPORTS.
this testimony with respect to the Great Northern is more satis¬
factory than that furnished by the Northern Pacific.. The engineer
of this company testified that there were in the offices of the company
detailed surveys showing the quantities of earth and rock in case of
82 per cent of the entire system, and that it was possible to make a
very close estimate with respect to the remaining 18 per cent. It
also has a detailed account of its tunnels, bridges, culverts, weight of
rail, number of ties, amount of ballast, etc. To these quantities
it applied the market prices prevailing in the spring of 1907, thus
working out in detail the cost of reproduction. This aggregates in all
$415,000,000, including $41,000,000 for equipment and $87,000,000
for right of way.
The expense of right of way is estimated by this company in the
same manner as by the Northern Pacific. The value outside of
terminals is $27,000,000, that of terminals $60,000,000. The termi¬
nals named embrace 17 cities. Seven of these are estimated at less
than $1,000,000 each, and disregarding these we have an estimated
value of $55,000,000 for terminals at 10 points.
The total above given includes $15,000,000 for contingencies,
$3,500,000 for general and legal expenses, $37,500,000 for interest.
The prices charged are in many instances somewhat too high and the
method of computation not strictly accurate. On the whole, however,
we are impressed that this estimate has been prepared in good faith
and with great care.
It was submitted to Mr. Gillette, of the Washington railroad com¬
mission, already referred to, for his criticism and revision. In his
opinion the estimate as given should have been reduced some
$80,000,000 in all, leaving a total of $335,000,000. Here, as in case
of the Northern Pacific, it is probable that the truth lies between
the extreme of his estimate and that offered by the defendant.
For our present purpose this estimate of the Great Northern is
rendered largely useless by reason of the fact that the mileage covered
by the estimate seems to be radically different from that covered by
the reports of that company to this Commission, upon which our infor¬
mation as to its financial operations are based. The statement of
the engineer covers 6,523 miles of main track, while the report of
the Great Northern to the Commission only covers 5,335. The cost
of reproduction per mile of main track, as stated by the engineer of
that company, would be $62,500. This is probably in the vicinity of
$10,000 per mile too high. Assuming that the cost of reproducing
the whole 6,523 miles was $52,500 per mile, as we have indicated,
the cost of reproducing the 5,335 miles, covered by the report of the
Great Northern to us, would be not far from $270,000,000.
These estimates of the cost of reproduction in case of both the
Northern Pacific and the Great Northern were made in the spring
ir> r. o.o. Rep.
CITY OF SPOKANE V. N. P. RY. CO.
403
of 1907, and it was said in testimony that the cost of reproduction,
not including the right of way, at that time would have been from
12 to 15 per cent higher than three or four years before. The cost
of constructing these properties when these estimates were made
would probably exceed by 50 per cent the cost of constructing them
when the Pacific extension of the Great Northern was built.
This investigation conclusively shows that if any importance what¬
ever is to be attached to the cost of reproduction in the establishment
of railway rates, the valuation must be undertaken by the Govern¬
ment itself. No individual has the means and no individual if he had
the means could afford the expense of procuring even a rough esti¬
mate, accurate within reasonable limits, of the cost of rebuilding
either of these defendant properties. In the present case we are im¬
pressed that the engineers of the defendants have proceeded in good
faith, and the complainants were fortunate in being able to submit
their estimates to the criticism of a witness unusually well qualified
to pass an opinion upon their accuracy; but even so we have little
confidence in the reliability of the conclusion reached. There can be
no satisfactory knowledge upon this point until public authority
makes a detailed valuation upon a uniform basis.
The Great Northern Company owns either all or practically all of
the capital stock of certain railroad companies which are operated not
by the Great Northern Company as such, but by the subsidiary com¬
pany itself. The statements of the Great Northern showing cost of
reproduction evidently include this mileage, upon the theory that a
railroad whose stock was entirely owned by the Great Northern Com¬
pany was in fact a part of that railway system.
COST OF ORIGINAL CONSTRUCTION GREAT NORTHERN.
There is no evidence in this record from which any satisfactory con¬
clusion can be reached as to the actual amount of cash expended in
the construction and development of the Great Northern Railway
system. As is well understood, the basis of that system is its lease¬
hold interest in the St. Paul, Minneapolis & Manitoba Railway, of
which it took possession in 1890. The Manitoba Company itself was
organized in 1879 and began operations in 1880 by acquiring certain
other railroads which were in the hands of receivers. The first
acquisition by the Manitoba Company represented 565 miles of com¬
pleted road and a land grant of 2,000,000 acres, and the price paid
was about $7,000,000. It is impossible to follow accurately the
development of the Manitoba system from 1880 to 1890.
One of the first acts of that company was to issue to its stock¬
holders $15,000,000 of stock, for which no money was ever paid.
Subsequently, $5,000,000 of stock were distributed among stock-
in T. a <1. Rep.
404 INTERSTATE COMMERCE COMMISSION REPORTS.
holders at par, and this made up the capital stock of the Manitoba
Company when it leased its property to the Great Northern.
Very early in its history it issued $10,000,000 in bonds, which
were apportioned among its stockholders at 10 per cent of the face
value. These bonds were perfectly good and were saleable upon the
market at par.
The first dividend paid upon the capital stock of the Manitoba
Company was in August, 1882, and was 3 J per cent. From that
time on dividends continued to be paid at the rate of 6 per cent or
more down to the date of the lease. The Great Northern by the
terms of its lease guaranteed the interest upon the bonds of the Man¬
itoba Company which were then outstanding or which might be
' issued in the further construction of that road and also guaranteed
a dividend upon its stock. This $20,000,000 of Manitoba stock was
subsequently retired in exchange for $25,000,000 of Great Northern
stock.
The last annual report of the St. Paul, Minneapolis and Manitoba
Railway to this Commission befbre its property was taken over by
the Great Northern was for the year ended June 30, 1889. Accord¬
ing to that report the company then owned 2,798.89 miles of rail¬
way and operated under contract certain additional lines which
brought the total up to 3,030.16. Its outstanding capital stock
was $20,000,000 and its outstanding bonds were $60,985,000, making
a total capitalization, in round numbers, of $29,000 per mile. It
reported the total cost of its road and equipment at $78,522,595.70,
or approximately $28,000 per mile.
It will be remembered that of the $20,000,000 of stock $15,000,000
had been a gratuity, and that of the $60,000,000 of bonds $10,000,000
had been issued to the stockholders at 10 cents on the dollar.
This company also owned, according to this report, certain stocks
and bonds in other railway companies which were really a part of
its system, amounting to about $20,000,000 par value, and the pur¬
pose of the organization of the Great Northern seems to have been
to "capitalize" a part or the whole of these securities. The first
issue of capital stock by the Great Northern Company was for
$20,000,000, for which stockholders paid only 50 cents on the dollar.
Still later the Great Northern issued $25,000,000 of its capital
stock in exchange for the $20,000,000 of Manitoba stock, upon whk>h,
by the terms of its lease, it had guaranteed a 6 per cent dividend.
No money was ever paid for either of these issues. The balance of
the stock issued from time to time by the Great Northern Company
seems to have been paid for at par. The stock of that company was,
during the period covered by these issues, very much above par upon
the market, being at the time of one issue $264 per share. This new
15 I. O.O. Rep.
CITY OF SPOKANE V. N. P. RY. CO.
405
stock was in all cases issued proportionately to holders of Great
Northern stock at par.
What was done with this money so realized from the sale of the
balance of its stock does not very clearly appear. The Manitoba
road provided for the extension of its line to the coast, a distance of
something over 800 miles, by issuing a mortgage for $30,000,000. In
the development of its system the Great Northern Company has
sometimes built railroads, becoming itself the owner of their capital
stock; it has sometimes built railroads by advancing the money and
afterwards capitalizing the interest of its stockholders in that property.
After spending days in examining the annual reports to this Com¬
mission, the annual reports to its stockholders, current accounts in
financial journals, it is still impossible to state with any degree of
accuracy what money has gone into the properties of the Great
Northern System—either the '5,335 miles which it now operates or
the 6,523 miles which it controls and which are really a part of its
entire property. It would be difficult to devise a scheme better
intended to confuse and to conceal than that employed in the
development and operation of the Great Northern Railway System.
