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Problems of the Industry
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§ American Electric Railway
Association
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30th Annual Convention * . . . . . .
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Atlantic City, New Jersey º # 1.
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º October 9-13, 1911 . . . jji
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• ‘ ADDREsses - ... •
The American Ełectric Railway Associatien and .
tts Work.......... . ............................., ARTHUR W. B R A DY |
The interurban . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .CHARLES L. H. ENRY §
Measures for the Welfare of Employes. . . . . . . DANIEL F. P. ERCE | ||
The Hudson and Manhattan Tunnels. . . . . . . . . . J. V | Po N O DAV: £5 i
The Toledo Street Railway situation.........., ALB to N. E. Lá N (; . . . ;
The Effect of Electric Ralfway Operation on Tax- * - |
able City Property. ... . . . . . . . . . . . . . . . . . . . . . GEORGE H , H A R R ES |
Physical valuations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . OSCAR T. CRCŞ.BY | |
overhead charges..................PROF. MoRTM ER E. cool EY -
Report of the Committee on Federal Relations :
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(ºrfuher H-13, 1911
The American Electric Railway Association
and Its Work.-Arthur W. Brady
The Intel urban.—Charles L. Henry
Measures for the Welfare of Employes.
—Daniel T. Pierce
The Hudson and Manhattan Tunnels.
—J. Vipond Davies
The Toledo Street Railway Situation.
—Albion E. Lang
The Effect of Electric ‘ Railway Operation
on Taxable City Property.
—George H. Harries
Physical Valuations.—C'scar T. Crosby
Overhead Charges. -
—Prof. Mortiner E. Cooley
Report of the Committee on Federal Rela-
tions.
PUBLISHED BY THE ASSOCIATION
Of FI CE OF THE SECRETARY
29 W EST 39th STREET, N E W YORK, N. Y.
DECEMBER, IQ I I
£ngin. Library
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THE AMERICAN ELECTRIC RAILwAY ASSOCIATION
AND IT'S WORK
By ARTHUR W. BRADY, President,
American Electric Railway Association
To-day, for the thirtieth time, our Association meets in annual con-
vention, but the organization which in 1882 was the American Street
Railway Association, and became in IQ05 the American Street & Inter-
urban Railway Association, now ends its first year as the American
Electric Railway Association. This final change of name makes emi-
nently proper a brief reference to the amazing development which the
Association has witnessed in the industry which it represents. The
track mileage of the street railways of the United States, estimated at
approximately 3,000 miles in 1882, and grown to an amount slightly
more than 8,000 miles by 1890, now exceeds, in the case of the various
kinds of electric railways, 41,000 miles, an increase of more than 1,200
per cent, with over 4,000 additional miles under construction. The
gross annual income, estimated at approximately $35,000,000 in 1882,
now exceeds $500,000,000. The annual operating expenses, estimated
for the earlier period at less than $25,000,000, now approximate
$300,000,000. The number of employes, estimated in 1882 at less than
35,000, now exceeds 250,000. The number of passengers annually car-
ried, estimated in 1882 at I,212,000,000, is now Io,000,000,000. Most
wonderful of all, practically every one of the ninety thousand and odd
cars now in operation has for its motive power a force absolutely un-
used and unknown for the purpose in 1882. Few industries have mani-
fested so great a power of growth. None has added more to the wel-
fare, comfort and convenience of our people during the same period
of time. -
In this drama of progress, continuing for almost a third of a cen-
tury, our Association has played an honorable and useful part. The
growth of the Association itself is evidence of this. Embracing
within its membership at the outset seventy-eight out of a total of four
hundred and fifteen companies, it now bears on its rolls three hundred
and seventy-four companies. While these constitute only a little more
than one-third of the total number of electric railways within the
United States, Canada and Mexico, in their mileage they include about
seventy per centum of the total electric railway mileage, and in earn-
ing power represent over seventy-five per centum of the total earning
power of all electric railway companies within the countries named.
These companies operate street railways, elevated railways, under-
ground railways, underwater railways, interurban railways, and par-
tially electrified steam railways. Furthermore, these companies are so
widely scattered as to afford ample representation to practically every
4
major governmental division within the jurisdictional limits of the
organization. The Association is, therefore, not only free from sec-
tionalism, but is broadly representative of the electric railway industry
throughout the entire territory coming within its scope. -
Such a report of progress is cause for gratification, and compels the
conclusion that an organization having a membership composed of so
large and influential a proportion of the industry can and should ac-
complish results of high value in the electric railway field. f
Permit me to review briefly the work of the Association during the
past year. The four affiliated associations have given active attention
to the various branches of electric railway operation falling within
their respective fields. Their officers and committees have devoted
much valuable time to the duties imposed upon them, and are entitled
to the thanks of the Association for their labors and to commendation
for what they have accomplished. Noteworthy in the record of the
Accountants' Association is its continued co-operation with the Inter-
state Commerce Commission in answering all questions propounded to
the Commission touching matters of electric railway accounting. No
question so propounded is answered until it has been considered by
both a committee from the Accountants' Association and representa-
tives of the Commission. It is gratifying to note that the Committee
and the Commission's representatives have finally agreed upon the an-
swers to be made to all questions except those falling within one nar-
rowly limited class, where fundamental differences appear to exist.
The importance of this work to all electric railway companies, whether
subject to federal regulation or not, and whether members of 'this
Association or not, is clear. Through such co-operation the dangers
arising from the adoption of hastily formed, impracticable and erro-
neous theories are minimized, and a consistent code of wise and work-
abſe rules of accounting, having persuasive authority with govern-
mental bodies everywhere, is being constructed. . Matters of account
connected with the National Association of Railroad Commissioners
have also received the attention of the Accountants' Association. The
Accountants' Association has also, through a committee, undertaken a
study of the life of the physical property of electric railways. The
work of this committee has progressed sufficiently to make it clear
that there will finally be gathered a collection of data upon this intri-
cate subject exceeding in value any heretofore brought together.
The Transportation and Traffic Association and the Accountants’
Association have co-operated, through a joint committee, in the prep-
aration of a standard method for the compilation of the expenses of
freight and express traffic. The work of this committee will be pre-
sented to the two affiliated associations for their approval at this Con-
vention. The growing importance of the subject makes this report
most timely. It should be remarked that the spirit of co-operation
between associations, manifested by the appointment of this joint com-
*
5
mittee, is constantly growing more pronounced, thus insuring the pro-
duction of results adapted to the conditions of all affected departments
of electric railway operation. Another instance is found in the elab-
orate, and pioneer report on block signals for electric railways by a
joint committee from the Engineering Association and the Transpor-
tation and Traffic Association. An instance of the co-operative bene-
fits arising from association work, although not an instance of co-
operation between affiliated associations, is found in the fact that the
Claim Agents' Association reports frequent instances of aid being
given by one company to another in connection with the investigation
and settlement of claims as the result of the close relationship of claim
agents brought about through that Association. . It is also reported by
this association that the advantages of the General Index Bureau in the
detection of fraudulent claims are extensive, and justify continued
Support. -
Turning again to the individual work of the affiliated associations,
reference should be made to the report of the Committee on Interur-
ban Rules from the Transportation and Traffic Association. This re-
port may be fairly said to be now the resultant of the best experience
in interurban operating conditions from coast to coast. The code
agreed on by this committee bears the distinction of having been al-
ready adopted by the New York Street Railway Association. The
results of other good work of the Transportation and Traffic Associa-
tion will also be found in the reports of the Committee on City Rules
and the Committee on Schedules and Time-tables. The Engineering
Association, besides a continuation of its excellent work in the direc-
tion of standardization, has this year for the first time undertaken to
co-operate in matters of common interest with other technical associa-
tions, such as the National Electric Light Association, the American
Railway Engineering Association, and the American Society for Test-
ing Materials. In this way it is believed that the dangers arising from
the adoption of different methods and conclusions in reference to the
same matter by organizations approaching the subject from different
viewpoints will largely be done away with. The Engineering Associa-
tion has also, through its Committee on Way Matters, developed a set
of rules for the government of the Maintenance of Way Department.
Through its Committee on Buildings and Structures, a valuable re-
port is presented dealing with various matters of importance, among
which is that of fire protection of power houses and terminals, includ-
ing open yards. The matter of specifications for overhead crossings
of electric light and power transmission lines and that of clearances
for third-rail working conductors have also received consideration by
this Association.
Your especial attention is called to the excellent programs arranged
by the affiliated associations, and your attendance at the meetings at
which these programs will be presented is urged. This Association is
6
engaged in serious work for the betterment of the electric railway in-
dustry, and to the attainment of that end your participation in these
meetings is necessary. In this connection, reference should be made
to the exhibit which has been prepared by the allied Manufacturers’
Association. This exhibit represents much thought, time and pains, as
well as the expenditure of much money, all for the purpose of bring-
ing before us everything new and worthy of note in electric railway
apparatus and materials. The magnitude of the enterprise is shown
by the fact that the space occupied this year is 76,000 square feet.
This exhibit is to be regarded as one of the most valuable educational
features of the Convention, and a careful inspection of it during the
hours available for that purpose is urged as one of the means of de-
riving the utmost benefit from the Convention.
Passing to the work of the American Association itself—the con-
stantly increasing demands upon the office in New York afford proof
not only of greater activity upon the part of both parent and affiliated
associations, but also of enlarged usefulness to member companies.
The volume of business transacted during the past twelve months has
been greater than in any previous year. To take a single item — the
advance reports and papers of the various associations to be presented
at this Convention show an increase of about fifty per cent over those
of last year, thereby entailing much additional work upon the office,
through which all this matter must pass, frequently more than once.
Particularly worthy of note are the constantly increasing requests ad-
dressed to the Association for practical data in all branches of electric
railway affairs. Some of these requests have involved much labor, in
several instances even extending to the compilation of information
relating to the practice of foreign companies. These inquiries fre-
quently make it necessary to call on member companies for data. Such
applications to member companies are made only when necessary to
return a satisfactory response to the inquiring company, and every en-
deavor is made to reduce the amount of information requested to a
minimum. As the basic idea of association work is co-operation, it is
hoped that nember companies will recognize the necessities of the case,
and the intention of the Association to ask for no needless informa-
tion, and will give prompt attention to the answering of data sheets
when received. In this connection, reference should be made to the
fact that permanent files of information in respect to important sub-
jects, such as wages of electric railway employes, agreements with
labor unions, arbitration agreements, cost of living, rates of fare, traf-
fic agreements, and others, are gradually being gathered in the office of
the Association, and will become more complete from year to year.
These files of information not only enlarge the amount and Scope of
information which may be furnished, and make the same immediately
accessible, but also tend to reduce the number of calls upon member
companies.
Av
{
At this point the fact may properly be recorded that the entire force
at the office of the Association is entitled to commendation for their
careful attention to the business entrusted to them, and that to Mr.
H. C. Donecker, Secretary-Treasurer of the Association, are due espe-
cial praise and thanks for his loyal, energetic and intelligent interest
in and attention to the affairs of the Association.
That membership conditions and finances are in a sound and healthy
condition appears from the report of the Secretary-Treasurer, pre-
sented at this meeting. The addition during the year of 40 companies
to the roll of active members and of about I50 names to the roll of
associate membership speaks for itself of the work of your committees
on active and associate membership.
There is no single act of the Association during the past year more
worthy of note than the action taken upon the recommendations of
the Committee on Insurance. These recommendations for some years
have been to the effect that the Association should organize a bureau.
of insurance, which should perform services having for their general
objects the securing of more definite and full information with respect
to the cost of insurance to member companies and to the insurance
companies themselves, the prevention of fires, the reduction of the
cost of insurance and the betterment of fire protective and insurance
conditions generally. After careful deliberation on the part of your
officers and Executive Committee, it was decided that the time for ac-
tion had arrived, and Mr. Henry N. Staats, of Cleveland, was chosen
as the Expert of the Association in charge of the Bureau, under the
general direction of the Committee on Insurance. By the arrange-
ment made, the expense of the Bureau to the Association treasury
consists only of the cost of added clerical work, if any, printing, post-
age, and other incidental expenses, while a fixed scale of compensation
is provided at which any company may avail itself of the special ser-
vices of the Bureau. The appointment was not made until June of the
present year, but it is believed that the report of the Committee will
afford ample evidence of the wisdom of the action taken. There is no
other direction in which wisely guided efforts on the part of the Asso-
ciation should be capable of accomplishing greater practical results to
the electric railway companies within its membership. The industry
for years treated the burden of insurance as one imposed by a superior
power, which could neither be shifted nor lessened. The basis upon
which premiums were computed was unknown, as were also the results
to the insurance companies. The compilation of statistics in 1907 and
I908 by your Committee on fire insurance under the lead of the pres–
ent chairman, showing that of the total premiums paid during a period
of about eight years only about thirty-eight per cent had been returned
to the companies in the way of compensation for losses, was the first
displacement of guesswork by knowledge. This was followed by wide-
spread reductions in rates on the part of the insurance companies, af-
S
fording a striking example of the beneficial results possible from Asso-
ciation work. There is no reason why still further valuable results
should not be accomplished in the future, both in the way of reduced
cost to electric railway companies of their insurance, and, what is of
yet greater importance, the prevention of fires. The need of activity
by the Association to meet recent proposed action by the insurance
companies upon the subject of ratings will doubtless appear from the
report of the Committee. I recommend that member companies give
full support to the new undertaking of the Association, in order that
the possibility of securing the benefits anticipated therefrom may be
fairly tried and determined.
A word should be said concerning the work of the Committee on
Education. This committee has from time to time recommended the
putting into effect of an educational system for the training of young
Imen in electric railway service. Steps were taken this year, with the
co-operation of five member companies, to try out experimentally the
recommendations of the Committee. The results will be shown by
the report, which, being founded on actual experience, should be of
more than usual interest.
In connection with the work of the Committee on Public Relations,
your attention is called to a compilation of the laws of the various
states upon the subject of Public Regulation by Commission or other-
wise which has been prepared and is practically ready for issuance.
It is believed that this compilation will be found of permanent value
to member companies. The expectation is that the information therein
contained will be kept current from year to year.
In connection with the work of the Committee on Public Welfare,
a bulletin covering mutual benefit associations, and other forms of
welfare work, was issued during the year. This bulletin contains in
convenient form a large amount of information not heretofore acces-
sible, and will doubtless be the subject of frequent reference by mem-
ber companies on this timely and important matter.
Much and valuable work has been done by the Committee on Tax-
ation, the Committee on Compensation for the Carrying of United
States Mail, the Committee on Federal Relations, and the newly ap-
pointed Committee on Fares, as will appear from their reports which
will be made to the meeting. Note should be made in connection with
the work of the Committee on Federal Relations that the Association
has undertaken to keep member companies advised of the more im-
portant features of proposed federal legislation relating to electric
railway companies. Many of the member companies are engaged in
interstate commerce, and therefore directly subject to federal legis-
lation. Moreover, the enactments of the federal congress are likely
to serve as the models for similar legislation by other 1egislative
bodies. Hence it has seemed that every member company has a
greater or less, interest in every enactment of Congress relating to elec-
9
tric railway carriers. There being no other convenient source of in-
formation, it has appeared to be the duty of the Association to keep
its members advised of the more important proposed federal legisla-
tion affecting the industry, in order that members might, if they should
sec fit, communicate with their representatives in Congress, or take
other suitable measures to avoid the dangers of improper legislation
arising from ignorance, misconception, or mis-information.