CAPITALIZATION GREAT NORTHERN.
The outstanding capital stock of the Great Northern Company,
according to its last report to this Commission, is $149,577,300 at
par. The Great Northern Company itself has no bonded indebted¬
ness. It is impossible to state exactly the funded indebtedness
or the capitalization of the properties which enter into either the
mileage operated by the Great Northern or the total mileage in
which it is interested. The Eastern Railway of Minnesota embraces
500 miles, with a capital stock of $16,000,000# and a bond issue of
$9,700,000. The Great Northern guarantees 6 per cent on the stock
and the interest on the bonds. The St. Paul, Minneapolis and Mani¬
toba leases to the Great Northern 3,875 miles. It reports an out¬
standing bond issue of $94,000,000, including $12,000,000 of improve¬
ment bonds issued to the Great Northern itself and a stock issue of
$20,000,000, which, as we have already seen, has been retired by
an issue of Great Northern stock. The remaining mileage operated
by the Great Northern filed no reports with this Commission and
we have no information as to its capital accounts.
EARNINGS—GREAT NORTHERN.
The Great Northern Railway Company is an operating and holding
company exclusively, owning no railway itself. As previously
15 I. C. C. Hep.
406 INTERSTATE COMMERCE COMMISSION REPORTS.
stated, it owns a half interest in the Burlington system, which it
carries in its accounts as $107,000,000, and against which it assumes
a liability of a like amount. This asset has been treated as offsetting
the liability.
It appears from the last annual report of that company to this
Commission that the Great Northern had in its treasury stocks
which it valued at $78,000,000 and bonds which it valued at
$22,000,000, making in all $100,000,000. These stocks and bonds
are all interest-paying securities and are of two classes.
It has been already stated that the Great Northern Company
issued its own stock in the amount of $25,000,000 par in exchange
for the Manitoba stock amounting to $20,000,000 at par. This
Manitoba stock is now carried as a treasury asset by the Great
Northern Company, and in its income account, as stated to this Com¬
mission, it is charged with dividends on this stock and credited
with the same dividends as rental paid for the Manitoba property-
This, of course, produces no effect upon the net result, but does swell
the amount of income which the Great Northern derives from other
sources than operation.
That company also owns the stocks of certain railroad companies
which operate their own properties and pay a dividend to the Great
Northern Compan}^. For example, it has $5,500,000 of the capital
stock of the Wilmar & Sioux Falls Railway Company, upon which
that company pays a dividend of 7 per cent. This, of course, is distinct
from operation, and it should be remembered, therefore, that the finan¬
cial report of the Great Northern Company, as shown by its returns
to the Interstate Commerce Commission, does not merely represent the
results from the operation of the 5,335 miles which it operates, but
includes as well the income which it derives from its ownership of
some 1,200 other mil^is of railway which are a part of its system, but
which are controlled through stock ownership and not by lease.
These companies are accumulating a surplus on their own account,,
and hence the financial statement of the Great Northern does not
fairly represent either the operating results from its entire system or
from the mileage which it operates itself. With this explanation
we give below for the various years since 1890 the surplus, the per¬
manent improvements, and the dividends paid by the Great Northern
Railway Company.
By 11 surplus" is meant what remains after payment of dividends,
fixed charges, taxes, and all other expenses, and the deduction of
" permanent improvements."
35 I.C. C. Rep,
CITY OF SPOKANE V. N. P. RY. CO.
407
\
Year.
Surplus.
Perma¬
nent im¬
prove¬
ments.
Divi¬
dends.
1891
$988,621
943,475
1,182,330
o Deficit.
189,508
1,042,547
1,207,267
2,071,768
1,787,191
2,217,763
Per cent.
31
5
5
5
5
5
5
6
6|
7
7
7
7
7
7
7
7
1892
1893
1894
1895
1896
1897
1898
$2,250,000
1,800,000
1,800,000
1,689,064
2,000,000
3,000,000
2,023,843
3,000,000
5,130,910
4,934,976
1899
1900
1901
1902
2,116,990
4,133,979
3,432,181
5,137,376
5,184,569
2,155,703
1903
1904
1905
1906
1907
o Deficit in 1894
33,791,268
104,153
27,628,793
33,687,115
The complainants make certain claims with respect to the matters
hereinbefore stated touching the value and earnings of these prop¬
erties and as to the conclusions to be drawn from those facts, which
may be considered here.
NORTHERN PACIFIC COAL LANDS.
They insist that the coal lands of the Northern Pacific should not
be included in the value of that property upon which the company
is entitled to earn a return. This position is well taken. Those
lands are certainly of the very first importance to that railroad, and
it might have been both a wise and a proper thing to make this pro¬
vision for the future. In that case the public could not well find
fault if it were compelled to pay interest upon whatever outlay was
reasonably necessary; but if the public is required to pay upon the
value of these lands it should also have the benefit which accrues
from their ownership. As it is, the title to these properties is vested
in an independent company. That company conducts the mining
operations and sells coal both to private consumers and to the rail¬
way, and it makes from its railway fuel, according to the statement
furnished us, a handsome profit. The railway pays as a part of its
operating expenses for its coal at this price, so that the public once
pays a return upon these properties when the railroad buys its fuel
coal at the figure now charged. To permit the value of these prop¬
erties to be used for the purpose of swelling the amount upon which
an income may be demanded by the Northern Pacific Railway Com¬
pany would be to compel the public to pay twice upon this part of the
investment.
15 I. C. C. Rep.
408
INTERSTATE COMMERCE COMMISSION REPORTS.
GREAT NORTHERN ORE CERTIFICATES.
The annual report of the Great Northern Railway Company for
the year 1900 contains an item under deductions for the year of
$1,851,364, and the report states that this amount has been charged
off by reason of the transfer of certain securities of the company to
the Lake Superior Company, Limited. It seems that such a company
was organized and did take title to various properties and securi¬
ties formerly owned by the Great Northern Company. In this
manner the Lake Superior Company obtained title to certain lands
in the State of Minnesota containing extensive deposits of iron ore.
These lands have since been transferred to trustees and a contract
for the taking out of the ore has been entered into with the United
States Steel Corporation. A certificate was issued to each holder
of a share of Great Northern stock entitling the holder of such cer¬
tificate to a proportionate share in the income received by these
trustees from the operation of the ore leases. These ore certificates
were worth on the market at one time $90 each; to-day, February 9,
1909, the market price is about $71, and they have a prospective
value very much greater if the quantity of ore is anything as large
as the estimate and the leases are fulfilled according to their terms.
When it is remembered that none of the Great Northern stock
was issued for more than par, it will be seen that the holder of a
share of this stock could by the sale of his ore certificate have real¬
ized nearly enough to reimburse him for the original cost of his
stock. A considerable part of the Great Northern stock was issued
as a gratuity, or at least represented no cash advance. These ore
certificates at $90 each would considerably more than return to
stockholders all the money ever actually advanced to the Great
Northern Company in payment for stock. The complainants insist
that in determining what returns these stockholders may demand
from the public the fact that this stock represents practically no
investment of cash must be kept in mind by this Commission.
Without attempting to determine what the rights of the public
may have originally been in these ore lands—a question which could
not be intelligently determined upon#this record—it is difficult to
see how, at the present time, any practical application can be made
of the idea of the complainants. These certificates are transferable
and they are in no way connected with the stock on account of which
they were originally issued. The stockholder having received his
certificate might sell his stock and retain the certificate or sell the
certificate and retain his stock. It is altogether probable that the
ownership of stock and certificate in many cases has ceased to be the
same. How, then, could we say that the holder of Great Northern
15 I. C. C. Rep.
CITY OF SPOKANE V. N. P. RY. CO.
409
stock who has purchased his stock in the open market, who does not
to-day own and never has owned an ore certificate, can be account¬
able for the value of these ore lands? Certainly this was a most
momentous transaction to the holders of this $150,000,000 of Great
Northern stock, for on the basis of past market prices it represented
to them from $75,000,000 to $135,000,000 in money, but apparently
this Commission, in the decision of the questions before it, can take
no account of that transaction.
DISTRIBUTION OF GREAT NORTHERN STOCK AT PAR.