The selection of the place for holding the present convention pre-
sented one of the perplexing problems of the year. Doubtless when
the convention of a year ago was adjourned practically all present Sup-
posed that the next convention would be held at some point in the
Central West. Such was the expectation of your officers and the de-
cision of your Executive Committee. Committees from the American
Association and the Manufacturers’ Association visited a number of
western cities, including Chicago, St. Paul, Minneapolis and St. Louis,
and carefully canvassed the facilities of other cities asking to be con-
sidered. It was finally concluded by the Joint Committee that insuffi-
cient hotel accommodations, convention quarters and exhibit space
precluded the possibility of holding the convention this year at any of
the cities mentioned except Chicago, which was therefore provisionally
selected as the location. On a re-assembling of the Committee at
Chicago to make final arrangements, it was found that the information
previously secured from a supposedly authoritative source, to the ef-
fect that the Coliseum Building could be had for the convention, was
incorrect, and that that building had in fact a number of months
before been engaged for practically the entire period from the middle
of September to the middle of November. No other convention or
exhibit hall of sufficient size being available, and other cities properly
located being unavailable this year for the reasons stated, the plan of
holding this year’s convention in the West was reluctantly abandoned,
and Atlantic City was finally chosen as the best Eastern point. Since
arrangements were made to hold the convention in Atlantic City, a
new suggestion has been made on behalf of Saratoga which may lead
to that place being shortly available as a point for the holding of a
convention of the magnitude of ours. This suggestion is free from
the objectionable features of the proposition which was considered by
the Association a year ago. Proposed additional facilities should re-
move some objections found to exist this year to Western cities other
than Chicago. It should, however, be borne in mind that the growth
of the Association renders it increasingly difficult from year to year to
find a city having to the necessary extent those accommodations which
the meetings, exhibits and delegates require. *
During the past year nothing novel or extraordinary has arisen in
the general relations between the electric railway industry and the
public. Perhaps the most noteworthy development during this period
is found in the extension of the idea of regulation by commission.
10
Among the states which have newly adopted this method of regulation
in its most modern form, Ohio and Connecticut are conspicuous.
Even in conservative Massachusetts, whose pioneer railroad commis-
sion, though weak in legal power, has yet been mighty in strength,
the newer ideas were vigorously urged before the legislature, and the
attempt was made to confer on a commission practically all the powers
of compulsion possessed by any of the later commissions. In the
words of one of its long honored and leading citizens, the attempt was
“in conformity with the tendency of modern thought, which recognizes
no force in existence except the constable's staff, supported by the
bayonet of the soldier, and regards appeal to reason as an archaic
proposition,” to substitute “for intelligence and reason the physical
forces of the Commonwealth.” These various measures, enacted or
urged, taken with others of the past few years, demonstrate that the
atmosphere is now charged with the commission idea. Many students
of the subject believe that the final step has been taken, and that this
system of regulation is the method which will be permanently followed.
However this may be, it is unfortunately true that in few of the states
has this system been adopted as the result of a well-conceived and
carefully thought-out plan of procedure. It is universally conceded
that power to regulate public service corporations resides in the legis-
1ative branch of government, and it is undoubtedly true that, from the
standpoint of both the regulator and the regulated, it should be pos-
sible to secure wiser regulation through a properly constituted com-
mission, having opportunity and facilities to investigate before acting,
than through the legislature itself. This is the theoretical view, but
practical results do not always coincide with theory. Those who ap-
point commissioners are not all equally wise, or equally free from
party or personal obligation, or equally unaffected by the demands of
partisan politics. Then, too, commissioners differ. Some are fairer,
wiser, better informed, more thorough, more careful in reaching a
conclusion, than are others. Some, too, take a higher view of their
functions and duties than do others. The only true theory is that a
commission in all matters of dispute should hold itself strictly impar-
tial, should take no important step without full investigation and hear-
ing, and should reach its conclusions absolutely unbiased by any ex-
traneous considerations. It is safe to say that the commission form
of regulation will fail unless in the appointment of the commissioners
the ideal is pursued of selecting men who are fair-minded, experienced
in affairs, well-informed as to the business which they are to regulate,
and, above all, thoroughly imbued with a sense of their solemn duty
as arbiters to decide all matters impartially and without bias, whether
the result be pleasing or the contrary to public or corporation. Again,
another proven weakness in the commission form of regulation is
found in the inability exhibited in some cases to discriminate between
regulation and management. If authority exists to cross this line, the
11
result of its exercise would be harmful, and even disastrous, to both
public and corporation. When the State, through legislature, commis-
sion, or otherwise, has enforced the duty which the law imposes on
every public service corporation to furnish to the public reasonably
good and adequate service of the kind dealt in at fair, reasonable and
Inon-discriminative rates, it should not undertake, and, I submit, has no
right to undertake, to go farther and supervise and control the internal
affairs of that corporation. To do so means the substitution of irre-
sponsibility for responsibility. It would constitute an unwarranted in-
vasion of the right of property. Such interferences were undoubtedly
in the mind of the Supreme Court of the United States when it said
only three years ago, in speaking of measures of railroad regulation,
that “in no proper sense is the public a general manager.” Another
difficulty with the commission form of regulation is that in the past
it has generally consisted of a mixture of regulation by legislature and
regulation by commission. In other words, it has not in fact been reg-
ulation by commission. A conspicuous instance arose in Wisconsin
Inot long ago when the conclusion of the Railroad Commission of that
state, formed after a thorough investigation, that two and one-half
cents per mile was a fair and reasonable rate of fare for the railroads
in that state was repudiated by the legislature, which limited the rate
to two cents. There are other instances. Now it is apparent that if
the legislature will observe the conclusions of a commission only so
1ong as they conform to the preconceived conceptions of the legisla-
tors, no great impartiality can be hoped from a commission in serious
cases. The fear of being overruled, and in a sense discredited, by the
1egislature, its creator, must constantly prejudice the commission mind.
In short, so many weaknesses have been developed in the latest forms
of commission regulation that the case for their permanency and fi-
Inality must be regarded as still in the early stages of trial. The seri-
ous consequences which flow from regulatory measures of an improper
character render it highly important that the public entertain correct
views on this subject. --
The most serious question in relation to our industry before the
public mind at the present time is perhaps that of the permissible rate
of return on investments in public service utilities. By putting the
question in this form it is not intended to admit that the rate of return
upon these investments can be in fact directly limited. It is submitted
that the fact is exactly the contrary. The rate of return may be, and
frequently is, a factor, and often a controlling factor, in determining
whether questioned rates are reasonable or unreasonable. Surely it is
the law that a public.service corporation cannot charge a rate unrea-
sonably high, or otherwise unfair, merely because without so doing it
cannot earn a fair return, or any return, on its investment. If this be
so, the conclusion is inevitable that if the rates of such a corporation
are fair, reasonable and non-discriminative, and its service is reasonably
12
good and adequate, the corporation has discharged its full duty to the
public, and the return from such rates cannot, under the guarantees
of the United States constitution, and of most, if not all, of the state
constitutions, be reduced by a lowering of rates, or otherwise. The
view stated is, however, not the one commonly held, and in particular
is not the one held by legislatures and commissions. The view current
in these bodies is that plenary power exists in the legislature, and, if
properly delegated, in a commission, to lower rates and exact enlarged
service in any direction, subject to no condition save that such reduc-
tions and such exactions cannot be carried to the point where the loss.
of revenue or addition to expense thereby caused would so reduce the
return as to amount in effect to a confiscation of the property. But
public power and public interest are not the same. What one permits
the other often condemns. There is, however, a widely disseminated
belief that the rate of return on public service utility investments not
only can be but should be limited, and that the limitation should ap-
proach the point of the ordinary interest rate, or less. There is no
doctrine more energetically preached than this by some of the promi-
nent would-be leaders in public opinion of the present day. In those
cases where this belief is sincerely entertained as a proposition of gen–
eral application to public service businesses, it can be termed nothing
but a delusion. It adds another to the many examples shown by the
pages of history where a hasty generalization founded on false or in-
sufficient premises is made the rule of action in matters of high con-
cern. This belief can be due to nothing but a misconception of the
real facts. It can have for its basis no other view than that public
service businesses differ from other businesses in being practically free
from risk, and offering a substantially assured source of income. How
has such a view been created P Certain prominent cases of immense
returns, actual or apparent, from electric railways and other public
service utilities, have done much to foster it. The sensational articles
with which the periodical press has teemed during recent years have
greatly aided in its formation. More than all else, perhaps, the nat-
ural proneness of humankind to see nothing that is not open and ap-
parent to their eyes has helped. The millions of our patrons are seen,
and their payments into our treasuries are known. The cost of the
service we render to each is unseen and unknown. The burdens of
daily operation and maintenance, the struggle to meet the losses aris-
ing from obsolescence and depreciation, the strain to keep pace with.
public demands due to the growth of population or to the desire for
the latest refinement in the art of transportation — these are unrecog-
nized. The differences between properties are unappreciated. The
case of the old established property, with an earning power demon-
strated through many years, both good and bad, into which capital
for improvements and extensions flows almost of its own momentum,
is not regarded as, widely different from the untried property with no
13
history, or but a short one, behind it, with little margin between in-
come and outgo, and with a future of doubt or distrust.
Generally coupled with the doctrine that returns should be limited to
a minimum is the claim that the capitalizations upon which this mod-
est return is to be permitted should be reduced to an amount which
represents the actual present replacement value of the plant furnish-
ing the service. In other words, it is insisted that the entire burden
of all losses that may have arisen in the conduct of a utility shall be
borne by its owners. The reason for the loss is unimportant in the
minds of the proponents of this proposition. The men who installed
the original horse car lines in our great cities should have foreseen
that cable power would shortly offer a better means of propulsion,
while those who introduced the cable car in place of the horse car
ought deservedly to have been mulcted in the loss of their property
because they knew, not of the quick coming of electric traction. So,
likewise, the pioneers in electric railway construction should have
waited for the full development of the industry before they laid their
rails, built their power plants, or equipped their cars, unless they were
ready to bear the loss of all investments made obsolete or less in com-
mercial value by advances in the art, by lessened manufacturing cost,
or by public demands impossible to anticipate.
What could more quickly blight the growth and development of the
electric railway properties of a country than to have such doctrines as
these prevail? What could sooner end the promotion of new enter-
prises which would extend the blessings of cheap and rapid transpor-
tation into new fields? To us the mere statement of these doctrines
carries refutation. Yet many hundreds of thousands of our fellow-
citizens hold views like these, or closely akin to them.
I have thus dwelt on these phases of our relations to the public be-
cause they clearly indicate the path which a large part of the labors of
the Association should follow in the immediate future. The work of
economically and efficiently operating and maintaining the properties
with which we are connected is important, but economy and efficiency
will little avail if the doctrines indicated are to prevail. Whether they
shall win or not depends on public opinion, which is nothing but the
resultant of the opinions of the individuals who compose the public.
Whether that opinion shall be right or wrong, fair or unfair, depends
upon whether the opinions of those individuals are right or wrong,
fair or unfair. During many years the practice of public service cor-
porations was to observe silence as to all their affairs. There is little
cause for wonder that as a result of this practice, taken in connection
with some cases of serious corporate abuse, the public became imbued
with suspicion and distrust. Prejudices and misconceptions were
formed against which we must now contend. The temporary judg-
ment of the people is often wrong. Our systems of government are
founded on the theory’ that the people rule, and that their final judg-
14
ment is right. Surely, therefore, it is the part of wisdom to lay our
case fully and fairly before the tribunal to which we must appeal.
Nay, more, it is essential to us that we do this. The results of error
in fundamental matters such as those referred to cannot be calculated.
We can be certain of nothing save that they will be calamitous to all.
We therefore have no choice. We must demonstrate to the people the
fallacies which underlie these doctrines. We must rid ourselves of
self-complacency and realize that we shall have ourselves to blame if
we permit a wave of adverse public opinion to bear down upon us
without a struggle against it. But let us not underestimate the diffi-
culties of our position. We have no spicy story to tell. We cannot
drive out sensationalism by still greater sensationalism. No one will
pay for the privilege of reading our arguments. Our tale is one of
sober fact. It will not be listened to by everyone. The heedless will
turn from it and the prejudiced will close their ears. Our appeal will
attract only the man who is ready to stop and think. It must be ad-
dressed to his reason and his sense of justice. By its fairness it must
commend itself to him.
In the warfare which must thus be waged against the forces of error,
this Association should play a leading part. It is the sole representa-
tive on a broad scale of the entire electric railway industry. It should
assume leadership. The various State and District associations, which
have been doing splendid practical work during the past year, should
co-operate. The affiliated associations and the allied Manufacturers’
Association should each do its share. Every associate member should
do his. But how shall the desired end be obtained, you will ask?
How shall actual results be accomplished P. How shall we avoid merely
beating the wind or lashing the water P It is apparent that our activ-
ities must be organized and concentrated. Our membership, active and
associate, must be aided in gathering and marshalling the facts and
arguments on which we rely. Every member must be impressed with
a sense of personal duty, as well as interest, to present our position
frankly, fairly and forcibly as occasion may offer through personal
argument, as well as through the Press and other recognized means of
publicity. Here is a field in which the smaller companies and those
associated with them can do most valuable and effective work for the
good of the whole industry. They are generally in closer personal
touch with their public than are the larger companies with theirs. They
are more likely to be regarded as component parts of the communities
wherein they operate. They will be listened to with less distrust.
Their words will take deeper root. They are more widely scattered
and hence cover a broader field. It is of especial importance that they
undertake this work. Beyond this an extension of the activities of
the Association itself is necessary. A new field must be entered. As
a potent agency in accomplishing our aims, I earnestly recommend that
the Association issue at stated intervals to its members, active and
15
associate, a publication having as a chief end the presentation of facts
and arguments which refute the false doctrines we fear. Details have
no place here, but permit me to add that such a publication could well
be adapted to circulation beyond our membership and to quotation in
the lay press.
Furthermore, the Association must wage a vigorous campaign to in-
crease its membership, both active and associate. Greater membership
means greater usefulness. The issuance of the publication recom-
mended would be of great importance in such a campaign. One im-
portant phase of that publication would be the distribution of practical
information through the question-box method and otherwise, as well
as the keeping of members in closer touch with all association work.
The interest of members in the aims and work of the Association is
essential to the attainment of those aims and the effectiveness of that
work. Such a publication would exercise a powerful influence in stim-
ulating the needed interest. Another means of increasing this interest
is one that has been found to operate successfully in the case of an-
other Association engaged in kindred work, and the adoption of this
has been strongly urged by prominent members of our own Associa-
stion. This is the company section plan, by which a company may, if
it so desire, form a section of association members among its own
forces. Such a section would be expected to study and discuss the
various practical branches of that particular company’s affairs, being
aided therein by the Association’s proceedings, publications and bulle-
tins. The advocates of this plan assert that thereby a more intelli-
gent and personal interest in company business is fostered, employes
are prepared for greater usefulness and the deadening rut of machine-
like labor is avoided. I recommend that this plan be given careful
consideration, with a view to the adoption of it, if the conclusion be
favorable. - - -
There is perhaps no way in which the campaign to form just
and correct public opinion can be better forwarded than through work
of the allied Manufacturer's Association. The interest of the mem-
bers of that Association is our interest; and yet they are sufficiently
removed from us and in touch with other lines of business, to Occupy
in public estimation a more impartial position than ours. Measures
have been discussed during the year to amalgamate with our Associate
Membership, the personal membership of that Association, and these
measures are still under consideration by a joint committee represent-
ing the two Associations. The precise form in which such amalgama-
tion may be agreed on by the Committee, if it shall arrive at an agree-
ment, is comparatively unimportant, but that the two Associations shall
come into closer relations with each other is not unimportant. On the
contrary, this is a matter of the highest importance to the welfare of
the industry to forward which is the prime object of both Associa-
tions. This Association will be blind to its opportunities if it shall
not enlist the hearty aid and co-operation of the Manufacturers' Asso-
* 16
ciation, not only in the generous way in which it has been shown in
the past, but also by a closer relationship which will insure intelligent
and harmonious efforts to a common end. I commend this matter to
the earnest attention of the incoming Executive Committee.
Gentlemen of the Convention, almost a year has now elapsed since
you honored me with the Presidency of this Association. During that
time the officers, committees and members of this, the affiliated and
allied Associations, as well as the forces of the technical press, have
liberally and energetically aided in advancing the interests of the Asso-
ciation, and to them I desire to express my sincere thanks and appre-
ciation. My conviction grows stronger as the year closes that, while
the past of this Association has been highly honorable and useful, the
work of the future is of still greater concern and import. The possi-
bilities are vast. Remember that we play a part in that general divi-
sion of industry which more than any other, perhaps, has advanced the
cause of civilization throughout all the centuries past — that division
which has to do with the breaking down of the barriers to the inter-
communication of mankind. We serve one of the strongest needs of
human beings in this day, and our industry is, therefore, founded on
the solid rock. Our duty is to see that the structure built thereon is,
worthy of the foundation.
THE INTERURBAN
By CHARLEs L. HENRY, President,
Indianapolis & Cincinnati Traction Co., Indianapolis, Ind.
The questions incident to transportation have, during all ages, pre-
sented very difficult problems for solution.
In the early days these questions were narrow and more simple in
their character. There is no doubt but that, as soon as man first ex-
perienced the desire to get away from home, either for war or in
peaceful pursuits, he discovered that transportation upon the waters,
both rivers and seas, furnished him the best opportunity and this he
used for visiting his neighbors, transporting food and other commod-
ities, and spying out new lands. For ages he knew no other way than
this, except the use of animal power and crude vehicles of various
kinds. With no other means of transportation, the ancients accom-
Tlished wonders. They went in their ships to all parts of the known
'earth; armies were transported and nation conquered nation; temples
and pryamids were built, which are still the wonder of the world.
The winds of Heaven wafted their ships into foreign seas and the
commerce of the nations increased and multiplied to vast proportions.
Until in the first decade of the present century, although inventive
minds were reaching out for new means of propulsion, the winds only
had been harnessed for use. Then, however, steam began to be used
in navigation, and its use was so rapidly developed that the present
year is to witness a centennial celebration of the opening of the Ohio
River with steam navigation. -
The use of steam power for navigation upon water soon led in-
ventors in a quest for some mode to use it for transportation upon
land. It was not, however, until the year of 1830 that they were suc-
cessful. In that year the first commercial steam railroad was put into
operation in England, from Liverpool to Manchester, and on the I5th
day of September it was opened with a public excursion, with eight
engines, pulling in all twenty-nine carriages and carrying six hundred
people, among them, the Duke of Wellington and other high officials
of the Government. The engines were all built by the great inventor,
Stephenson, upon the pattern of the “Rocket”, which was one of the
number. It is a fact worth noticing that, on this first trip, the man-
agement were so unfortunate as to kill one of their passengers, the
Secretary for the Colonies. When the trains were being arranged to
pass the Duke of Wellington, in order to be reviewed by him, the
Secretary became confused and stepped onto the track in front of the
engine “Rocket ’’, as it approached with its train, and the toll of death
was paid on this initial trip.
[I7]
18
Since that time steam railroads have been built all over the face of
the earth, until to-day their use is as common as the use of the sail-
ing ship, or even of the row boat, was to the early nations. Perhaps
no other such development in such a short period of time has ever
been known and it may not again occur for centuries to come.
The steam railroad transportation field remained unaffected by any
suggestion of the use of any other motive power until the year of 1883.
The electric generator or dynamo had been invented many years be-
fore, and continued experiments with electric current were being made
all over the world. Inventors were anxious to find a practical mode
of applying this newly discovered power in the propulsion of railroad
cars, but the difficulties in the way were great and it took years to
remove them. However, in September 1883, there was opened the
first practical commercial electric railroad, in the north of Ireland,
running from Portrush to the Giants' Causeway, a distance of about
eight miles, under the direction of Siemen, the world renowned elec-
trical engineer. The road was built upon the highway. The electric
current was generated by water power and was delivered to the cars
from a third-rail. This third-rail remained in use until about 1897
when the highway commissioners, on account of the numerous acci-
dents caused by the third-rail, ordered its removal and the substitu-
tion therefor of the overhead trolley.
No sooner had the first crude apparatus, for the propulsion of cars
by electricity, been put in use, until it was seen that electricity was
very desirable for the operation of street railroad lines in cities and
towns and it was not long until the horse car and cable car commenced
giving way to the electric car. In February 1888 the first commercial
electric street railroad in the United States was put in operation in
the city of Richmond, Virginia, under the direction of Sprague, one
of the great American, pioneer, electrical engineers. The equipment
of city lines with electricity increased so rapidly that it was only a few
years until no cable car was to be seen and the horse car was almost
a thing of the past.
By natural development these electric lines in the cities were grad-
ually extended into the country, for suburban purposes and next came
the idea of connecting city with city and the Interurban came into
existence, forming a distinct and separate proposition from the steam
railroad on the one hand and the electric city line on the other. The
name given to this new kind of railroad so correctly described it that
it has now become world-wide in its application. The first Interurban
roads were built in northern Ohio, and, curiously enough, the initial
letters in the names of the cities, connected by one of them, Akron,
Bedford and Cleveland, were A. B. & C., truly indicating that it was
the beginning, as the first letters in the alphabet are to the school
child, the beginning of his education. The building of these roads in-
creased year by year until all the important cities and towns, especially
in this country, have been connected by Interurbans.
19
At first, both in the building and operation of the Interurban, the
plans and practices, which had been adopted and grown up in the
building and operation of the city lines, were, very naturally, adopted,
and the roads were built upon the country highways, as if they were
to be, in fact, only an extension of the city lines. They were limited
also, exclusively, to the carrying of passengers, no provision even being
made for the passenger's baggage. The fares were based upon the
five cent street railroad idea and whenever a passenger was carried
farther than the company thought it ought to carry him for five cents,
the conductor went through the car and collected another five-cent fare
and this was repeated, section by section, until, at the end of his jour-
ney, the passenger would have paid as many five-cent fares as the
distance travelled was divided up into five-cent sections. The cars
were of light construction, though somewhat heavier and larger than
the ordinary city cars; the trucks carried motors of much the same
capacity provided for the city cars and the speed attained was about
the same. These Interurban cars at once attracted great attention and
became very popular with the public, and the patronage with which
they were favored was much greater than had been estimated by those
instrumental in their building. The cars ran at frequent intervals,
which was at once recognized as a great convenience; there was no
smoke as upon the steam railroads, and the stops, both in town and
country, were arranged at proper intervals to accommodate the public,
and the people were attracted to them and their use became at once
general. -
Soon, however, it became evident that the ideas controlling in the
construction, equipment and operation of the first Interurbans, were
too narrow and that they must be widened and broadened in order to
make this new means of travel meet the requirements of the public.
Private rights of way must be secured and the tracks removed from
the highways, wherever possible, to avoid interference with and in-
convenience from the ordinary highway traffic, otherwise, the requisite
high speed could not be attained. The cars must be larger and more
commodious, provided with all conveniences, including provision for
the carrying of heavy baggage. They must be built in such a substan-
tial way as to make them secure for higher speed, which, in turn, re-
quired that the electric motor equipment must be increased. The elec-
tric current, which at first was furnished by power stations at short
distances from each other, or transmitted from a “Booster’’, by means
of a feed wire, allowing for the necessary drop in voltage, must be
distributed from a central power station over high-tension wires to
various sub-stations at which the voltage would be reduced and fed
into the trolley wires. A very rapid development ensued, until to-day
upon the best Interurban railroads of the country are found cars of
practically the size, capacity and construction as the best steam rail-
road coaches, equipped in some instances with motors of more than 400
20
horse power capacity to the car, running across the country on private
rights of way, on tracks which compare favorably with the best steam
railroad construction and making a speed equal to the fastest railroad
trains, in some instances at a schedule speed, for country running, of
approximately 60 miles per hour. Instead of the collection of a five-
cent fare at each five-cent section, through tickets are sold, good, not
only over the company’s own road, but, also, over connecting lines.
This rapid development and change has from time to time brought
the managers of the Interurban roads face to face with the most seri-
Ous problems. The entire situation is changed. In the beginning, it
was but natural that estimates as to the character and cost of construc-
tion, the fixing and collection of fares, and the arrangements for oper-
ation, should be controlled by the ideas regarding like questions in
connection with city lines; but the requirements under the new era of
development were entirely different. Expensive equipment for air
brakes must take the place of the simple, but insufficient, hand brake;
head lights must be provided, extending the motormen’s range of
vision at night to a safe distance ahead; the old 40 pound rail track
must be replaced by heavier rails; a perfected telephone system, for
the use of the dispatcher, must be developed; the cast iron wheel must
be taken from the trucks and in place thereof substituted a steel-tired
or rolled steel wheel; these and many other things called for increased
expenditures in construction and operation, and caused the heads of
the managers to roll upon their pillows in sleepless hours of the night.
It appeared and was in the beginning sufficient to provide hand oper-
ated signals from one switch to another on a single track, so that a
north bound car could not enter a section while a south bound car
occupied it, even though it occasioned a delay of ten or fifteen minutes
in waiting at a siding, and it was not thought out of the way to delay
a few minutes to enable a belated farmer, coming across the fields, to
reach a stopping point. But the old ways have been completely
changed. Bridges of light construction have been and are being re-
placed by those strong enough to carry an ordinary steam railroad
train. Tracks laid with 70 to 90 pound rail upon standard cross ties
are used. Dispatchers are maintained for the operation of the cars,
their hours of service being limited by the Interstate Commerce Com-
mission to 8 hours per day. The cars themselves are heated by hot
water systems and even now the legislatures and railroad commissions
..of the various states are requiring the installation of the Block Signal
"System. All this makes the cost of construction and equipment of
Tnterurban roads three-fold or four-fold what was originally antici-
-pated, and the cost of operation has been very greatly increased. Skill
is required in the operation of the car. Track men are constantly em-
ployed in keeping up the tracks; overhead linemen, at high wages, are
kept busy all the time. * p
Coupled with and added to this increased cost of construction and
21
operation, are many burdens growing out of the changed condition of
the public mind. In many towns it is now thought to be the proper
thing to object to the running of freight cars along the streets, although
the idea has never occurred to prevent the hauling of freight in open
wagons over these thoroughfares, or the driving through them of
droves of cattle and hogs, that may stray upon the adjacent lawns,
and are indeed a nuisance. Even in many towns of insignificant size
the Interurban will no longer be permitted to load and unload bag-
gage, express and freight matter in the public streets, although the
baggage wagon, the express wagon, the wagon from the farm or the
truck from the store or factory, is, without comment, permitted and
expected to do this. The Interurban, it is urged, must provide wait-
ing rooms, with expensive toilets, baggage rooms, express offices,
freight houses, in the heart of the city or town, all at great expense.
In some cities and towns — I now recall one of less than 1,200 inhab-
itants — it has been deemed wiser to require the Interurban car, that
may be carrying three score of passengers, to come to a full stop be-
fore crossing one of the principal streets, rather than to ask the cigar-
ette-Smoking, speed fiend, or the simpering thirteen year old high school
girl to slow up their automobiles enough to avoid danger. Notwith-
standing teamsters, of all classes and kinds, use all parts of the streets,
without charge or compensation of any kind, the Interurban must be
required to pave the streets between its tracks and out to the ends of
its ties, and to maintain the same at its own expense; waiting rooms or
shelter stations must be constructed at all stopping points in the coun-
try; the fare must be limited by statute law to two cents per mile, so
that a passenger pays no more for his ride upon an Interurban car
from city to city, than a few years ago he paid for the privilege of
driving his own horse and buggy over a toll macadam road the same
number of miles. A passenger not only rides upon the car at this low
rate of fare but the company must, in addition, carry free of charge,
along with him, I50 pounds of baggage, and if, perchance, a lady pas-
senger's trunk is lost, although it is carried free, the company receiv-
ing not a cent therefor, it must make good in damages the value of
the trunk and of all the beautiful dresses contained therein. In some
of the states it is an accomplished fact, and in others a threatened one,
that the Interurban must also pay to an employe, who is injured in
working for the company, the damages sustained by him, even when it
is clearly shown, that the carelessness and negligence of the employe
himself, was the sole cause of the injury. Laws of this class alone
have been the cause of an increase of from 50 per cent to IOO per cent
in the cost of Liability Insurance. *
In the early development of the steam railroads, the cost of labor
was one-half what it is at the present time. Rights of way were given
free and donations in addition were made to secure location of the
roads. . Cross ties could be secured without any expense beyond the
22
cutting and hauling, the present cost being 80 cents per tie. Rails cost
$18.00 per ton as against $28.00 at this time, and all other expenditures
were likewise lower in amount. Notwithstanding all this the steam
railroads were permitted to charge, during their early days, 4, 5 and
in some cases 6 cents per mile for the carrying of passengers, and the
charge for the transportation of freight, was many times greater than
now. Remembering all this it indeed seems strange that the public
should expect the Interurban to bear all of this increased cost of con-
struction and operation at a time when the purchasing power of money
has decreased one-half and yet only be permitted to charge two cents
per mile for the carrying of passengers, and the same low freight and
express rates as are now charged by the steam railroads after their
full development.
The problem for the future before the Interurban is indeed great
and to many it would seem that its solution must be similar to the
answer which the boy gave in School to the problem in arithmetic,
stated, by mistake, on the part of the teacher, as follows: “If a frog
is in a well I5 feet deep and jumps up 2 feet at night and falls back
3 feet in the daytime, how long will it take him to get out?” The boy
covered both sides of his slate with figures and then calling the teacher,
said: “You did not say how long the frog had been doing this, but
if he had been doing it very long he must be in hell by this time.”