Of this same character is the contention of the complainant with
respect to the manner in which the stock of the Great Northern
Company has been issued.
It has been already said that since about 1893 the stock of this
company has sold upon the market at above par. It has also
appeared that all the stock issues of the company after the first,
with the exception of that issue made to retire the Manitoba stock,
were distributed pro rata among the holders of the stock of the com¬
pany at par. The actual market value of the stock at the time of
these various issues so distributed ranged from $140 to $264 per
share. A stockholder could therefore have paid $100 for his share
of stock and at once sold the same upon the market for a much higher
price, thus realizing from the transaction from $40 to $164 per share.
The complainant insists that this manner of selling stock is vicious
and unlawful, and that in determining the return to these stock¬
holders we must have in mind the benefit conferred upon those
stockholders by this operation.
Assuming, without deciding, that the complainant is right in its
position that this practice is both unlawful and unwise, how can
we, in this proceeding, take any practical note of what has been
done? This stock is selling to-day, January, 1908, upon the market
at something less than $120 per share. If the original stockholder
has retained and now owns his stock he paid $100 in the begin¬
ning, has received a regular dividend, and now owns his stock at
the above advance. While the profit to him has been a handsome
one, there is certainly nothing here which would call for a penaliz¬
ing of the stockholder. Suppose, now, that instead of retain¬
ing the stock the stockholder sold the same to some innocent pur¬
chaser who paid the market price and who has continued to own
the stock from then until now. This present stockholder paid
perhaps $264 a share for his stock. He has lost $144 per share.
Should we, for that reason, compel him to sustain a further loss?
The manner in which this stock has been manipulated may furnish
a strong argument against the propriety of permitting the sale of
15 I. C. C. Rep.
410 INTERSTATE COMMERCE COMMISSION REPORTS.
new stock in this manner, but so far as this particular company and
the stock already issued are concerned the transaction is ended and
can be given no practical consideration in determining what rates
shall be charged by the Great Northern Railway Company.
WATERED STOCK—GREAT NORTHERN.
Of the $150,000,000 of the capital stock of the Great Northern
Railway Company outstanding, $30,000,000 has been issued without
the payment to that company of any money consideration. The
complainant insists that we should deduct from the outstanding
capital stock of the Great Northern Railway Company this $30,000,000
and allow that company to earn dividends not upon $150,000,000, its
actual issue, but upon $120,000,000, the amount for which cash was
received.
This claim is undoubtedly somewhat different from the two pre¬
ceding. A stockholder by the purchase of a share of stock becomes a
part of the corporation and must of necessity stand like every other
stockholder whose stock is of the same grade. If the stock of the
corporation has been inflated, his stock, even though he pays par for
it, becomes tainted with that inflation. As a practical matter, this
must be so. But we very much doubt whether in determining what
rate of dividend the stock of a railway company may earn we can
properly deduct in every instance watered stock. It is impossible to
distinguish the spurious from the genuine. Those who received their
stock without consideration have usually parted with it and that
very stock, if it could be identified, is owned by its present possessor
for a valuable consideration. The whole stock has gone upon the
market, has assumed a market value, has become the subject of
investment by innocent stockholders. We may undoubtedly and we
should have in mind the manner in which this stock was issued and
the consideration which was paid for it, but we do not think that we
should, for example, treat the outstanding capital stock of the Great
Northern Railway as $120,000,000 and not $150,000,000. These
transactions ought to have been prevented to begin with. Great
sums might have been properly saved the public by suitable super¬
vision at the outset, but the evil has been done and for the most part
can not be safely undone. If this Government in the past has per¬
mitted the "capitalization" of earnings and securities and the "con¬
ferring of benefits" it ought not to-day to penalize the innocent
holder of the values thus created.
PRICE PAID FOR NORTHERN PACIFIC STOCK.
The same observation applies to the claim of the complainants that
we ought to establish the earnings to which the Northern Pacific
stock is entitled in reference not to the present value but to the
15 I. C. C. Rep.
CITY OF SPOKANE V. N. P. RY. CO.
411
original cost of this stock. It will be remembered that of the
$155,000,000 common stock of that company now outstanding
$75,000,000 was orignally a preferred stock and $80,000,000 a com¬
mon stock; that the preferred stock was issued upon the payment
of $10 per share in exchange for one-half share of old preferred and
one-half share of old common, and that the $80,000,000 of common
stock was issued in exchange for common stock share for share, upon
the payment of $15 in cash. It is urged that this old common stock
was utterly worthless and the preferred stock of very little value, so
that this stock was really sold for $10 and $15 per share. It is still
further pointed out that a very large quantity of the common stock
was never taken under the plan of reorganization and was sold for
$15 per share.
Undoubtedly this fact must be kept in mind by the Commission in
determining what earnings the Northern Pacific stock may fairly
demand, but if that stock, estimated upon whatever may be the
proper basis, whether by the money which had gone into the prop¬
erty or the cost of reproducing the property or the earning capacity
of the property upon the basis of a reasonable rate, was actually worth
$100 per share, the mere fact that it sold at that time for much less is
no reason why we should limit its earnings to-day.
Counsel for the complainants suggests certain other questions
which are not equally free from difficulty. The foregoing statement
of facts shows that the Great Northern Railway since 1890 has paid
a dividend upon its outstanding stock, which was for the first year
3} per cent, for the years 1892,1893, 1894,1895,1896, 1897, 5 per cent;
for the year 1898, 6 per cent; 1899, 6f per cent; and for the remaining
time 7 per cent. The first issue of Great Northern stock was at 50
cents on the dollar, and, as we have just seen, the total issue embraces
$30,000,000 at par for which no money was actually paid. The divi¬
dends paid by the Great Northern have yielded its stockholders an
ample return upon the investment. In addition to this that com¬
pany since it began operations has shown a surplus, including its
investment out of earnings in permanent improvements, of some
$60,000,000. The Manitoba Company in addition to the payment
of dividends upon its stock, of which three-fourths was an absolute
gratuity, accumulated during the ten years of its existence a surplus
of some $10,000,000. It does not appear what surplus may have been
accumulated by the other companies which the Great Northern
controls.
Now, the complainants insist that this $70,000,000 has been obtained
by the imposition of unjust and unreasonable rates; that it belongs
not to the Great Northern Company but to the public which has paid
these rates, and that upon whatever basis we fix the return to which
this company is entitled, we must first deduct this $70,000,000.
15 I. C. C. Hep.
412 INTERSTATE COMMERCE COMMISSION REPORTS.
A somewhat similar question is raised touching the estimated value
of the right of way, which is embraced in the cost of the reproduction
of these properties. It will be remembered that the total value of the
structures and equipment of the Northern Pacific Company was stated
by us to be not far from $250,000,000. This represents the total cost
at present prices of reproducing that entire property. Now, it was
estimated that the land upon which this structure stands was worth
$107,000,000, almost one-third of the entire value of the property
itself upon the basis of reproduction.
Much of this right of way was given to the Northern Pacific origi¬
nally by the Government and by individuals. A considerable part of
it has indeed been since acquired at large expense, but still the total
cost to that company of this right of way has been but a fraction of
the amount at which it is carried into this cost of reproduction. The
complainants insist that the defendant Northern Pacific Company
can not charge the public with this enormous sum for which it has
never paid.
These two questions are not by any means the same, but the argu¬
ment by which they are sustained on the part of the complainants is
substantially identical and may be briefly stated.
In 1872 a considerable part of the business portion of the city of
Boston was destroyed by fire. The legislature of the state of Massa¬
chusetts, then in session, authorized Boston to issue its bonds for the
purpose of loaning money to individuals with which to rebuild this
burnt district. Suit having been brought by a taxpayer to restrain
the city from this action on the ground that the statute authorizing
it was unconstitutional, the Massachusetts court enjoined the bond
issue.
Its decision was placed upon the ground that no public tax could
be levied for the benefit of a private enterprise. No matter how
great the indirect benefit to the entire city of Boston might be from
the rebuilding of these burnt stores promptly, the loan in the first
instance was to a private individual; the public benefit was only an
incident. Hence, the incurring of an obligation which might finally
necessitate the imposing of a public tax was unconstitutional and
void. Lowell v. Boston, 111 Mass., 454.