However, those engaged in the building and operation of interurban
railroads have been and still are undaunted and look into the future
without flinching. Understanding, as they do, that the cost, both of
construction and operation, cannot be materially reduced and that
many additional things will arise from time to time to increase this
cost; they are looking to the development of the business and the in-
crease of receipts, and the changing of public sentiment by proper
educational means, so that the burdens placed upon them, by reason
of public clamor, may be removed, to lead them out of the desert and
into the promised land.
First of all, it is important that public officials, and the public at
large, shall be made to understand clearly that it is unfair to place
burden after burden upon the Interurbans. They are, indeed, as they
were in the beginning, the people's roads, furnishing them, at compara-
itvely insignificant cost, convenience which they could not otherwise
get. This idea must be brought back and strengthened in their minds
and they must be shown that the people cannot have the conveniences
furnished by the Interurban at such insignificant cost if burden after
burden is to be piled upon the companies, increasing the expense for
construction and operation — for, after all, the consumer must pay
the cost or the Interurban cannot exist. Let the public be educated
to the point that it shall be understood that the Interurban is not to
be a subject of prey on the part of public officials, but is to be favored
and helped, to the end that the people may, even at the present re-
duced passenger fares and freight rates, receive the benefit thereof.
23
TEvery means should be taken to educate all members of the community
to assist in avoiding accidents. They should also be taught that
where a person, whether a passenger or not, is injured, he should not
expect to recover anything from the company unless the company was
: at fault, and then only what is fair and reasonable compensation for
the injury received.
In the matter of taxation they should again be taught the self-
evident truth, that although the Interurban is owned by a corporation,
yet it is not morally honest or economically right that its property
should be burdened with a higher tax than other property of the
community, and that if any favors are to be shown, they should
rather be given to these companies which furnish to the people at
large such desirable service at such low figures. All these things
can be accomplished in large degree, if not entirely, by a proper and
persistent plan for the education of the public, and that this be done,
Interurban people owe not only to themselves but to the patrons
whom they serve. By the means indicated a very material reduction,
both in the cost of construction and operation, may be secured.
While in the beginning there was no thought of the Interurban en-
tering either into the field for the transportation of freight or ex-
press, or for long-distance passenger travel, it has become evident
that all these fields are fertile for exploitation, both in the interest
of the public and for the increase of receipts from operation. Even
now in some places through travel between large cities has been estab-
lished and the passengers may purchase a through ticket between the
two termini and check his baggage through, notwithstanding the route
of travel may carry him over two or more Interurban railroads. The
Central Electric Railway Association, composed of electric city and
interurban railroads in the states of Indiana, Ohio, parts of Michigan,
Pennsylvania and Kentucky, has made very great progress in this
regard through its efficiently managed traffic association, and in other
parts of the country the Interurbans are doing likewise. This kind of
Interurban travel is being so rapidly developed that it is not too much
to expect that in the near future the traveling public will prefer the
Interurbans for long-distance travel, the same as they have heretofore
preferred them for short-distance travel. It is a matter of interest that
the Illinois Traction System has put in use sleeping cars equipped
with all the conveniences and comparing in every respect favorably
with the best Pullmans operated upon the steam railroads. These they
:are operating to and from the city of St. Louis. When the con-
venience of long-distance travel upon the Interurbans, on trains mak-
ing few stops and running at high speed, is added to the convenience
of short-distance travel on slower trains, making frequent stops, it
will be readily seen that the management of these roads may expect
very largely increased passenger receipts.
24
The express business, or expedited freight, carried on the passen--
ger cars has been developed to such an extent that it furnishes a .
very handsome income, which gradually increases as the people get:
more accustomed to it and therefore dependent upon it. Being per- .
mitted to make these shipments on the cars, usually running every
hour, the merchant and others are enabled to get extremely quick :
shipments and deliveries, and, combined with the use of the telephone, .
in many cases the farmer gets repairs for his machinery in such a .
short time that while waiting he permits his team to stand in the field
without unhitching. Some of the old line express companies have
seen the advantage of Interurbans for express business, and on many
roads they are carrying business the same as on steam roads. On ac--
count of the convenience and popularity of this business it is sure to .
grow to very large proportions and thus swell the Interurban receipts. .
As to the handling of freight on freight cars, it may be said that
on many roads, where it is carried but little beyond the extent of
package business, the receipts constitute from IO to I5 per cent of the
gross receipts, and on others, where the service has been broadened
and extended, the receipts have been very materially increased. What
has been learned by experience leads us to believe that with a proper
development of the handling of the freight business, what furnishes.
now an insignificant proportion of our receipts may be made to furnish
a very much larger proportion. We may not be able to reach the pro-
portion of freight receipts which the reports of the steam railroads.
show, but this will not be necessary, for the passenger receipts of the
Interurban promise, almost certainly, to greatly exceed the passenger
receipts of the steam roads over the same territory. This extension
of the freight business, we well know, cannot be brought about ex-
cept by extending the facilities for the handling of freight, but if dili-
gent attention is given to the matter, as it certainly will be, it is sure
to demonstrate the fact that the increased expenditures, occasioned
thereby, will bring greatly increased returns in the way of receipts.
On one road, where the handling of a large amount of grain on a
certain section, in carload lots, was deemed profitable, it was found
that if the grain was turned over to the steam roads, in the cars fur-
nished by the traction company, it was difficult and practically impos--
sible to secure the return of the cars, without long delay. The plan
was adopted of transferring the grain from the Interurban freight
car to the steam road freight car at a conveniently constructed ele-
vator, where the roads connect, and it has been found to work with
entire satisfaction, the transfer being thus made at very little cost.
The comparatively recent development of the single phase system
and the high trolley voltage direct current system has greatly cleared
the field from doubts as to the ability of Interurbans to handle heavy
freight; and a careful development and extension of the business are
all that is necessary to bring large returns into the treasury of the:
Interurbans. -
25
Tn brief, then, the Interurban manager must recognize that the cost
of construction and the expense of operation have been and are being
greatly increased beyond the expectation of those early in the business,
and also that unless the public mind is educated to a different view
of matters there are to be very greatly increased burdens added by
legislation, national, state and municipal. Then, recognizing all this,
She must go forward in the development of Interurban business, ex-
tending it into all the new fields, thus bringing to his company the
:greatly increased income which is needed. And, with it all, he must
:aid in educating the public mind along right lines, so that, while doing
'all it should rightly do, the Interurban shall not be broken down and
crushed by burdens that should not be placed upon it.
The accomplishments of the past are sufficient guaranties that the
'Interurbans will in the future, even more than in the past, fill the
place for which they are so well fitted in the great field of transporta-
tion, and that in so doing those who have shown their faith in them
will be rewarded by fair returns on the capital invested.
MEASURES FOR THE WELFARE OF EMPLOYES
By DANIEL T. PIERCE, NEW YORK, N. Y.
Mutual benefit associations are common and of long standing among
city and interurban railways. Thoroughly organized and Scientifically
planned relief, pension and insurance systems are rare. •
There are many instances where employers act in the capacity of an .
insurance company besides making very substantial contributions to-
ward the deficits of mutual benefit associations. Unorganized welfare:
measures in other directions are also found upon a considerable num-
ber of railways. - -
There are very few railways that have adopted as a policy welfare:
systems founded on or inspired by recognition of any obligation to.
provide, at the employer's expense, for the temporarily disabled or
superannuated employe and to insure dependents against immediate
want upon the death of the wage earner. This neglect is not peculiar
to electric railways. Few industrial concerns, even those whose human.
scrapheaps are largest, have assumed any definite responsibility for
the welfare of their workers. That this responsibility must be as-
sumed is evident from European experience and the trend of legisla-
tion here. And if the American employer does not take the initiative
in establishing sick relief, pensions and insurance for his employes,
this burden is likely to be imposed upon him in some form very much
less agreeable than measures of their own devising.
In this country the strongest indications we have of ultimate possi-
bilities in this direction have come in the form of enlargement of
employer's liability and in the, to us, new contention that even in those
cases of disablement classed as “unavoidable” the burden should not.
fall entirely upon the person injured by accident or disabled by sick-
ness. But the best way to escape compulsory insurance and pensions.
and the whole paternalistic policy now generally adopted in Europe is.
to make such a policy unnecessary. The German employer's enforced
contributions to disability, accident and pension funds now amount to
5% per cent of his wage account.
MoTIVES AND RESULTS.
It makes every G, fference in ultimate results whether welfare meas-
ures are undertaken from motives of pure expediency or because the
employer wants to improve conditions of employment. No welfare
plan will prevent labor troubles or even lessen their occurrence if it
impresses the beneficiaries as something by which the employer ex-
pects to avoid a wage increase. And if that or something like it is
the employer's motive the employe will find it out in more ways
than one.
[26]
27
Such return as is obtained by the employer from welfare measures
comes in the less direct and more intangible forms — in attracting and
holding a better class of men and in creating such a spirit of attach-
ment to the employer's interest as manifests itself in loyal, conscien-
tious service. These things have a dollars and cents value, but they
must be incidental to another reward — the reward which comes with
the discharge of the duty to do something more for the faithful, per-
manent employe than to pay him his wages while he is able to work.
If this is enough to do for the shifting and shiftless employe, it is
not enough, judged by the standard either of expediency or obligation,
to do for the man who spends his life in railway or any other service.
Many will deny that there is any obligation to care for the disabled
employe and to provide at his death for those dependent upon him.
This denial, however, is, I believe, based less upon the merits of
the case than upon the fancied impracticability of doing systematically
for a large number of more or less remote and scattered workers
what is done without rule or system for old employes of the class
which comes closely in contact with the employer.
If there is any difference at all in the treatment accorded the two
classes of men, those whose wage is smallest and who are not paid
except for actual working hours should, but do not, receive the most
consideration. Old Uncle John who sits at the president's door, or
any long-service employe, is always “taken care of ; ” but old Uncle
Billy, who has motored a car for fifteen years, perhaps after com-
pleting about as many years of horse-car driving, who knows or
cares anything about him P Certainly not the executive officers of the
company; they could not know much about the individual employe
even if they wanted to, and this is the reason why we should do by
rule for all deserving employes what is done for men who happen to
be within the range of official notice.
DATA AND DETAILS.
Coming down to details, such statistics and data as we have apply
almost wholly to associations to the funds of which members con-
tribute nominal dues. These figures show that the average death
benefit paid by such associations on electric railways is $212, and the
average sick benefit $6.50 a week. Eliminating from consideration
what I have ventured to call the obligation of the employer, in regard
to which there is, of course, room for wide difference of opinion, the
objections to the mutual benefit associations are that they involve
joint control with employes; require a large amount of administrative
work, the collection of dues, etc., that only about 50 per cent of em-
ployes take advantage of what such associations have to offer, which
makes them only half as effective as a system supported by the employer
and comprehending all employes. They also result in carrying large
numbers of ex-employes on insurance rolls or in depriving such men of
28
the benefits of their payments. The latter course is unfair and has
been made illegal in many states. *
It is contended, on the other hand, that employes most highly value
something that they pay for, and that while the assumption of the
entire cost of pensions and insurance by the employer will at first be
greatly appreciated, it will finally be taken as a matter of course and
a matter of right. The same thing may be said with equal truth of
any plan, but in the one case the employes know that the employer
is bearing all the expense, while if the employes pay any dues, how-
ever inadequate, they will feel that the benefits they receive are paid
for by themselves and that no gratitude is owing to anyone. Further-
more, if the employer is assuming that cost of all the benefits offered
by trades unions, and a pension in addition, this fact will retard,
though it cannot be said that it will prevent, undesirable organization
of employes.
If the mutual benefit association on old lines has any value from
the employer's viewpoint, as a social center and as affording a harm-
less outlet for the tendency, found among all classes of men, toward
some form of association, social activities and tendencies can best be
encouraged independently of insurance, which is an intricate business
proposition and one that should not be complicated with other things,
however desirable in themselves.
SAFEGUARDS AGAINST FRAUD.
The principles that should govern the payment of death benefits
are the same as those I have outlined as applying to payments for dis-
ability. Such safeguards may be thrown about both that there is little
chance of fraud or imposition. Sick benefits are not paid, as a rule,
until the second week of disablement, and so, even if it were possible,
it would not be profitable for the employe to lose a week's wages in
order to draw $1.00 a day for the limited time after that. In the case
of both sick and death benefits it is not customary to make employes
eligible until they have completed at least a year's service.
Pensions in almost all cases are carried wholly at the expense of
the employer, and are paid only under such restrictions as will limit
pensioners to men who have been in continuous employment for a
period of, say, twenty-five years.
The fairest method of fixing the amount of pensions is on the basis
of a percentage, determined by length of service, of the average wage
for a period of years preceding retirement. There should, however,
be a minimum of not less than $20 a month to protect the employe
whose wage has been so small that on a percentage basis the pension
would be inadequate.
The great preponderence of low-paid men in any industry can be
depended upon to keep the average pension very close to the minimum
Stated. Payments figured on a basis of I per cent for each year's
29
service of his average wage for ten years preceding retirement gives
a man with an average wage of $1,000 and twenty-five years' service
a pension of $250 a year, which is enough to keep a man from want.
In such casual investigations as I have made of the life of pensioners,
it appears that with an income of $20 a month or thereabouts they
become welcome guests in families where as penniless dependents
they would be an unwelcome burden.
That it is possible to institute within reasonable limits of cost a
sick and death benefit and pension system — all wholly supported by
the employer — has been demonstrated by at least one large public
service corporation and by a number of industrial corporations. The
former company's estimates call for an appropriation of $50,000 a
year for this purpose, and its plan makes at least 8,500 employes eligi-
ible for insurance and pensions. If, as indicated by these figures, $5.50
per employe per annum will defray the cost of insurance and pensions
it is easy to estimate the cost of such a system on any railway.
It should be stated that this cost estimate is founded upon very
brief experience, and that if, as is hoped, insurance and pensions hold
men more permanently in the service, an increasing number would be
eligible, and the expense would enlarge in the same proportion. If,
however, electric railway service can be made more permanent — that
is, if the present small proportion of long-service men can be in-
creased — it will be worth more than the cost in insurance and
pensions.
Employment on city railways is not considered very desirable by the
class of men that the railways want. We have plenty of applicants,
but they are not all that they might be as to quality. Except for a
certain minority found on all railways, motormen and conductors
seem to be willing to leave railway service for almost any other em-
ployment. Street railroading does not appear to be adopted in most
cases as a permanent calling, but merely as a makeshift. Those fea-
tures of the work—such as the hours, wages and friction with the
public — that make platform work among the less desirable employ-
ments cannot be materially changed, and as they do improve other
employments offer increasing advantages, so that electric railway serv-
ice retains its relatively undesirable position from the workingman's
Standpoint. In view of these facts, it appears to be all the more neces-
sary to counter-balance the real or fancied disadvantages of the
service by making provisions for insurance and pensions.
LOAN FUNDS
Aside from employes' club rooms, which are not a part of my subject,
there is another way in which street railways can help their men and
themselves. This is by the loaning of small sums of money – rarely
more than $25—to employes whose misfortune or unusual require-
ments have got them into financial difficulties. Such loans should be
30
made only in cases of real necessity, such as a birth, illness or death
in the employe's family. Repayment in small installments each pay
day should be insisted upon. A loan fund of $1,200 has been found.
adequate on a system employing 7,000 platform men. It is possible, .
Owing to the constant repayments, to make each year loans aggregat-
ing many times $1,200 and to accommodate probably 250 applicants.
With such a fund open to the deserving man, there is no reason what-
ever why any employe (except those whose difficulties need excite no
sympathy) should patronize the loan shark. In large cities the loan
shark is a nuisance and sometimes a serious evil. Experience has
shown that a carefully administered loan fund very largely eliminates
the loan man, is a great help to employes, and enables the employing
company to put such financial aid as it is called upon to render em-
ployes on a businesslike footing.
While the control of welfare work of all kinds must be in the hands
of executive officials, it is very desirable on large systems that the
detail work, the making of investigations and the immediate contact
with employes should be in charge of a welfare secretary. One reason
for this is that the manner and spirit in which welfare work is done
has much to do with its success. Furthermore, a connecting link
(other than subordinate officials whose tendencies are not over-
sympathetic) between men and management is a valuable aid toward
the establishment of a good understanding and good feeling.
THE HUDSON AND MANHATTAN TUNNELS
By J. Virond Davies, Member A. S. C. E., Inst. C. E., can Soc. C. E.,
Chief Engineer,
Hudson and Manhattan Railroad Company, New York, N. Y.
It is a matter of great regret to me, and I think it will be still more
so to you, that Mr. McAdoo is unable to be here to present to you an
address on the subject of the tunnel system of the Hudson and Man-
hattan Railroad. I have had very short notice of his inability to be
present and have undertaken to act as his proxy, but very naturally
the point of view from which I, as engineer, can treat the subject is
not the same point from which he would speak, and I fear what
I shall say will not be as interesting. In the very short time I have
had to prepare any notes on the subject, I have decided to present to
you for your consideration a few thoughts as to the construction of
the tunnels and its relation to the equipment and operation of the
system, which may be of some interest to your Association. The
proposition presented by this railroad is peculiar and unique. I know
of nothing quite like it anywhere else, although to some extent the
conditions are nearly reproduced in London. The Hudson and Man-
hattan Railroad, which comprises only 19 miles of single track, proba-
bly represents some of the most difficult conditions and also the most
expensive construction of any similar railroad, and the total cost per
mile of road was probably as high, or even higher, than any other
rapid transit railroad in existence. It is essentially a terminal proposi-
tion, having as its functions the connection by railroad of all the lines
of travel terminating at the water-front of New York, Jersey City and
Hoboken, and serving as a terminal for all these lines of travel existing
in the State of New Jersey, to and within the State of New York
across the great barrier formed by the Hudson River which separates
the Island of Manhattan, the principal borough of the City of New
York, from the mainland of the United States. Prior to the con-
struction of this railroad, you are aware that the only means of con-
veyance across the Hudson River was by ferries operated by the re-
spective railroads terminating on the westerly bank of the river. Since
the completion of the tunnels and their opening for business, the
Pennsylvania Railroad Company has constructed their tunnels beneath
the Hudson River and has extended its line from the State of New
Jersey to their new terminal station in New York City, but the Penn-
sylvania Railroad proposition is essentially an extension of its steam
railroad system, although the company incidentally employs electric lo-
comotives for hauling its steam trains from Manhattan Transfer at
Harrison, N. J., into New York City. Notwithstanding the fact that the
Hudson and Manhattan Railroad has within the past year hauled
[31]
32
something over 50,000,000 passengers, there is still business being done
by the ferries to the extent of some 80,000,000 passengers per annum,
and one great feature of strength in the Hudson and Manhattan sys-
tem is the fact of this large volume of possible business still being
handled by ferries and which may by degrees be acquired by the rail-
road, the getting of which must necessarily depend upon the service
rendered by the railroad and on the education of a public antagonistic
to any methods of underground travel. The tunnels, therefore, serve
as an alternative means for crossing the Hudson River, and their use
is optional upon the part of the traveler. The obvious question which
presents itself is : What is there offered by the railroad company
which will in the course of time attract to itself the business now
being handled by the ferries? The answer to this is not difficult to
find. Between points on the water-front there is a material saving in
time but at the expense of a slightly higher rate of fare. Between
points further remote from the water-front a greatly increased saving
of time at a materially lower aggregate rate of fare, when it is taken
into consideration that from these more remote points on either side
of the river practically every passenger not only would use the ferries -
but would use a trolley car on one or both sides of the river to reach
his objective point. -
In consideration of this subject the first thought is regarding the
nature of the resemblances and differences between this proposition
and any other street railway or rapid transit development. The Hud-
son and Manhattan Railroad is an interesting railroad enjoying the
privileges, or otherwise, of subjection to the Interstate Commerce
Commission, and at the same time being not only an interstate railroad
but also an interstate railroad operating within the states of New
York and New Jersey and existing within those two states by virtue
of rights and franchises to operate a railroad under certain streets
of each city, although in the State of New Jersey the larger part of
the lines are constructed under private rights of way. It might also
be noted that this railroad, in addition to being subject to the regula-
tions of the Interstate Commerce Commission, is also subject to the
requirements and regulations of the public utilities commissions of the
states of New York and New Jersey.
To those who are not familiar with the exact locations of the lines
of the company, it should be noted that in New Jersey the westerly
terminus on the tracks of the Pennsylvania Railroad is at Summit
Avenue, Jersey City, although the operation of trains is continued over
the tracks of the Pennsylvania Railroad into Newark with connection
with the main line trains of the Pennsylvania Railroad at Manhattan
Transfer. In addition to this connection, the Hudson and Manhattan
Railroad is immediately adjacent to the terminal of the Delaware,
Lackawanna and Western Railroad at Hoboken, to the Erie Railroad
at Pavonia Avenue, Jersey City, and to the Lehigh Valley Railroad at
33
Exchange Place, Jersey City, and at all these points and at various
other points in Jersey City and Hoboken close connection for transfer
of passengers is made with the lines of the Public Service Corporation
of New Jersey. All the points above referred to, therefore, immedi-
ately connected across the Hudson River to the Church Street Ter-
minal of the Hudson and Manhattan Railroad in the heart of the
downtown business district of New York City, and by the uptown
lines to various points along Christopher street and Sixth Avenue as
far north as Thirty-third Street and Broadway, with existing fran-
chise rights to extend the lines to the New York Central and New
York, New Haven and Hartford Railroads at the Grand Central Ter-
minal in Forty-second Street. The peculiar convenience of the down-
town terminal will be readily noted from its being within immediate
proximity, one block either way, to the rapid transit subway in Broad-
way and the Sixth and Ninth Avenue lines of the elevated railroad,
immediately adjacent to the proposed Lexington Avenue subway, and
to all the surface lines operating in lower New York, while along
Sixth Avenue uptown immediate connection is afforded with the
Broadway and Sixth Avenue surface lines and all crosstown lines be-
tween Eighth Street and Thirty-fourth Street, as well as close con-
nections with the Sixth and Ninth Avenue elevated railroad lines.
The difficulties in the construction of any such rapid transit rail- .
road as this, practically the whole of which exists below the level of
the sea, involved obviously an extremely large cost, but while the total
cost of the undertaking is great and involves for the complete railroad
and necessary real estate, power stations and equipment, a sum equiv-
alent to approximately two and one-half millions of dollars per mile
of railroad, yet this railroad is peculiar in the concentration of its
business; and the short haul, over which it operates its traffic, per-
mits a low operating cost per passenger to offset the high original
capital cost of construction. The system as a whole, including its
connection with the Pennsylvania Railroad, has been in operation only
since the first of October of this year, and even yet the Jersey City
terminal and connection with the Public Service Company’s lines at
Summit Avenue have not yet been completed. In the past year also
the Pennsylvania Railroad has changed its terminal from Jersey
City to their new station in the Borough of Manhattan, thereby di-
verting a large number of its own passengers to the new station in-
stead of delivering them to the Hudson and Manhattan Railroad; yet,
notwithstanding this change, the growth of traffic month by month
for the current year has shown an increase of practically 20 per cent
over the traffic of the same months last year, and as the suburban
district of New Jersey develops and the education of the traveling
public increases, it appears certain that a growth such as this may
reasonably be expected to continue.
2
34
One important advantage this roads enjoys is that it would be almost
impossible to duplicate its facilities by any other road which might
in the future be built. With the laying out by the Public Service Com-
mission of New York of subways and rapid transit routes on nearly
every north and south thoroughfare, it is becoming continually more
difficult to introduce any other lines which could by any possiblity
give to an interstate railroad, such as this, facilities both in the up-
town and downtown business districts for the distribution of pas-
sengers. While a competing road might enter the uptown district,
it is very unlikely that any railroad could be laid out which gives such
extensive facilities for distribution of traffic from the steam railroad
as the Hudson and Manhattan system. The development of the
proposition is now dependent solely on the satisfactory and efficient
operation of the railroad, and the road will attain the growth desired,
owing to the improved facilities which it can and does render to
the travelling public.
The constructive features in their bearing L, on this operation, have
as their first and all-important consideration the utmost simplicity
in every part of the structure and in the design of all portions of the
railroad with a view to reducing as much as possible, consistent with
good management, the costs of maintenance and operation. Every-
thing connected with the railroad has been planned with the idea of
obtaining the greatest possible provision for advantageous Óperation
up to the limit of the capacity of the railroad tracks to carry the
traffic, at the same time eliminating every possible complication which
is not necessary for the actual studied operation of the system and
not requisite to the operation of trains up to the limit of the ultimate
capacity of the railroad. In the preparation of plans for railroads
to handle traffic of similar nature as this road, it is very common
to insert complicated features such as “jumpover * tracks and switches
for terminating and interchanging trains, which in themselves form
complications in the operation of a railroad which are undesirable
and expensive and are usually not used in the operation of the road.
It has, therefore, been the endeavor throughout this work to eliminate
any such construction and to produce throughout a railroad of ab-
solutely the greatest simplicity obtainable and which is all-important
in an underground system.
The determining factors in arriving at the capacity of a railroad
such as this were:
(I) The carrying capacity of the train determined by the dimen-
sions of the cars and the cars per train. Physical conditions of con-
struction at terminals limited the possible train length to approximately
400 feet suitably divided into eight car trains. Cars about fifty feet
long by nine feet wide.
(2) The headway which it would be feasible to obtain with the best
possible equipment of brakes on the cars and by a satisfactory signal
35
System operating an automatic block system equipped with automatic
stops, permitting operation of trains on an actual headway of ninety
seconds.
The downtown terminal in New York provides for the existing
double track railroad operated under the above conditions from the
JPennsylvania Railroad to Church Street Terminal, and also provides
for two additional tracks to be constructed across the river, portions
of which on the New York side are already built in readiness for
future development, and the terminal station at Church street is de-
signed and constructed with ample provision to care for this future
construction and development with the resultant increase in traffic.
The uptown system further provides for similar capacity of the
double track railroad as constructed, and the connecting line on the
New Jersey side of the river is nearly filled to its capacity by trains
alternating between uptown and downtown. The plans of operation of
the road on all parts of the line have worked out peculiarly well, not-
withstanding the fact that the evolution of this system from its incep-
tion in 1869 up to the present has not been conducive to the best con-
sideration of operating features but has been governed by the ne–
cessities in the case, and the construction of the railroad has had
to be executed as best it could, to produce a proper and efficient oper-
ating scheme from a proposition which has grown to its present con-
dition after a lapse of about 40 years. To obtain this it has been
essential to eliminate all grade crossings. This has been done at
great expense by superimposing the tunnels one above the other at
points where crossings are necessary; in other places constructing
them alongside. There is, therefore, no point in the tunnels of this
system where a ninety second headway cannot be maintained in prac-
tical operation.
The great depth of water in the Hudson River and the nature of
the underlying soil and the position of the deep channel of the river,
involves unfortunately heavy grades on either side of the river, and
while a great deal of power is necessarily consumed in ascending the
heavy grades, there are fortunately in every case approaches to these
grades which permit of trains coming up to the grades at high speed,
and in most cases permit the starting out from stations on grades
which assist materially in the acceleration of trains, and the result
works out very economically with respect of power consumption. For
the most part the track in these tunnels is designed with ballast
foundation, but at certain points such as on curves and at junctions,
the track is on a concrete foundation, but as a general proposition
we have found the ballasted track more satisfactory through the
ability of the maintenance department to more easily maintain the
surface and to renew ties and rails. For the most part the running rail
is open hearth steel with carbon between 0.75 and O.90, this steel being
entirely satisfactory in these tunnels where the changes in temperature
36
are extremely slight. The principal trouble which has arisen in the
maintenance of track is the rapid corrugation of rail at points where
power is usually applied or where brakes are usually applied, and
in such locations it has been found desirable to renew the rail without
any regard whatever to the fact that the wear of the rail may not
be sufficient to justify renewal, but the renewal is made solely to
obviate the unpleasant “chatter” due to the corrugations in the rail.
A portion of the system is equipped with a signal system of all-
electric design while the other portion is equipped with the electro-
pneumatic system, all being arranged with single overlap and with
automatic stops throughout the lines which are under cover. The
wellnigh perfect results obtained from the signal system may be in-
teresting, as from the signal failure reports for the year ending:
August 31, 1911, the failure of signals was in the ratio of I to 1,050,784.
and automatic stops at the ratio of I to 2,793,591.
In the construction of these tunnels, a point which may be of general
interest is that of ventilation and temperature in the tunnels. The
maintenance of continuity in the single tube system is carried out as
far as possible, and only at stations with island platforms or at junc-
tions is there any break in this continuity. The result is that the
trains themselves force the column of air through the tunnels to such:
points where exhaust fans are installed, which remove this air column
as it is pushed forward to the fans. At the same time at other points
intake fans for supplying fresh air from the outside are installed,
which force fresh air into the tunnels in the rear of trains to supply
the displacement. By actual test and experiment as to the movement
of the column of air ahead of trains, it has been found that 60 per
cent of the entire tunnel displacement is pushed forward by the moving
trains. I stated just above that fresh air is taken in by intake fans. It
will be obvious that in the hot summer months when the external tem-
perature is higher than the temperature in the tunnels, that forcing
air into the tunnels or the changing of the tunnel air with the outside
atmosphere, would not tend to lower the temperature in the tunnels
but on the contrary might tend to increase it. Furthermore, there
must be of necessity be a large heating effect from the operation of
motors, journal bearings and from brakes, as well as the great volume
of heat generated by the passengers themselves, and it, therefore,
becomes of the utmost necessity to actually lower the temperature in
the tunnels. The construction of the Hudson and Manhattan tunnels,
as well as the tunnels of the Pennsylvania Railroad, is for the most
part with an exterior metal lining and in other parts with an internal
lining or a complete lining of concrete, but in every case the lining
itself is in contact with the moist exterior soil, thereby providing the
means of properly absorbing and radiating the heat within the subway
into the exterior soil. The effect of this construction has been most
satisfactory to the management as well as to the traveling public, with.
37
the result that the temperature in the tunnels throughout the year both
winter and Summer, does not vary more than ten degrees.