Somewhat before the great Boston fire the legislature of the state
of Wisconsin authorized the county of Fond du Lac to make a money
contribution in aid of the construction of a certain railroad in that
county, and the county, in pursuance of this act of the legislature
and in observance of its requirements, issued certain notes to the
railroad company. These notes were not paid at maturity and suit
was brought against the county by a bona fide purchaser into whose
hands they had previously come.
15 I. C. C. Rep.
CITY OF SPOKANE V. N. P. RY. CO.
413
The supreme court of the state of Wisconsin held that the act of the
legislature authorizing this expenditure of money by the county was
unconstitutional for the reason that it involved the levying of a public
tax for the benefit of a private enterprise. It was said by the court
that this railroad while sometimes spoken of as public was essentially
a private undertaking; the funds with which it was constructed were
private; its operation and control were private; its profits belonged
to private individuals. Hence, the county of Fond du Lac could not
by a general tax subsidize this private venture.
This holding of the state court was reversed by the Supreme Court
of the United States. It was conceded in the opinion of that court
that no public tax could be laid for a private enterprise, but it was said
in the most emphatic terms that the construction of a railroad was not
a private work. The service which it performed was public; its rates
and its operation were subject to public control. The fact that the
agency designated by the legislature for the performance of this
public function happened to he a private corporation was of no signifi¬
cance; the purpose and not the means selected for the performance
of that purpose must control. Since the purpose was public the legis¬
lature might authorize the county to levy a public tax in furtherance
of this enterprise. The court used the following language:
Whether the use of a railroad is a public or a private one depends in no measure
upon the question who constructed it or who owns it. It has never been considered
a matter of any importance that the road was built by the agency of a private corpo¬
ration. No matter who is the agent, the function performed is that of the state.
Though the ownership is private the use is public. So turnpikes, bridges, ferries, and
canals, although made by individuals under public grants, or by companies, are
regarded as publici juris. The right to exact tolls or charge freights is granted for a
service to the public. The owners may be private companies, but they are compel¬
lable to permit the public to use their works in the manner in which such works can
be used. That all persons may not put their own cars upon the road, and use their own
motive power, has no bearing upon the question whether the road is a public highway.
It bears only upon the mode of use, of which the legislature is the exclusive judge.
Olcott v. The Supervisors, 16 Wallace, 678, 695. yi
The levying of tolls by a railway for its transportation service is
in essence the imposing of a tax upon the public which requires that
service. This has always been so held of tolls imposed for the use of a
turnpike, whether provided and maintained by the Government
itself or by a private corporation under franchise from the Govern¬
ment, Bussey v. Storey, 4 B. & Ad., 98, and there can be no differ¬
ence in principle between the tolls exacted for the right of passage
over a highway and the charge for the transportation of freight or
passengers upon the railway. Railroad Commissioners v. Portland
cfc Oxford R. R. Co., 63 Me., 275; Wabash Ry. Co. v. Blinois, 118
U. S., 586.
15 I. C. C. Rep.
414 INTERSTATE (JOMMERCE COMMISSION REPORTS.
From these cases and from many others cited in the brief of the
complainants, to which no reference is here made, the following general
principles are sought to be deduced:
The providing of the highways of a nation is an act of sovereignty
essential to the existence of the nation. These highways may be
provided directly by the Government itself or by private individuals
under sanction of the Government. If the duty is delegated to a
private individual, that individual, whether person or corporation, is
the agent of the Government and acts subject to the well-known
laws of agency. If being authorized to impose for its service a rea¬
sonable charge, it in fact imposes one that is excessive, it is answerable
to the Government. If having imposed excessive tolls it still has in
its possession the surplus over and above what would have resulted
from a fair charge, that surplus belongs to the people and is held by
the private corporation for the benefit of the people.
VALUE OF NORTHERN PACIFIC RIGHT OF WAY.
The practical importance of this question will be readily appre¬
hended. The Northern Pacific Railway extends through a com¬
paratively thinly settled portion of this country. In comparison
with other sections land values along its line are small. Its lines
penetrate no city which can fairly be called a great city. Neverthe¬
less, the cost of its right of way equals almost one-third of the entire
cost of reproducing that property.
The original cost of this right of way to the Northern Pacific Com¬
pany was insignificant as compared with the present valuation placed
upon it. What of it was taken at the time of the original construc¬
tion, cost practically nothing. Much of it was given by the Govern¬
ment for the purposes of a right of way, which, it should be noted,
is entirely distinct from the land grant of the company. The ter¬
minals in Spokane are mainly located upon the right of way of the
railway. They cost the railway nothing whatever, and they are ex¬
tended in this statement at $7,000,000.
A considerable portion of its terminal property in Seattle has
been purchased within the last seven or eight years, but the prices
paid for this were nothing like the values now placed upon it. It
was said by one witness for the defendants that the terminals of the
Northern Pacific and Great Northern in Seattle had appreciated
within the last few years 150 per cent, and that portions of their ter¬
minal lands had increased within that time from 500 to 600 per cent.
Whatever may be true to-day, in the comparatively near future
the structures of the railways of this country will be less in value
than the land upon which they stand, estimated as the value of the
15 I.' C. C. Rep.
CITY OF SPOKANE V. N. P. RY. CO.
415
right of way has been estimated in these cases. Whether, under the
laws and Constitution of the United States, our railroads can de¬
mand a return not only upon the money which has been actually
invested in these properties, but also upon this value, which has
grown from almost nothing to vast proportions without the expend¬
iture of money or the assumption of risk, is a question of tremen¬
dous importance.
Elaborate briefs have been submitted by counsel, at the request
of the Commission, upon this question, but it does not seem profitable
to discuss or decide it in this connection. We shall assume, in dis¬
posing of this case, that the cost of reproduction is properly
estimated upon the basis followed by these defendants, and that the
item of value of right of way is to stand as a part of that cost, like
any other item.
SURPLUS EARNINGS.
We come now to the complainailts' claim that the surplus which
has been accumulated by these defendants from earnings should be
first subtracted from the value of their properties in determining the
amount upon which they may properly earn. The contention of
counsel is that this surplus is a fund held by the railway company as
trustee for the public, which this Commission should in some way
manage to redistribute to the public in the establishment of just
and reasonable rates. The railway is certainly an agent of the Gov¬
ernment in the construction and operation of its property, and it is
only allowed to charge for its services a reasonable compensation;
Does it from this follow that the surplus of the Great Northern Rail¬
way, for example, which is said to be $70,000,000, is held by that
company in trust for the public ? Does it follow, even, that the value
of this property to-day should be decreased by $70,000,000 upon the
theory that the public has paid into the property that amount?
It is well understood that rates by all lines to Spokane from a given
eastern destination must be the same. We have already held that
in establishing a reasonable rate the strongest line should not alone
be considered; the necessities of the weaker line must also be taken
into account. In the application of this principle it is evident that a
rate might be fixed which would pay a very moderate return by one
lino and a very handsome return by the other. Under the operation
of these rates the Great Northern, by reason of its cheaper construc¬
tion and its easier operation, might accumulate a surplus while the
Northern Pacific did not. If so, could it be said that the surplus of
the Great Northern had been improperly accumulated when its rates
had been just and reasonable? Does the mere fact of the accumula¬
tion of a surplus by a particular road show that the rates upon that
road have been excessive?
15 I. C. C. Hep.
416
INTERSTATE COMMERCE COMMISSION REPORTS.
But assume that they have been. This $70,000,000 to which the
complainants refer in case of the Great Northern surplus is the result
of the operations of the Manitoba and the Great Northern companies
since the year 1880; that is, for twenty-seven years. During all that
period this surplus has been gradually accumulated and has gone into
the property. Should the Government to-day take note of that sur¬
plus for the purpose either of so reducing the rates of the company
that no earnings can be made upon this much of the property or
with a view to in some sense turn that surplus back again into the
hands of the public?
There is no absolute test of a reasonable rate, and the Government
has supplied none. During all this period the excess has gone into
the property, which has gradually become more valuable, and this
increased value has reflected itself in the market price of the securi¬
ties of that company. It is impossible to restore what has been
improperly taken in the way of excessive rates to those persons from
whom it has been received. The Government, under those circum¬
stances, can not lay hold on this surplus as a fund held in trust for
the public.
This case strongly illustrates the fact that if any Government
tribunal is to do justice between the railway and the public, if it is to
feel any confidence in the correctness of its conclusions, its supervision
must be continuous and not spasmodic. There must be some point
of departure and from that point the knowledge of the Government
must be accurate and complete. After earnings" have once been
"capitalized" and benefits have been "conferred," when the various
interdependent organizations have been perfected, it is impossible to
either know or to undo.
Having considered the claims of the respective parties touching the
evidence introduced as to the value and earnings of these properties,
we may now inquire what facts are established by this evidence and
what the bearing of those facts is upon the issues before us. The com¬
plainants insist that even if the discrimination created by the imposi¬
tion of higher rates at Spokane than at more distant points is not
strictly within the inhibition of the third and the fourth sections, it is
nevertheless a discrimination which should be removed provided
this can be done without unduly reducing the revenues of these
defendants. Otherwise stated, if their return upon the present basis
of rates is excessive the excess should be removed by removing the
discrimination complained of in this case. First, then, is there any
excess ?
Many governments construct and operate their own railways;
ours has elected to discharge this function of sovereignty by delega¬
tion to private corporations, who, in the language of the Supreme
St! ; ,h. 15 I. C. C. Ilep.
CITY OF SPOKANE V. N. P. KY. CO.
417
Court of the United States, act as agents for the Government in this
respect. Few governmental functions can be higher than the pro¬
viding of proper highways, and the most essential highway under
national control to-day is the railway. It is of first importance that
our railway service should be efficient, for just in proportion as it is
inadequate, industry must suffer and commerce languish. If the
present system of private ownership is to be continued, sufficient
inducement must be extended to private investors.
Capital will seek investment in railways for the same reason that
it does in other enterprises, the amount forthcoming depending upon
the attractiveness of the investment. This in turn is determined
by two considerations, first, certainty; second, amount of probable
return. If the Government of the United States were to guarantee
an income of 4 per cent on all money invested in railroads, an abun¬
dance of capital would be offered. If that Government were to
impose upon our railways such rates that not exceeding 4 per cent
could be realized without giving a guaranty that anything what¬
ever should be paid, it would be exceedingly difficult to procure
funds for railway development. It seems certain that in the imme¬
diate future very large sums of money must be expended in improv¬
ing and extending the railroad facilities of this country, and it is
therefore extremely important that railroad investments should be
made sufficiently attractive so that the necessary money for these
improvements can be obtained. It is not necessary to-day that
opportunity should be given for the accumulation of enormous for¬
tunes by speculation in and manipulation of railroad securities, but
it is necessary that railroad capital should be assured of fair treat¬
ment and of a suitable return; otherwise, this Government will find
itself confronted with the problem of providing such railway capital
from its own resources, for it is absolutely essential that railroad
development keep pace with industrial and commercial requirements*
We turn now to the earnings of these companies.
It appears that from 1898 to 1907, inclusive, the Northern Pacific
earned over and above all fixed charges, taxes, and other expenses,
in addition to the payment of a dividend for every year except the
first, in round numbers $55,000,000. During the last six years of
that period it earned in addition to the payment of its taxes and fixed
charges from 10 to 15 per cent upon its capital stock of $155,000,000.
The period covered by the operations of the Great Northern is
seven years longer, extending from 1891 to 1907, inclusive, but these
additional seven years covered a period of the greatest depression
among railways in recent years, during which more than 25 per cent
of all the railroad mileage of this country was at one time in the
hands of receivers.
15 I. C. C. Hep.
418 INTERSTATE COMMERCE COMMISSION REPORTS.
The surplus accumulated by that company during that period, in
addition to fixed charges, taxes, and a dividend, usually of 7 per cent,
paid upon many millions of stock issued without any money consid¬
eration, was, in round numbers, $61,000,000. During the last six
years of that period this company has also earned upon the par
value of its capital stock from 10 to 15 per cent.
It is impossible to avoid the conviction that both these companies—
and there is very little difference between the two in this respect—have
enjoyed for the last half dozen years previous to June 30, 1907, exces¬
sive earnings.
In saying this we have in mind the fact that those years were
years of unusual prosperity, but it must also be remembered that the
development of the country served by these systems and the financial
strength of the systems themselves put them beyond the possibility
of a recurrence of the conditions of 1893. Nothing more conclusively
shows this than the actual results of the year 1908.
This report was prepared before the financial returns for that
year were available. According to the universal statement of rail¬
way managers it was one of unusual adversity. Almost without
warning came an enormous falling off in business and revenues.
Just as expenses do not ordinarily increase as. rapidly as traffic upon
a rising tide, so it was found impossible to reduce expenses at
a moment's notice to meet the reduction in revenues. As the
rates of these defendants ought not to be fixed altogether with
respect to the recent years of prosperity above referred to, so neither
should they be established upon the basis of this year of adverse
conditions. The annual reports of these companies show that in
this year of adversity the Great Northern paid its taxes, its interest,
a dividend of 7 per cent upon its capital stock, and had remaining
$3,000,000. The Northern Pacific, after the payment of its taxes,
its interest, and a dividend of 7 per cent upon its capital stock, had
left $9,000,000.
In order to understand the effect upon the revenues of these defend¬
ants of any order which might be made, we required them to furnish
us a statement showing the loss of income which would be worked by
applying terminal rates to the business which actually moved to
Spokane for the year 1906. Since it was a work of much labor to
determine these figures for an entire year, two months were selected
which were said to bo fairly representative, and it was assumed that
the showing made in these months would indicate correctly the whole
year. From these figures which have been worked out by taking
actual shipments to Spokane and applying terminal rates it would
appear that during the year 1906 the Great Northern would have lost
in its revenues at Spokane $340,484, and that the Northern Pacific,
15 I. C. C. Iiep.
CITY OF SPOKANE V. N. P. BY. CO.
419
during the same time, by the application of terminal rates, would
have lost $477,139.
The rates attacked are made in pursuance of a well-defined scheme
of rate making. All other intermediate territory pays higher rates
in common with Spokane. Whatever rule is applied here must be
applied elsewhere, and in deciding this question we must consider
the effect upon the revenues of these defendants of applying terminal
rates not only at Spokane but at all other intermediate territory.
The defendants were therefore required to furnish, in addition to the
above-mentioned computation as to Spokane, a further computation
showing reductions in revenue if terminal rates had been applied to
all business both east and west of Spokane. These figures show that
the entire loss to the Great Northern would have been $645,000,
while the entire loss to the Northern Pacific would have been about
$1,197,000.
The effect upon the earnings of these defendants would not prob¬
ably be limited to the loss of these sums. The present system of rate
making has become a part of the commercial development of the
Pacific coast, and any radical departure from that system would
inevitably lead to agitation and changes of various kinds. The inter¬
veners, representing the coast towns, earnestly insist that rates from
those cities toward the east are higher than rates from Spokane to
the west and south. They demanded in this proceeding a reduction
of those rates, and while we did not deem this a proper case in which
to pass upon that question the demand will undoubtedly be renewed.
The complainants urge that the defendants, by charging a lower
rate to Seattle from eastern destinations than is applied at Spokane,
the intermediate point, discriminate against that locality, and that
the Commission should order a removal of that discrimination. We
have expressed the opinion that this contention is not well taken;
that Seattle by virtue of its location upon the ocean can command
a better rate from eastern territory than Spokane, situated 400 miles
inland; that the carriers may meet this situation at Seattle by making
a lower rate than is accorded Spokane. This is a disadvantage of
location under which the city of Spokane rests and of which it can
not justly complain. Spokane is entitled to ask of these defendants,
not of necessity tl e same rate as Seattle, but a rate which is, under
all tl e circumstances, just and reasonable, and our duty in the
premises is to establish such just and reasonable rate.
It has been seen tl at tl ese rates to Spokane and Seattle are of two
general kinds, namely, class rates and commodity rates. These two
kinds si ould be considered separately.