The large percentage of the total length of these tunnels which exists
under water, made it absolutely necessary to construct the same with
shields under air pressure, and to use iron tubular lining 15 ft. 3 in.
internal diameter. Irrespective of what size the land portions of the
tunnels might be constructed, these river sections were the controlling
factors in the size of the car equipment to be operated, and while
Originally it was intended to operate a rather small size car in order
to maintain light weights for operation, when the river portions of the
tunnels were constructed and cars were to be ordered, the natural
result came about that the cars were made of the largest size possible
to operate through the tunnels. The curvature at terminals and under
streets precluded any length greater than the present cars operated
by the Interborough subway, or 52 feet coupled length, and with the
exception of some details of the roof construction, the cars also were
designed of the same general dimensions as those now operated in
the subway by the Interborough Company.
. In the early operation of the railroad, when only the Hoboken line
was completed, and it was desirable to commence operation at once,
even with an incomplete railroad, we had no car yard in the open
and cars had to be inspected and maintained standing on tracks under-
ground. At a later date when we were able to extend our lines into
New Jersey and get our car shops and yards in operation, it was readily
seen how absolutely essential it is in the operation of any such tunnel
railroad as this, to have the inspection and maintenance of cars exe-
cuted in the open where there is plenty of natural light. The cheapest
thing possible in the maintenance and care of car equipment is day-
light and any underground tunnel proposition must be considered only
with proper provision for carshops and yards in the open daylight.
I cannot leave this subject without a reference to the Church Street
Terminal Buildings. This in itself involves a decidedly unique prop-
osition. At the time we laid out the plan and location of the down-
town tunnels the property on Church street was, comparatively speak-
ing, poor in quality and value and, as far as general business activity
was concerned, notwithstanding the fact that it was within 200 feet
of Broadway, it had no resemblance to the busy downtown section of
the city. The plot necessary for such a terminal below the surface
involved a very large expenditure and investment of close to three
millions of dollars, and although the first idea was to build simply a
railroad station on the plot of land, which extends two blocks from
Cortlandt to Fulton Streets, the property was of too great a value
to sacrifice to the sole and entire use of an underground railroad
terminal without constructing above it some improvement which would
assist in carrying the heavy charges on such an investment for real
estate. The provisions of the franchise required that the railroad
38
should be at the depth below the street at which it is located, this being
necessary to leave provision for the future construction by the city
of north and south lines of subway on the adjacent streets, and as
the soil was entirely quicksand it was necessary to enclose the entire
area of the station with a solid coffer dam wall to permit of the
excavation for and construction of the station and other improvements
necessary to the operation of the railroad. We therefore put this
coffer dam wall down around the entire area, some 500 feet long and
200 to 250 feet wide, by sinking a continuous wall of caissons to solid
rock and sealing them together, and then put in the floors to brace and
support the wall construction. The provision of such an improvement
as this on the property, the superstructure of the building being twenty-
two stories in height, has practically revolutionized the surrounding
neighborhood. In these twin buildings every particle of rentable space
in the offices and on the floors is now rented, and there is a population
carrying on its daily occupations within the buildings numbering
Io,000 people. The great interests which are concentrated in the build-
ings, owing to the facilities offered and the conveniences for trans-
portation, have created a new centre of industry and thereby have
extended to that extent the limits of the downtown district of the
City of New York and thus insuring a very large daily contribution
to the passenger traffic of this railroad. The convenience of such a
facility is evident from the time taken from the various railroads in
New Jersey to reach this terminal. From the Manhattan Transfer of
the Pennsylvania Railroad, just outside of Jersey City, the present
running time is 16 minutes, including all stops; from the Lackawanna
terminal in Hoboken 9 minutes; from the Erie Railroad in Jersey
City 5% minutes, and from the Lehigh Valley Railroad in Jersey City
3 minutes. Such conveniences in time saving must make it evident
to every thinking person that any such utility serving the public with
such a saving in time in their daily transportation between their homes
and places of business, must sooner or later get the business, and there
can be little doubt that as the public becomes better educated to the
value of time and the advantages to be gained by the saving of such
time, there will be a continual and growing use of this facility, and as
this transportation grows with its short haul and heavy concentration,
it will develop one of the prettiest operating propositions anywhere to
be found. e
In closing I trust I may be pardoned for mentioning the names of
certain gentlemen who have been the guiding spirits of this vast under-
taking, and I also must again refer to the loss you are under in not
having Mr. McAdoo here to better present the subject of the tunnels
and their operation. Since the reorganization of the old Hudson
River Tunnel Company about the year 1902, Mr. McAdoo and my
own firm (Jacobs & Davies) as engineers, have been associated
with this proposition through all the various business vicissitudes
39
which arose, and Mr. McAdoo's services to the company and under-
taking as the active head cannot be over-estimated. With the able
financing and under the guidance of the banking house of Harvey
Fisk & Sons, we have seen this propostition grow step by step from a
very small beginning, overcoming many constructive, physical, and
other difficulties, into what is to-day an eminently satisfactory oper-
ating proposition, and one which is to-day and shall ever be of great
and lasting benefit to the community.
THE TOLEDO STREET RAILWAY SITUATION
By ALBION E. LANG, President,
Toledo Railways and Light Co., Toledo, Ohio.
Much has been said in the newspapers from time to time about
negotiations pending in the city of Toledo for the renewal of certain
franchises under which the Toledo Railways and Light Company is
operating, and from present appearances there will be much more to
say before they are renewed — although there is ever present in the
minds of citizens, as well as the company, the hope that a speedy
settlement of the subject can be effected. -
In the year 1885 three horse-car systems were in operation, one being
of standard gage, one of 3 ft. and the third of 3 ft. 6 in gage,
several miles of which were located on the sides of streets in the side-
walk bed.
About this date and in the three or four years following the city
entered upon very extensive improvement of streets by way of paving,
thus imposing heavy expenses on the roads in reconstructing tracks
and paying for pavements as required under their several ordinances.
During this period renewal ordinances had been easily obtained by
each company running the statutory time of twenty-five years, and
all roads had passed into a single ownership under the name of the
Toledo Consolidated Street Railway Co. Subsequently the right to
change the narrow to standard gage and extend tracks into new
territory had been obtained, and work was actively going forward
when electricity as a motive power made its appearance, and the right
to change from horse to electric motive power was asked and readily
granted by Council.
Added to the work of reconstructing tracks as above mentioned, a
power house was built, new cars purchased, and in the four or five
years following very large expenditures were made necessary to meet
these conditions.
One of the earliest electric roads fully designed and operated as such,
and backed by the Thomson-Houston Co., was constructed in our
city in the year 1888, and extended from the heart of the city into
the suburbs, a distance of about two and one-half miles. It was built
to demonstrate the practicability of operating surface cars by the new
power, and notwithstanding there was little if any natural traffic tribu-
tary to it, people from all parts of the city and from neighboring towns
eagerly sought a ride over it, and for several months it did a rushing
thusiness. This road later became a part of the consolidated system.
From day to day during this period electricity as a motive power
grew in popularity, and the promise of its great economy over the
[40]
41
expense of operating by horses was so clearly demonstrated by en-
gineers and sales agents, that the tales of the Arabian Nights in the
light of Subsequent experience sounded very commonplace.
These promises and demonstrances of the superiority of electricity
over horse power for surface car operation, backed by the skill and
energy of the manufacturers of electric apparatus and car builders,
stimulated the business of street railroading in all our cities and
Toledo was no exception.
In 1889 The Toledo Electric Street Railway Co. was incorporated,
and procured from the City Council the right to construct and operate
a street railway in certain sections where transportation facilities
were really needed, but there was no way for it to reach the heart
of the business district except over the tracks of the horse-car com-
pany. The laws of the State then, as now, permitted the joint use
of tracks, one mile of old for every eight miles of new track built,
and in order to procure the necessary mileage, the horse-car lines were
paralleled, in many cases for long distances, in territory where traffic
was insufficient to properly support one road.
This great promise of economy 1ed the promoters of the electric road
to offer reduced rates of fare, viz.: cash fare, 5 cents; tickets, 24 for
$I, 6 for 25 cents, 5 for. I5 cents, good between the hours of 6 and 7
morning and evening, and I cent for children under 8 years of age;
I per cent on gross earnings and other unusual concessions to the
city were also granted, thus facilitating the passage of the coveted
grant. The work of building a power house, tracks and overhead
structures followed immediately upon the passage of the ordinance.
Operation was commenced, although passengers were forced to dis-
embark at the outskirts of the business district and walk to their
destination pending the determination by the courts of the cases that
had been commenced by the electric company for the right to reach
the business center over the horse-car company’s tracks, and thus
active competition between the companies was carried on for five or
six years. At the time the grant was made to the electric company,
the existing company charged a 5-cent cash fare, and voluntarily Sold
and has since continued to sell II tickets for 50 cents, charging children
under 10 years of age 3 cents, and issuing transfers to all lines em-
braced in the consolidated system.
The effort on the part of the electric company to gain entrance to the
business district over the horse-car tracks was stubbornly contested
in court, and continued for two or three years at great expense to
both companies, but finally, ended triumphantly for the electric
company.
The unscientific and haphazard way in which the roads had been
laid out resulted in one line competing with another to the detri-
ment of service on both, brought about constant friction between em-
ployes, and imposed extraordinary costs of operation and rapid depre-
42
ciation. It was not difficult to foresee an early termination of such
a situation, and it came in 1896, when all the lines passed under a
single ownership. Immediately thereafter application was made to
council to make a new grant with uniform terms and conditions,
eliminating some of the parallel lines and double tracking others, and
offering not only an improved service, but a lower rate of fare than
the majority of our patrons were then paying, with transfers good
between all lines in the city, coupled with other concessions more
favorable to the city than had existed theretofore. This application
was promptly refused. The mileage at this time was greater in pro-
portion to population than in any American city, but had this excess
mileage been properly placed population would have followed it, and
the burden of the company not only lightened, but the city at large
greatly benefited. The company was therefore forced to continue
operation under these disadvantages to await the growth of popula-
tion, in the meantime making no extensions of track into territory that
needed transportation facilities, and building only such double tracks
as necessity required. Rates of fare are still collected in accordance
with ordinance requirements, and until about three years ago, when
the company voluntarily inaugurated a system of transfers between
all lines upon the payment of a 5-cent cash fare, passengers were
required to pay two fares to reach certain sections of the city.
Many of the grants overlap each other in the length of time they run
on the same street, and out of a total of sixty-eight miles of streets
occupied by tracks, the city is now claiming that on about nine miles
our rights expired in November, IQIO.
Under a former management in 1904 a second effort was made to
effect some changes and improve the transportation facilities of the
city, but the subject later became engulfed in politics and the appli-
cation was refused. This is briefly the story of franchise negotiations
since the advent of electricity as a motive power down to the year
I908. Since 1904 in every political campaign, although no claim was
made that any grants had expired or would expire until 1910, candi-
dates for office have declared that no street railway grant should be
made except on a basis of 3-cent fares, hence during this period
no tracks have been built into new territory, and no new construction
carried on not absolutely required to conserve the business. The
feeling has been so bitter, fostered largely by some of the newspapers
of the city, that council was afraid, or at least would not grant a right
even for a switch or curve, no matter how important such right might
be to facilitate the operation of cars, accommodate shipping interests
or otherwise benefit the company and our patrons. This spirit of
antagonism has put a stop to the construction of a large terminal
station estimated to cost in excess of $250,000, and also curtailed the
shipping interests of merchants and manufacturers using the several
interurball roads to reach their customers in adjacent towns.
43
With the hope of removing the embargo, so to speak, the present
management of the roads called on city officials in the autumn of
1908, and said that 3-cent fares with transfers in Toledo is wholly
impossible and make any return on the capital invested, but we were
met with the statement that nothing could be done until the Cleve-
land negotiations then pending had progressed to the point of proving
that 3-cent fares were impracticable. Later an adjustment of street
railway matters was made in Cleveland on the basis of a sliding
Scale of fares, with which all are familiar, following which, on March
28, 1910, we requested the mayor and council to take up the subject
of renewing the franchises which by the terms of the original grants
would soon expire, with a view to arriving at a fair settlement of all
questions involved, fair and equitable alike to the city and to the
company, and in so doing offered to furnish the city with every facility
for an examination of our street railway properties and books showing
the actual cost of carrying passengers, the capital required for future
developments, and all such other facts and information as might be
desired. In due time our invitation was accepted, and the city ap-
pointed a firm of Cleveland accountants to examine our books, every
facility being furnished them to do so.
After the accountants had examined our books and reported their
findings, the same accountants requested that we furnish them in great
detail an inventory of our property. This, of course, we declined to
do. We said, however, that “if in the course of our negotiations
with the city it should become necessary or desirable for the city
of Toledo and this company to agree upon a method of reaching a
valuation of our street railway property as part of a comprehensive
solution of the franchise question, we will be pleased to present to
any board of engineers upon whose selection we can both agree, all
such data and information as may be required by such engineers
in making such valuation.” In replying to this offer the city declined
to appoint an engineer, but instead asked for an inventory to be
turned over to the accountants. We, therefore, employed a competent
firm of engineers to make a complete inventory, and handed the same
to the city on the first day of November, IQIo. In December following,
the mayor addressed to the company a communication outlining his
views as to the modern theory of the relations between public service
corporations and municipalities, reiterating a belief that he and his
administration believed that a rate of fare fixed at 3 cents, with
universal transfers, possible under certain conditions, saying: “If
3-cent fares are unjust then the people would not insist upon
them,” “that these several conditions therefore make it necessary finally
to determine the true value of the property employed,” etc., and sug-
gested “that the next step in these negotiations is logically the drafting
of an ordinance recognizing these broad general principles and pro-
viding for their practical and specific application,” etc. Replying to
44
this letter we asked the mayor to cause to be drawn an ordinance
based upon the principles he had enunciated in his letter, so as to
put matters in a concrete form for public discussion (which he had
requested), leaving blank, spaces for the insertion of valuations and
rates of fare. The preparation of the ordinance was committed to
the city solicitor, and possibly through some misunderstanding was
printed and distributed before being submitted to council for its
approval, but it was a wide departure from the lines and theories
outlined in the mayor’s letter. The city solicitor’s office had evidently
procured copies of various ordinances under which roads were being
operated in this country and Canada, and extracted from them all
their most burdensome conditions, and incorporated them into what
he called a tentative ordinance as a proper basis for an easy solution
of the franchise question. One reading of the ordinance was sufficient
to convince any practical operating man that a fare of IO to I5
cents would not produce enough revenue to meet daily operating
expenses. Other communications on the subject were passed between
the representatives of the city and the company, which finally resulted
in an agreement to hold open negotiations in the council chamber
to discuss the whole subject and try to agree upon the usual condi-
tions of an ordinance, leaving until the end the subject of valuations
and fare. Several meetings were held and many provisions agreed
upon, while others were rejected, until the subject of fixing a valuation
was the next necessary step in our negotiations. We, therefore, sug-
gested to the city the appointment of a competent board of appraisers,
one by the city, one by the company, and the two so named to select
the third competent disinterested man, and thus appraise the property.
This was followed by the city appointing Prof. Bemis as its appraiser,
at the same time suggesting the United States judge in this judicial
district as the third man. Believing that a proper person to appraise
a property embracing so many elements requires a man who by training
and experience is qualified to deal with the subject, our negotiations
with the city have, for the time being at least, come to a standstill.