The Northern Pacific and the Great Northern establish class rates
from St. Paul to Spokane and Seattle. These same defendants, in
15 I. C. O. Itep.
420
INTERSTATE COMMERCE COMMISSION REPORTS.
connection with other defendants, establish joint class rates from
Chicago to Spokane and Seattle. There are no joint class rates east of
Chicago. While railroad lines extending all the way to the Atlantic
seaboard are parties to this proceeding, there is no petition before the
Commission for the establishment of a joint through rate, and we can
not therefore properly deal with these class rates east of Chicago,
and shall not attempt to do so.
The class rates from St. Paul and Chicago to Spokane and Seattle
are given on page 379 of this report. By referring to those tables it will
be seen that the first class rate from St. Paul is the same to both
Spokane and Seattle, while the first class rate from Chicago is 60
cents higher to Spokane than to Seattle. With some trifling excep¬
tions the same relation is maintained in the other classes. Are these
class rates from St. Paul and Chicago to Spokane unreasonably high?
The first class rate from New York to Chicago, a distance of
approximately 1,000 miles, is 75 cents, and this rate is the basis for
the making of all first class rates from the Atlantic seaboard into
western territory east of the Mississippi River. The rate from St.
Paul to Spokane is four times as great for a distance but one-third
greater. It is said that this difference in rates is justified by differ¬
ent traffic and operating conditions, the two principal points of
difference being that the cost of operation upon the transconti¬
nental defendant line is greater than upon the Chicago-New York
line and that the density of traffic is very much less.
For the purpose of putting in its true light this argument derived
from greater density of traffic we have caused to be compiled from the
annual reports of these carriers certain information which is given
below, comparing the year 1897 with the year 1907:
Gross earn¬
ings from
operation,
per mile.
Net earn¬
ings from
operation,
per mile.
Ratio of
operating
expenses to
earnings.
Tons carried one
mile.
1897.
1907.
1897.
1907.
1897.
1907.
1897.
1907.
Northern Pacific Ry. Co
Great Northern Rv. Co
Union Pa -ific R. R. Co., including Oregon
Short Line R. R. Co., and Oregon R. R. &
Navigation Co
$4,074
3,950
5,754
$12,574
9,606
13,403
$1,338
1,805
2,300
$5,666
3,972
6,288
P. ct.
67.15
54.31
60.04
P. ct.
54.94
58.65
53.08
261,029
303,377
389,841
1,011,164
941,512
1,010,543
Of all lines between New York and Chicago the Lake Shore &
Michigan Southern is perhaps the most profitable. The gross earn¬
ings per mile of that road in 1897 were only slightly in excess of the
gross earnings of the Union Pacific and the Northern Pacific to-day,
and its percentage of operating expenses was higher than either of
those lines at the present time. There was in 1897 no through line
from Chicago to New York whose gross earnings per mile were
15 I. C. C. Rep.
CITY OF SPOKANE V. N. P. RY. CO.
421
materially greater than those shown by the two defendants last
named and none which showed as low a ratio of operating expenses.
The thing which is not properly understood nor allowed for is the
wonderful change in conditions upon these transcontinental roads
due to the increase in traffic in the last decade. During that time
every condition which should make for a lower rate has come into
existence, while the rates themselves, on the whole, instead of being
reduced have been advanced.
It was said in the original Spokane case, 5 I. C. C. Rep., 478, that
these class rates were not competitive. Whatever may have been
the case then, this is not strictly true now. At that time the class
rate graded up from the Missouri River to the Atlantic seaboard,
being, first class, S3.50 from St. Paul to Seattle, as compared with
S4.20 from New York. To-day, under the influence of competitive
conditions, class rates are in the main the same from all territory east
of the Missouri River to Pacific coast terminals. But while these
class rates to the coast cities are influenced to some extent by com¬
petitive conditions, this is not true to the same extent as with com¬
modity rates, and whatever may be said of such rates from points
east of St. Paul, we are clear that the present scale of class rates from
St. Paul to Seattle affords ample compensation to the defendants.
In the original case the Commission established from St. Paul to
Spokane class rates which were 82 per cent of those to Seattle. The
first class rate from St. Paul to Seattle was then $3.50; it is now $3.
In our opinion reasonable class rates from St. Paul to Spokane would
be obtained by reducing the present Seattle rate about 16 § per cent.
Class rates from Chicago to Spokane may properly be higher than
those from St. Paul by the following arbitraries:
Class 1 2 3 4 5 A B C D E
Rate 50 42 33 21 17 21 17 14 12 11
The resulting rates will be substantially those which have been
applied in the past from St. Paul to Seattle, and which we have
found to be sufficiently high without reference to competitive con¬
ditions. The distance from Chicago to Spokane is but slightly
greater than that from St. Paul to Seattle, and there is no condition
of transportation which would justify the maintenance of higher
class rates.
In our opinion, therefore, upon a consideration of all the facts and
circumstances, the rates named below would be reasonable class
rates to be charged for the future from St. Paul and Chicago to
Spokane:
15 I. C. C. Rep.
i
422
INTERSTATE COMMERCE COMMISSION REPORTS.
\ From—
To Spokane.
1
2
3
4
5
A
B
C
D
E
St. Paul
Chicago
250
300
217
259
183
216
158
179
133
150
133
154
104
121
83
97
79
91
71
82
While it is not the duty of this Commission to declare the divisions
of this rate, it is proper to say that in our opinion in the making of
rates from points east of the Missouri River to Spokane the line leading
to the Missouri River ought not ordinarily to be allowed its full local
rate. Joint through rates should be established and all lines partici¬
pating in the rate should, in consideration of the long distance covered,
abate something from the ordinary local charge.
We next come to the commodity rates, and here the problem pre¬
sented is much more difficult. As already said, there are some 1,600
commodity items from eastern destinations to Seattle, and in most
cases the rates so established are lower to Seattle than to Spokane.
The complainants insist that this is unlawful, first, because a dis¬
crimination is created against Spokane, and, second, because the
rates to Seattle are in and of themselves reasonable rates to apply at
Spokane.
We have already seen that the Seattle rate is induced by water
competition and that the carriers do not, therefore, of necessity vio¬
late either the third or the fourth sections in maintaining from a given
point of origin a higher rate at Spokane. It remains to inquire
whether these rates would be reasonable to apply at Spokane irre¬
spective of Seattle.
While the complaint attacks generally all commodity rates to
Seattle which are less than those upon the same article to Spokane,
only 34 of these rates are specifically referred to. No testimony was
taken as to any articles except these, and in the view which the Com¬
mission has taken of its authority under the statute, we can only fix
specific rates upon these articles which have been made the subject of
specific complaint, although we must consider what our probable
action would be if required to pass upon the remainder of these com¬
modity rates, and its probable effect.
These terminal rates to Seattle apply generally from all points
upon the Missouri River and east. It is evident that in establish¬
ing rates to Spokane which are just and reasonable we must h&ve
regard to some extent to distance; that is, we can not establish the
■ same rate from New York, Chicago, and St. Paul, but must increase
the rate as the distance increases. We will first inquire, therefore,
whether these Seattle rates are just and reasonable to apply as
local rates from St. Paul to Spokane. While terminal rates are
15 1. C.C.Rep.
CITY OF SPOKANE V. N. P. RY. CO.
423
usually the same from all eastern points of origin, the Chicago-
Seattle rate will be selected as representative.
The complainants insist that upon this point the past conduct
of the defendants is conclusive upon the reasonableness of the rates.
It is 400 miles from Chicago to St. Paul, and another 400 miles
from Spokane to Seattle. For many years past the defendants
have maintained the Chicago-Seattle rate through St. Paul and
Spokane. Further, the rate from New York to Seattle is usually
the same as from Chicago, and under this rate business has for many
years moved habitually through St. Paul and Spokane to Seattle.
The distance from New York to Seattle by this route is 3,200 miles.
While this competitive rate can not be selected as the measure of
a reasonable rate from St. Paul to Spokane, it must be assumed
that the business has been handled from New York and Chicago at
some profit. It is urged with great, force that a rate which pays
the cost of the movement from New York to Seattle, a distance of
3,200 miles, through St. Paul and Spokane, must yield a reasonable
profit when applied as a local rate for the 1,500 miles of that haul
between St. Paul and Spokane.
We have examined the ton-mile revenue which would be pro¬
duced by applying these Chicago-Seattle rates as locals between
St. Paul and Spokane, and we find that in almost every case it
equals, and in most cases exceeds, their revenue under the rates
which they have voluntarily established for the transportation of
fruits, vegetables, and other products of the Pacific coast states
to the east.
We have compared these rates with those upon similar commod¬
ities for corresponding distances in various parts of the United
States, and when due allowance is made for difference in condition,
it is believed that such rates are fairly in line with those elsewhere,
excepting always transcontinental rates themselves, which are really
under attack in this proceeding. The distances, for example, from
Cleveland to San Antonio, from Boston to Omaha, and from Chi¬
cago to El Paso are about the same as from St. Paul to Spo¬
kane. Below is given a table showing rates in force January 1, 1909,
upon these commodities between the points named:
Commodity.
Tinware, n. o. 8., In boxes, barrels, or crates
Plow points, In bundles
Shovels, spades, and scoops
Fruit Jars and glasses
Canned corn, peas, and beans
Belting, canvas, or rubber
Bicycles, crated
Blank books with flexible paper covers
Blank books, m o. s
15 I. C. C. Rep.
Boston to
Omaha.
Cents.
m
57}
02
57
57
94
136
02
119
Cleveland
to San
Antonio.
Cents.
107
92
103
91
07
139
187
144
144
Chicago
to
El Paso.
Cents.
118
95
100
93
09
142
179
132
132
Chicago
to
Seattle.
Cents.
85
110
135
85
90
120
250
125
125
St. Paul
to
Spokane.
Cents.
190
104
104
190
125
205
335
170
170
J
424
INTERSTATE COMMEECE COMMISSION EEPOETS.
Commodity.
Paper tablets
Books, n. o. s
Bottles, wine or beer
Drugs and medicines, n. o. s
Cotton ducks and denims
Glass, common window
Glassware, n. o. s
Dry paint in bags, kegs, barrels, or casks
Paints in oil, buckets or kits
Paint in oil, iron drums, kegs, etc
Paper bags
Rubber boots and shoes
Circular saws without frames, in boxes..
Stoves, alcohol, gas, etc., with frames...
Stoves, n. o. s
Twine, in bales, boxes, or barrels
Cordage, in packages
Wheelbarrows, k. d
Windmills, k. d
Copper wire
Wire fencing, in rolls
Woodenware....
Boston to
Omaha.
Cents.
53
119
57
103
100
57
68
50
57
57
53
136
127
63
57
62
62
59i
60
68
59
68
Cleveland
to San
Antonio.
Cents.
96
144
91
81
121
51
71
71
96
181
164
96
96
121
121
101
92
121
74
107
Chicago
to
El Paso.
Cents.
98
126
93
179
164
83
132
51
73
73
98
179
158
98
98
132
132
104
95
132
74
118
Chicago
to
Seattle.
Cents.
125
140
75
150
100
90
120
90
90
90
100
150
150
150
130
95
95
90
135
110
80
125
We have carefully considered the probable effect of the application
of such rates upon the revenues of these defendants in the light of
the figures already given in this report. In so doing it has^ been
assumed that other commodities must receive substantially the same
treatment as is accorded to these and that reductions at Spokane
must be followed by corresponding reductions at other points.
It should also be noted that the percentage of shrinkage upon all
commodities, if the Seattle-Chicago rate were to be established as the
local rate from St. Paul to Spokane, would be nothing like as great
upon the average as that in case of the above. Naturally, the com¬
plainants have selected those articles where the showing is most
favorable to the contention of Spokane. In many instances com¬
modity rates at the present time are the same or nearly the same from
eastern points of origin to both Spokane and Seattle. Below is given
a table enumerating a few of these commodities, the rates being those
now in effect from Chicago to Seattle and Spokane.
Commodity.
Boor, boor tonio, malt, alo, and porter
Flour (whoat, ryo, or buckwheat) and corn meal
Boilers, steam, under 30 foot in length, and fire brick for use in same
Machines and machinery
Oil cako and oil-cake meal
Pipe, sewer (clay), and drain tile
Butter, butterlne, oleomargarine, dressed poultry, eggs, and choose
Fertilizer, n. o. s., including dried blood
Desks, and desks and book cases combined
Kitchen safes and wardrobes, k. d., flat and compact, not cost not to exceed $9 each ..
Sideboards, buffets, combination sideboards and bullets, and sideboards and chiffo¬
niers, not cost of each piece not to exceed $16
Mineral water bottles, In original packages, empty, second hand, returned
Potatoes
Terracotta, building
Rate to—
Seattle.
Spokane.
Cents.
Cents.
110
100
75
80
150
140
150
150
75
75
65
75
200
200
60
60
160
160
105
105
160
160
75
75
75
75
75
75
15 I. C. C. Rep.
/
CITY OF SPOKANE V. N. P. RY. CO.
425
Examining in detail the rates upon the 32 articles in question, in
the light of all the facts and circumstances, we are of the opinion
that the Chicago-Seattle rate on the first item, "tin boxes," would
be too low, and that a just and reasonable rate from St. Paul
to Spokane would be $1. Our conclusion as to " fruit jars and glasses"
is the same. The present rate on "bottles, wine, and beer" of 90
cents is, in our opinion, sufficiently low already. The Seattle rate
on "cotton ducks and denims" is a carload rate, especially induced
by water competition. This commodity moves generally upon an
any-quantity rate. We see no reason why this rule should be de¬
parted from in case of Spokane, and think that a rate of $1.50 per
100 pounds in any quantity is sufficiently low. We are also of the
opinion that the rate of $1.50 upon boots and shoes ought to be $1.75,
and that upon rope and cordage $1.25. Otherwise these rates seem
to be just and reasonable.
We are further of the opinion that just and reasonable rates upon
these commodities from Chicago to Spokane would be obtained by
adding 16§ per cent to the rates thus found to be reasonable from
St. Paul to Spokane.
We are therefore of the opinion that the following rates in cents
per 100 pounds are just and reasonable charges to be applied for the
future to the shipment, in carloads, of the various commodities
named from Chicago and St. Paul to Spokane, the minimum to be
in all cases the same as that applied upon similar business to Seattle.
Commodity.
Tin boxes and lard pails, n. o. s
Boxed, crated or jacketed
Nested in boxes, barrels, or crates
Carpets, n. o. s
Plow points
Shovels, spades, scoops, in packages
Fruit jars and glasses
Canned corn
Canned beans
Canned peas
Belting, cotton or rubber
Bicycles, boxed
Bicycles, crated
Blank books and tablets
Books, n. o. s., boxed
Drugs and medicines
Cotton duck and denims, any quantity
Glass, common, window, under 08 inches
Glass, common, window, all sizes, n. o. s
Paint, dry, in cans (packed In boxes or barrels), or in barrels,casks, kegs, kits, boxes,
or Iron drums
Paint, in oil, in cans (packed in boxes or barrels), or in barrels,cases, kegs,kits, boxes,
or iron drums
W lilto or red lead, dry or in oil, in cans (packod In boxes or barrels), or in barrels,
casks, kegs, kits, boxes, or iron drums
Paper bags, plain
Paper bags, printed
Rubber boots and shoes
15 I. O. C. Itep.
Rates from-
St. Paul.
Chicago.
Cents.
Cents.
100
117
100
117
100
117
185
216
110
128
135
157
100
117
90
105
90
105
90
105
120
140
250
292
250
292
125
146
140
163
150
175
150
175
90
105
90
105
90
105
90
105
90
105
100
117
100
117
175
204
426
INTERSTATE COMMERCE COMMISSION REPORTS.
Commodity.
Saws, circular, etc., on boards .'
Saws, circular, etc., in boxes...;... *
Water heaters, gas or gasoline, instantaneous
Stoves and ranges (cast iron), cooking, etc .
Stoves, air-tight heaters (sheet iron) 1.
Glassware, n. o. s
Twine and cordage, cotton, hemp, jute, etc., in bales, boxes, or barrels
Wheelbarrows, kT d., flat 1
Windmills, k. d
Wire, copper ...
Wire, fencing, in rolls.
Woo den ware, in packages
Rates from—
St. Paul.
Chicago.
Cents.
Cents.