Since negotiations have been interrupted all sorts of drastic measures
have been proposed and discussed, among them being the imposition
of a rental charge for the use of the streets where rights have ex-
pired as claimed (a procedure clearly not authorized by the laws of
Ohio), ejectment from streets, etc., but notwithstanding council has
figured out what it considers to be a proper rental charge, computed
from the tenth day of November last at the rate of $250 per day,
and the city solicitor has brought suit for its recovery.
In the meantime another political campaign has opened up, and the
old bogie of standing pat for 3-cent fares is being used as a rec-
ommendation for election or re-election, as the case may be, and the
subject that is as vital to the growth and development of the city as
it is to the best interests of our cómpany is still pressing for solution,
as it has been for many years.
45
During all these negotiations there have been some good business
men in council, men of decision and sound judgment, and had they as-
Serted themselves with courage at the opportune time, the hypocrisy or
political cowardice of their associates could have been easily exposed,
and the whole subject progressed along sensible business lines that
would doubtless Soon have brought order out of chaos. It must not
be inferred from what I have said that some officials have not ear-
nestly and seriously endeavored to bring about a settlement, but the
public mind has been so poisoned by the abuse of capitalists and cor-
porations in general for so long a time, that many men, especially
those holding public office, have become so intimidated that under no
circumstances can they be betrayed into a defense of either. Toledo
is no exception to the general rule in this respect, but the facts cannot
be disguised. ' g
We have a city unequalled in natural advantages for manufacturing
purposes, many beautiful dwellings and tenements of moderate cost,
and comparatively few palatial residences, and while our population
has increased to some extent during the past decade, the percentage
of increase has been less than it should have been, and our material
prosperity less than our natural advantages warrant, and this is largely
due to the constant agitation of the street railway franchise subject,
and the continued abuse of corporations and So-called capitalists.
Many citizens agree with me in this belief, and our only solace is
that what we have lost in quantity of growth . we have more than
offset in quality, and to this sentiment all loyal citizens assent.
I have many times said in public and private that the manufacturing
interests of our city, as well as our real estate and banking interests,
can in no way be as rapidly stimulated and improved as by a speedy
and just settlement of the franchise question. We have a large body
of very intelligent and emergetic young business men, and they, as
well as citizens generally, are beginning to discuss this phase of the
matter, and when they become fully aroused there will be “something
doing,” as the boys say, and Toledo will be the gainer.
This represents the franchise situation in Toledo today, briefly
stated, but being naturally optimistic I am hopeful that the subject
will soon receive that careful and unbiased consideration its importance
deserves, and will result in a settlement of our differences in a manner
mutually advantageous to the city as well as to the company.
THE EFFECT OF ELECTRIC RAILWAY OPERATION ON
TAXABLE CITY PROPERTY
BY GEN. GEORGE H. HARRIES, Vice-President,
WASHINGTON RAILWAY AND ELECTRIC CoMPANY, WASHINGTON, D. C.
While there is an overflowing stream of popular sentiment as to
the benefits accruing to electric railway companies by reason of an
imaginary public generosity in the matter of street-occupying rights,
there is nothing in legislative procedure, on the lecture platform, or
in the press, with respect to the error of such belief, nor is there even
local admission of the actual facts. In spite of the rapidly and tre-
mendously increased number of stockholders whose experiences have
been and are exceedingly painful, there still remains the aggressive,
countrywide belief that electric railway enterprises must be enormously
profitable and that their vast suppositious wealth is due wholly to the
mistaken liberality of each charter-giving or charter-selling community.
During the horse-car era and through the days of cable operation the
lines were comparatively short and were invariably on busy streets;
a reasonable gross income being assured before the investors were
called upon to worry over that discounting and sometimes disturbing
power which we term “operating expenses.” But the incoming of
the overhead trolley wrought magically. Strides toward the suburbs
became record-breaking leaps. The sociologist foresaw the solution
of the slum problem and was encouraged. The municipal authorities
had new cause for pride. The rapid-transit organizer was a superior
sort of being. The stockholder was hailed as one deserving of con-
fidence, praise and compensation. The public smiled amiably. -
What have the years developed 2 The fulfilment of the farmers’
golden dreams; the brokers' opulent visions transmuted into solid
cash; the Sociological theory a many-times accomplished fact; tre-
mendous municipal growth of the most desirable sort with ernormous
increase in municipal income; and electric railway construction, equip-
ment, service, indebtedness, deficits, receiverships and strife far beyond
the initial thought of any of us who basked in the pleasing sunshine
in that seemingly long-ago time when city transportation really began
to be.
In this brief paper are set forth figures which should show conclu-
sively where lie the benefits which have come to one city — the Na-
tional Capital — as a result of individual courage and corporate effort.
Because of the difficulty of obtaining the assessors' figures as to
values on Specific streets prior to 1902 the comparisons generally are
for the eight years following that date, although that method works
(47)
47a
materially to the disadvantage of the railway case. With respect to
the preceding years it may be sufficient to say that all electric-railway
operation other than in the heart of the city had been conducted at a
net loss which so terrified local banks that when consolidation meas-
ures were planned the whole sum needed to make them effective had to .
be secured from outside interests.
BENEFITS FROM ExTENSIONS.
Now as to the relative benefits: In 1902 a total of 406 acres stretched
alongside an extension had an average assessed value of $348 per
acre; brought up in eight years of operation from $40 per acre. In
1905 the average assessed value was $968 per acre. In 1908 it was
$1,013, and in 1911 it was $2,370; an increase per acre in assessed value
of 601 per cent, while the city's tax revenue from that property was,
of course, correspondingly increased. On this same line was a famous
old-time estate of 352 acres. This was sold in 1888 for $30,000; prac-
tically $85 an acre. To-day the least desirable of it is bringing 25
cents a square foot, while the better portions are 40 cents or more per
square foot. -
The railway and the railway only is responsible for the difference
between $85 per acre and $18,000 per acre. It is a reasonable con-
clusion that within the past five years this line has added $8,000,000
to land values in its immediate vicinity. The railway that did the
work piled up a deficit in excess of $200,000, and the deficit, decreas-
ingly, continues. - -
An extension of less than a mile of conduit construction road
brought into the real estate market 2Io acres in the northwestern Sec-
tion of the city. In 1902 the average assessed value was $553 per acre.
In 1905 it was $950. In 1908 it was $2,735 and in 1911 $5,701, an in-
crease of 931 per cent. Since the completion of this extension the
aggregate of property values jumped, in response to transportation
facilities, to nearly $10,000,000. For the right to extend its lines one
mile the railway company was assessed $25,000 by Congress. The con-
struction cost was in excess of $100,000. The company has not yet
wiped out the deficit which accrued during the years when it was en-
gaged in making many fortunes for other people and in adding
largely to the city’s income. -
One of the most interesting lines in the exhibit has had a hard time
from its beginning. Originally a horse-car line — then electrically
equipped, later the victim of a pneumatic exploitation and investment,
then completely reconstructed for electric service — it has been the
most persistently hammered proposition at which the Washington pub-
lic ever threw brickbats. It is directly responsible for fully $8,000,000
of increased values and its books show with torturing exactness that
it has piled up a deficit of $417,960.17,
47b
Since 1900 one of our lines toward the western edge of the District
has been doing a great deal of development work, increasing values
considerably in excess of $3,000,000. The bank examiner would say
that it is at this time $148,000 short in its accounts.
Other development lines are struggling bravely for the public wel-
fare. One has succeeded in pushing land values from $100 an acre
to $1,000 an acre throughout a stretch of territory three and one-half
miles in length and two miles wide. This particular public benefactor
is $27,484 in arrears, just now. . -
Other lines, whose owners mourned over deficits for years, but that
are now beginning to see daylight, are conceded to have given to the
collector of taxes his percentage on more than $13,000,000, but have
never given to their stockholders one penny of dividends. The securi-
ties that we sold at par are even now to be purchased at an average
discount of about seventy-five per cent. -
A little more than twelve years ago what is now the Washington
Railway & Electric Company’s system consisted of eleven separate
and distinct railway companies. One of the first moves made by the
then holding company was to open up free reciprocal transfers between
these independent companies. Discussing railway matters with the
president of a local trust company and a great building association,
who had many things critical to say of us, and whose conservatism
is one of Washington’s proverbs, he said that our transfer system —
to the effects of which he had given much thought — had added
$50,000,000 to property values in the District of Columbia.
How do the books balance? The authorities — never willing to con-
cede Overmuch to public utility corporations — are agreed that electric
railway development in the District of Columbia during the period
covered by this paper has added directly about $46,000,000 to land
values (without considering the vast transfer benefits) and is responsi-
ble for a steady increase which in a large part of the territory now
exceeds one hundred per cent annually.
The railways that did the work have accumulated a deficit of more
than a million dollars with further deficits in prospect for two or
three years to come.
Who is the debtor?
REPORT OF THE COMMITTEE
ON
FEDERAL RELATIONS
To the American Electric Railway Association:
GENTLEMEN.— Steadily, and against the continuing protest of those
far-seeing publicists who deem it easily possible that grave injury
shall increase as the self-governing powers of the several States are
diminished, we are moving toward absolute Federal control over cor-
porations and natural persons engaged in interstate. commerce. To
this movement the great transportation agencies no longer offer objec-
tion. Driven in every direction but the right one by the conflicting
winds of State legislation they are ready to welcome a statute which
will be THE statute, and under the terms of which they shall definitely
know what they can do. The Sherman Act — which many lawmakers
insist should not be amended — leaves the answer to practically every
commerce question in the keeping of the grand jury. The great need
is for a potent and capable federal force which shall in large sense
supplant the inexcusably destructive practice of to-day by definite reg-
ulation which shall prohibit the doing of specifically unlawful things.
It may be by federal incorporation or “license,” although the idea of
“license” is illogical and repugnant. The right to do business is basic
and therefore has precedence over permission. More probably the
legislative conclusion will be “registration.” In the propositions sub-
mitted to Congress both methods are set forth, and to many of the
disputants either conclusion would be satisfactory. But there is wide
difference of opinion among them as to the powers to be placed in the
hands of the registering authority. Here the devotees of the sacred
Sherman Act insist, practically, that the only way in which the business
man can find out whether his method is right or wrong is by going
ahead after his own fashion until the grand jury passes upon his pro-
cedure. That way lies industrial confusion and financial disaster.
The demand of the hour and the age is for direct information prior to
possible indictment; for a controlling body clothed with authority to
say “Yes” or “No ;” something closely related to the power which —
whether lawfully or otherwise, but with high personal and political
courage — averted that frightful shrinkage in values which must have
come to this country had Tennessee Coal and Iron been thrown on an
abnormally debilitated market. -
Whether anything like well-balanced and permanent statutes will be
enacted during the approaching session not even the various leaders
can safely foretell. With the ever-present presidential campaign ap-
proaching a junction with the campaign for IQI6 no man knows what
one Congressional hour may bring forth, but there is reason for hop-
ing that some good will come out of our legislative Nazareth.
[48]
49
While the output of Federal energy during the past twelvemonth
has been almost equal in bus-bar quantity to that of any like preceding
period, yet, so far as our business is concerned, there has been a
marked drop in voltage and every evidence of a decrease in the dis-
tributing and disturbing efficiency; due, [\ossibly, to the fact that in-
Stead of one great prime-mover we now have a large number of com-
paratively small and necessarily less economical units. Remedial
measures taken by many companies have, of course, reduced the sup-
ply of partisan fuel and decreased the B.T.U. of opposition.
With the nominating conventions almost summoned, each party and
every faction of one party will strive for accomplishment. There will
be much playing with fire in spite of the fully demonstrated danger of
such recklessness, but there will also be determined effort to sanely
solve the great problem of the time — the problem in which we have
So much at stake.
There is demand for at least one Moses, and there are many candi-
dates; each of whom is industriously yearning to be called to Sinaiatic
elevation, there to be named and equipped as the one to lead his
people out of the wilderness and to whom the borders of the promised
land may not prove a barrier. Surely wisdom will somewhere be ap-
parent.
FEDERAL IN CORPORATION
Five new bills dealing with Federal control are ready for consider-
ation and others may reasonably be expected at the next session.
Some of the more thoughtful legislators are of the opinion that Con-
gress has not sufficient information on which to base sound legislative
effort. To meet that situation Representative Martin Littleton will
urge his bill to create an industrial and corporate commission; to be
composed of five members of the Senate, five members of the House,
and five members not members of Congress to be appointed by the
President of the United States. It is to be the duty of this commis-
sion to inquire into the method by which industrial and corporate enter-
prises enter into and transact interstate commerce, and to report at
the earliest date practicable what legislation is necessary to enable the
Government of the United States to regulate, supervise, and control
the entry of and the transaction of business by industrial and corporate
concerns engaged in interstate commerce. This measure will undoubt-
edly be opposed by some of those who are satisfied that the remedy
lies not in delay but in immediate and direct legislation. -
Senator Newlands of Nevada, who has given the matter much at-
tention, is sponsor for the bill which proposes to create an interstate
trade commission, which is to be the successor of the Bureau of Cor-
porations. By that commission every interstate corporation heretofore
or hereafter organized within the United States, whose gross annual
receipts, or the total annual receipts of whose subsidiaries, exceed five
million dollars shall be registered and shall thereafter be known as
50
“ United States Registered '' companies and shall have the sole and ex-
clusive right to use, in connection with their corporate title, their se-
curities, their operations, and by way of advertisement of their busi-
ness, the title “United States Registered,” or any convenient abbrevi-
ation thereof. The commission may require, should such a thing be
necessary, any registered corporation to so readjust its securities or
assets as to create no overcapitalization ; the penalty for failure on the
part of any corporation to make such correction being the revocation
of its license and the issuance of an order that such corporation shall
not thereafter engage in interstate commerce. Provision is also made
for the re-registration of any corporation which may have violated
any order of the commission, afterwards repenting and requesting for-
giveness.
The five bills referred to form part of the appendix of this report.
Other measures on committee calendars — some calculated to arouse
controversy and some certain to promote argument and laughter — are
lightly sketched for the information of members who have no acquain-
tance with the bill files at the Capitol and who are not devoted readers
of the Congressional Record.
*
PHYSICAL VALUATION
Physical valuation will have prominent place in any discussion af-
fecting transportation agencies. Three bills propose to require the
Interstate Commerce Commission to value the properties. Those in-
troduced by Senator La Follette and Representative Madden call only
for present values, but that presented by Representative Adamson pro-
vides for inquiry into every detail of original cost and all facts pertain-
ing to capitalization no matter how remote.