150
175
150
175
' 170
198
130
148
150
175
120
140
125
146
90
105
135
157
no
128
80
93
125
146
No attempt has been made to deal with less-than-carload com¬
modity rates. The carload rates which have been established will
necessitate a revision in some cases of the less-than-carload rate, but
the considerations upon which the relation of these rates depends were
not discussed before the Commission, and the carriers themselves
are better qualified to deal intelligently with that subject. If they
decline to do so, or if in the opinion of the complainants proper less-
than-carload rates are not established, the matter can be called to our
attention. We shall not attempt in this proceeding to establish
either class or commodity rates east of Chicago.
We realize that this case should be disposed of in some more com¬
prehensive manner, but after much consideration have been able to
determine upon no other order which would not be open to legal
objection. The carriers may, if they desire, present to the Com¬
mission, before the effective date of the order, some scheme for the
readjustment of these intermediate rates. If approved, the Com¬
mission will strike off the present order in favor of that plan.
We wish to emphasize the fact that the conclusion reached is of
necessity in a measure experimental. If in an honest attempt to
work out this idea any unexpected difficulty is encountered or any
unforeseen result produced or if the reduction in revenue is, upon an
actual trial, more than has been anticipated, the Commission will,
upon application of either party, make such modification of its order
as may seem just.
If the defendants simply establish the rates ordered in this pro¬
ceeding and stop there, or if in fixing other rates they do not, in the
opinion of the complainants, establish those which are just and
reasonable to Spokane, the complainants may file supplemental
petition.
The order in this case will be made effective on May 1. If the
Commission is satisfied that the carriers will require additional time
to check in rates upon other commodities and to other points, the
effective date will, upon application, be extended.
15 I. C. C. Rep.
ORDER.
At a General Session of the INTERSTATE COMMERCE
COMMISSION, held at its office in Washington, D. C.,
on the 9th day of February, A. D. 1909.
Present:
Martin A. Knapp,
Judson C. Clements,
Charles A. Prouty,
Francis M. Cockrell,
Franklin K. Lane,
Edgar E. Clark,
James S. Harlan,
Commissioners.
No. 879.
CITY OF SPOKANE,|WASTI.; CHAMBER/ OF J COMMENCE OF
SPOKANE, WASH.; COUNTY OF|SPOKANE, WASH.,* AND
SPOKANE JOBBERS' ASSOCIATION OF SPOKANE, WASH.,
v.
NORTHERN PACIFIC RAILWAY COMPANY; GREAT NORTH¬
ERN RAILWAY COMPANY; UNION PACIFIC RAILROAD
COMPANY; OREGON RAILROAD & NAVIGATION COM¬
PANY; OREGON SHORT LINE RAILROAD COMPANY;
CANADIAN PACIFIC RAILWAY COMPANY; CHICAGO,
BURLINGTON & QUINCY RAILWAY COMPANY; CHICAGO
& NORTHWESTERN RAILWAY COMPANY; LAKE SHORE
& MICHIGAN SOUTHERN RAILWAY COMPANY; NEW
YORK CENTRAL & HUDSON RIVER RAILROAD COMPANY;
PITTSBURG, FORT WAYNE & CHICAGO RAILWAY COM¬
PANY; PENNSYLVANIA RAILROAD COMPANY; NEW
YORK, NEW IIAVEN & HARTFORD RAILROAD COMPANY;
BOSTON & MAINE RAILROAD, AND SPOKANE FALLS &
• NORTHERN RAILWAY COMPANY.
This ease being at issue upon complaint and answers on file, and
having been duly heard and submitted by the parties, and full
investigation of the matters and things involved having been had,
0)
and the Commission being of the opinion that the class rates now
maintained by the defendants from St. Paul, in the state of Minnesota,
and Chicago, in the state of Illinois, to Spokane, in the state of
Washington, are unjust and unreasonable, and that the rates now
applied by said defendants to the transportation of the commodities
hereinafter named, in carloads, from St. Paul, Minn., and Chicago,
111., to Spokane, Wash., are unjust and unreasonable, and being
further of the opinion that the class rates named in the third paragraph
of this order would be just and reasonable class rates to apply between
said points for the future, and that the commodity rates stated in
the fourth paragraph of this order would be just and reasonable
rates to apply to the transportation of said commodities, in carloads,
between said points, and having on the date hereof made and
filed a report containing its conclusions thereon:
It is ordered, That the said defendants be, and they are hereby,
severally notified and required to cease and desist on or before the
1st day of May, 1909, and for the period of two years thereafter to
abstain from charging, demanding, collecting, or receiving, for the
transportation of property from St. Paul, aforesaid, and Chicago,
aforesaid, to Spokane, Wash., their class rates now in effect, and their
rates now imposed for the transportation, in carloads, of the com¬
modities hereinafter named.
It is further ordered, That the Northern Pacific Railway Company,
the Great Northern Railway Company, the Chicago, Burlington &
Quincy Railway Company, the Chicago & Northwestern Railway
Company, the Union Pacific Railroad Company, the Oregon Railroad
& Navigation Company, and the Oregon Short Line Railroad Com¬
pany be, and they are hereby, notified and required to establish and
put in force on or before the 1st day of May, 1909, and maintain for
a period of not less than two years thereafter, the class rates for the
transportation of commodities moving under the Western Classifica¬
tion from St. Paul, aforesaid, and from Chicago, aforesaid, to Spo¬
kane, Wash., which are named below in cents per 100 pounds, to wit:
To Spokane.
From—
Class.
1
2
_3
4
5
A
B
C
D
E
Cts.
Cts.
Cts.
Cts.
Cts.
Cts.
Cts.
Cts.
Cts.
Cts.
St. Paul
250
217
183
158
133
133
104
83
79
71
Chicago
300
259
216
179
150
154
121
97
91
82
It is further ordered, That said defendants last above named be,
and they are hereby, notified and required to establish and put in
(n;
force on or before the 1st day of May, 1909, and maintain for a period
of not less than two years thereafter, for the transportation of the
articles following, from St. Paul, aforesaid, and from Chicago, afore¬
said, to Spokane, Wash., the rates, in cents per 100 pounds, follow¬
ing, to wit:
Commodity.
Tin boxes and lard pails, n. o. s
Boxed, crated, or jacketed
Nested in boxes, barrels, or crates
Carpets, n. o. s
Plow points
Shovels, spades scoops, in packages
Fruit jars and glasses
Canned corn
Canned beans -
Canned peas
Belting, cotton or rubber
Bicycles, boxed
Bicycles, crated
Blank books and tablets
Books, n. o. s., boxed
Drugs and medicines
Cotton duck and denims, any quantity
Glass, common, window, under 68 inches
Glass, common, window, all sizes, n. o. s
Paint, dry, in cans (packed in boxes or barrels), or in barrels, casks, kegs, kits, boxes,
or iron drums
Paint, in oil, in cans (packed in boxes or barrels), or in barrels, cases, kegs, kits, boxes,
or iron drums
White or red lead, dry or in oil, in cans (packed in boxes or barrels), or in barrels,
casks, kegs, kits, boxes, or iron drums
Paper bags, plain
Paper bags, printed
Rubber boots and shoes
Saws, circular, etc., on boards
Saws, circular, etc., in boxes
Water heaters, gas or gasoline, instantaneous
Stoves and ranges (cast iron), cooking, etc
Stoves, air-tight heaters (sheet iron)
Glassware, n. o. s
Rope and cordage; cotton, hemp, jute, etc., in bales, boxes or barrels
Wheelbarrows, k. d., flat
Windmills, k. d ,
Wire, copper
Wire, fencing, in rolls '
Wooden ware, in packages
Rates from—
St. Paul.
•
Chicago.
Cents.
Cents.
100
117
100
117
100
117
185
216
110
128
135
157
100
117
90
105
90
105
90
105
120
140
250
292
250
292
125
146
140
163
150
175
150
175
90
105
90
105
90
105
90
105
90
105
100
117
100
117
175
204
150
175
150
175
170
198
130
148
150
175
120
140
125
146
90
105
135
157
110
128
80
93
125
146
The above commodity rates are in carloads, upon the same mini¬
mum as is applied to the transportation of the same commodities
from said St. Paul and Chicago to Seattle, Wash.
o
(!")