Representative Macon, however, does not propose to wait until the
Interstate Commerce Commission could complete the stupendous task
of valuation. He insists that “it shall be unlawful for any company,
corporation, organization, or association engaged in interstate or for-
eign commerce to use the mails, the telegraph or telephone lines, or the
railroads within the jurisdiction of the United States of America for
purposes of interstate or foreign commerce without first having filed
with the Interstate Commerce Commission an affidavit duly subscribed
and sworn to by the chief agent or officer thereof clearly setting forth
that the aggregate value represented in and by the stocks, bonds, or
other securities of the company, corporation, organization, or associa-
tion represented by said agent or officer does not exceed the aggregate
physical value of the property and the reasonable value of the business,
privilege, or franchise that said stocks, bonds, or other securities were
issued to represent. Any company, corporation, organization, or asso-
ciation violating any of the provisions of this Act shall be deemed
guilty of a misdemeanor, and upon conviction thereof shall forfeit
to the United States of America a penalty equal in amount to the dif-
51
ference between the aggregate value represented in and by said stocks,
bonds, or other securities and the aggregate physical value of the prop-
erty and the reasonable value of the business, privilege, or franchise
that said stocks, bonds, or other securities are intended to represent;
and each day's failure to comply with the provisions of said Act shall
constitute a separate offense, and any agent or officer of any company,
corporation, organization, or association violating any of the provisions
of this Act, or who shall knowingly swear falsely concerning the value
of anything mentioned herein, shall be deemed guilty of a felony, and
upon conviction shall be punished by a fine of not less than ten thou-
sand dollars and imprisonment in the penitentiary for some period of
time not less than ten years.”
The other valuation bill is by Representative Lafferty; who goes all
the way (leaving nothing for those who may follow after) by seeking
to enlarge the jurisdiction of the Interstate Commerce Commission by
giving to that body the power to fix reasonable rates, based upon phys-
ical valuations, to be charged by railroad, express, telegraph, and tele-
phone companies, and all other common carriers, in the transaction of
interstate business, and also giving to said commission the power to
fix reasonable prices to be charged by persons or corporations when
found to be exercising a monopoly in the interstate sale of any com-
modity.
RESTRAINTS AND MONOPOLIES
Desire to protect trade and commerce against unlawful restraints
and monopolies found form in many legislative suggestions. These
are interesting to us because it is generally provided in each bill that
all interstate or international transportation of the products of lawless
combinations is prohibited. Occasionally there is no effort to prevent
the loading of tabooed products, but when they cross a state line or
are being shipped to a foreign country it is laid down as a necessary
principle that the good; “shall be forfeited to the United States, and
may be seized and condemned by like proceedings as those provided by
law for the forfeiture, seizure and condemnation of property imported
into the United States contrary to law.” The strong arm reaches out
also for the responsible individuals. Any natural person who is an
officer, director, agent, trustee, receiver, lessee, or any person acting
for or employed by such corporation * * * or who shall aid or
abet therein, or who shall participate therein, or who shall suffer or
permit any act required by this Act to be done or not to be done, or
who shall aid or abet any such omission, or failure, etc., shall be
be deemed guilty of a felony with eight years in the penitentiary as a
resultant, “ and in addition to such imprisonment shall forever be dis-
qualified from acting as trustee, director, agent, manager of any na-
tional banking association or of any corporation engaged either in in-
terstate or in foreign commerce, or both, and shall be disqualified to
hold any public office whatsoever.” Resentment at recent opinions of
52
the United States Supreme Court is frequently displayed in bills which
insist “that every contract, combination in form of trust or otherwise,
or conspiracy in restraint of trade or commerce of any character what-
soever * * * is hereby declared to be illegal and unreasonable”
or as another court-directing measure has it, “shall be presumed, con-
Strued, and adjudged to be unreasonable.” The Act, of course, is a
statutory command which will compel the courts to declare unreason-
able not only those contract which are reasonable, but also those which,
from every point of view save that of the would-be-destructive poli-
tician, are mutually advantageous to the contracting parties and to the
public. -
The author of one House bill deems it insufficient to prohibit; he
would forbid “the purchase of any stock in a corporation engaged in
interstate commerce by another corporation engaged in interstate com-
merce doing a competitive or similar business.” -
In a similarly-designed measure the author seeks to destroy the last
hope of the individual who is in any sense party to a merger or a con-
tractual understanding. “It shall not,” provides this bill, “be deemed
a valid defense in behalf of such officer or members of the board of
directors that they had no knowledge of or were ignorant of the facts
constituting the offense charged.” Heavy fines and long terms are,
however, evidently insufficient. Two sections of one bill read as fol-
lows:
“That every person engaged in any business, any portion or
all of which constitutes a violation of this Act, shall forfeit by
reason of such violation any and all rights which such person may
have to protection under or right to damages for infringment upon
any patent right held or owned by such person, whether directly
from the United States or under purchase, assignment, or other-
wise; and the right to the free manufacture and use of any and
all articles, devices, or machines so held under right of patent by
the person who shall have violated any of the provisions of this
Act shall thenceforth be open to all.” •
“That any person who shall be injured in his business or prop-
erty by any other person or corporation, by reason of anything
forbidden or declared to be unlawful by this Act, may sue therefor
in any circuit court of the United States in the district in which
the defendant resides or is found, without respect to the amount
in controversy, and shall recover threefold the damages by him
sustained, and the costs of the suit, including reasonable attor-
ney's fee.”
Then we find two other interesting sections in another House bill:
“That it shall be unlawful for any two or more corporations
engaged in interstate or foreign commerce to have the same offi-
cers or board of directors; but each corporation engaged in
interstate or foreign commerce shall have its own Separate and
distinct officers and board of directors, and they shall not be
chosen from the officers, directors, stockholders, agents, or em-
ployes of any other corporation engaged in interstate or foreign
commerce where such other corporation is engaged in the same
53
kind of business or is, or may be, in the remotest degree, a com-
petitor of the corporation whose officers or directors are to be
chosen.”
“That it shall be unlawful for any trust, or combination or
association of persons in restraint of trade, or a monopoly to use
the United States mail for any purpose whatsoever.”
In the extremely important matter of security issues but one propo-
sition — by Representative Miller — has been submitted. It will be
found in the appendix. The Congressional disposition is to await the
report of the Hadley Commission, which body has not yet reached
any definite conclusions.
Just at this point our Manufacturers’ Association should become
personally interested, for a bill introduced by a member of the House
who is most conspicuous in steel corporation research says:
“No person who is engaged as an individual or as a member
of a partnership, or as a director or other officer or an employe
of a corporation, in the business, in whole or in part of manufac-
turing or selling railroad cars, or locormotives, or railroad rails,
or structural steel, or mining and selling coal shall act as a
director or other officer or employe of any railroad company which
conducts an interstate-commerce business.”
“That any person who shall be guilty of a violation of this
law shall be punished by a fine of one hundred dollars a day
for every day during which he shall act as a director, officer, or
employe of the railroad company, or by imprisonment for such
period as the court may designate, not exceeding one year, or by
both such fine and imprisonment, in the discretion of the court.”
In order that no guilty person may by any possibility escape punish-
ment Representative Raker insists in his declarations of the national
purpose with respect to monopolies.
“That every person, shall, in relation to the acts made unlawful
by this Act or the Act to which it is a supplement, be presumed
to have intended the natural and probable consequences of his
conduct; and all and every, person who has monopolized or at-
tempted to monopolize, or done, anything, tending to a dangerous
probability of monopoly, or shall have unlawfully restrained trade
or the freedom to trade, shall be prima, facie presumed to have
also intended unlawfully to restrain and obstruct commerce among
the States and with foreign nations.”
It must not be imagined, however, that every legislative proposition
looks toward the repression of all organized effort. Always there is
a fine vote-bidding discrimination, such for instance as is shown in
the proposed amendment to the Sherman Act, which amendment
blandly provides:
“That this Act shall not be construed to apply to any arrange-
ments, agreements, or combinations between laborers made with
the view of lessening the number of hours of labor or of in-
creas11ng their wages, nor to any arrangements, agreements, or
combinations among persons engaged in horticulture or agricul-
ture made with the view of enhancing the price of agricultural
or horticultural products.”
54
ANTI-EXPRESS COMPANIES.
During the early part of the recent extra session of Congress it
seemed possible that express companies would be entirely forgotten,
but in June there appeared a bill providing for the condemnation and
purchase of the franchises and physical property of the express com-
panies of the United States and for the establishment of postal express;
all express matter to be transported by the common carriers and paid
for at rates to be agreed upon if possible, but if no agreement could
be had then as the result of appeal to the lnterstate Commerce Com-
mission. Should the ruling of the Commission be unsatisfactory either
party would have the right of appeal to the Court of Commerce.
Upon the Interstate Commerce Commission would devolve the duty
of appraising the contracts, agreements, franchises, equipment and
property of the express companies at their true market values; appeal
as to values running all the way through to the Supreme Court of
the United States. When those preliminary details are out of the way
the Secretary of the Treasury would, by the Act which is here being
outlined, be authorized and directed to turn over the money to the
express companies for distribution to the parties entitled thereto.
The necessary funds are to be secured through an issue of United
States bonds, those securities to run forty years and bear interest
at the rate of two and one-half per cent per annum.
A less kindly measure is the House bill which declares that it shall
be unlawful from and after the first day of January, nineteen hun-
dred and thirteen, for any railway company engaged in interstate and
foreign commerce “to lease, sublet, or permit any other person, firm,
company, or corporation the right to carry or transport for hire articles
of commerce over its lines of railway, either in cars or facilities
furnished by the railway company, or by any other person, firm,
company, or corporation.” The interstate carriers are to be required
“ to furnish cars and other facilities for carrying and transporting
parcels and packages on passenger, mail, or express trains without
the medium or intervention of the so-called express companies.”
Then parcel freight rates are to be scheduled and approved by the
Interstate Commerce Commission. Should any managing officers or
agents of any carriers subject to the provisions of the Interstate
Commerce Law violate any of the provisions of this Act, there are
fines and imprisonments for such,
Evidence of unwillingness to permit the Interstate Commerce Com-
mission to have anything to do with express rates appears in one
bill which provides that a parcel not exceeding eleven pounds in
weight and valued at not more than eighty dollars shall be carried
between any two interstate points, not more than five hundred miles
apart, for not more than twenty-five cents; for thirty-five cents, if
the distance is not more than seven hundred miles; for fifty cents,
if the distance is not more than twelve hundred miles; for seventy-
55'
five cents, if the distance is not more than two thousand miles; and
for One dollar and twenty-five cents, if the distance exceeds two
thousand miles. -
Before, however, we expend any great amount of sympathy on the
threatened express companies we should give a little thought to the
bill (House 8083) introduced by Representative Reilly of Connecticut.
Therein is the solution for all of our problems, for should it, or any-
thing like it, ever become law this and a large number of allied asso-
ciations would have no excuse for further existence, unless they should
devote themselves to urging the United States to take possession of
burdensome properties. *
The plan set forth starts out with the consolidation of the Inter-
state Commerce Commission with the Post Office Department. The
consolidation having been completed the department is to be “em-
powered and directed to assume the management of and to extend
the postal business of the United States as rapidly as in its judgment
may appear consistent with the public interest under the terms of this
Act to cover the public transportation of persons, of baggage, of
correspondence, of parcels, and of general freight. For this purpose,
under conditions hereinafter named and subject to the further pro-
visions of this Act, this department is hereby empowered and directed,
for and in behalf of the Government of the United States, to secure
the control and management of such railroads and other transport
agencies as are now engaged in the transportation of the mails of the
United States and as are therefore post roads, and also to secure the
control and management of such other railroads and other transporta-
tion agencies as in the judgment of the department may be needed
for the public use under the proposed extension of the postal
business.” In view of the fact that it might not be wise to buy all
the desirable properties at once there may be temporary contracts
under the terms of which there must be absolute control of schedules,
of equipment, and of regulations; which contracts shall secure to the
owners of the leased properties a guaranteed annual return on their
investment equal to the average annual return of the ten years pre-
ceding the approval of this Act.
But three year contracts are nothing more than temporary, so it is
provided that the Post Office Department may take permanent posses-
sicn, after six months' notice, of any railroad or other transport
agency which it may deem a public convenience or necessity. Should
the properties thus acquired be dividend paying, then the owners shall
receive an annual return on the bona fide securities representing such
properties equal to the annual return of the ten years preceding the
approval of the law. If, however, the purchased one shall only
have been able to meet its fixed charges, then the United States will
do no more than guarantee the payment of the stated interest on such
bonds. The non-paying roads have not been forgotten, for it is
announced that in case roads acquired have no more than paid ex-
56
penses or failed to pay expenses during the ten years preceding the
Act, or if the road is but recently built or is in process of construc-
tion, the property shall be valued at reproduction cost and on that,
United States forty year, five per cent bonds shall be issued pro rata
to the holders of the bona fide and readjusted securities.
Securities which have been guaranteed by the United States may
be converted into United States, forty year, five per cent bonds, but
there will be no guarantee of dividends or interest of car trusts or
similar associations. Should the department find it necessary to lease
equipment, it may do so for a period of three years, or it may purchase
Such equipment, or it may construct new equipment, in its discretion.
All railroad companies that may be notified by the Post Office De-
partment that their properties are needed by the Government of the
United States may be required to turn over their properties to the
Government within five years from the passage of the Act and the
department is furthermore required to accept the charge of any rail-
road which in its judgment can be used to the public advantage within
six months after the receipt of such offer to the department.
It is provided that the working period for all employes of the en-
larged Post Office Department shall be eight hours a day or forty-eight
hours a week. Overtime is to be paid for at the same rate as for
regular time, but there will be no overtime except in case of delays or
accidents or other extraordinary circumstances. Such of the person-
nel of corporations as may be desirous of Serving the Government
when the properties are transferred shall be continued in service dur-
ing efficiency and good behavior as the business may require. All other
persons to be employed shall be subject to civil service examination
and will be employed on probation for a period of six months, but
the power is vested in the department to employ those whom the bill
designates as “irregular hands" without troubling the Civil Service
Commission.
All tolls, fares, parcels and freight rates must be prepaid. Passes
are absolutely tabooed except that all government supplies and troops
and publications shall be transported free and the same privilege will
be extended to the President, Vice President, members of the Cabinet,
justices of the Supreme Court and all Federal judges, and senators
and representatives, while engaged in the public service.
Wherever the receipts from operation prove insufficient, then the
Secretary of the Treasury, upon order of the Post Office Department,
will issue forty year, two and one-half per cent bonds.
There are to be three varieties of passenger service : local post, ex-
press, and fast post.
“Passenger fares shall be as follows: By local post, ordinary
cars, five cents per trip; by local post, palace cars, twenty-five
cents per trip ; by express post, ordinary cars, twenty-five cents
per trip ; by express post, palace cars, fifty cents per trip, by fast
post, ordinary cars, one dollar per trip; by fast post, palace cars,
two dollars per trip.”
57
“Children, except infants in arms, who shall travel free, shall
pay the same fare as adults. Those fares are only for continuous
trips in one direction. No stop-overs shall be allowed. Travelers
beyond the run of the through car or train of departure shall be
provided with transfers dated on the day of departure, but these
transfers shall only be good if used on or before midnight of the
day of departure. Holders of transfers must take the first service
of their class leaving the transfer station after their arrival. A
fast transfer, however, shall entitle the holder to proceed on his
journey by either of the different services. An express transfer
shall only cntitle the holder to proceed by express or local service.
Local transfers shall only be good on local services.”
“An additional charge shall be made for the use of sleeping cars
as follows: Tourists’ cars, upper berth, twenty-five cents per
night or fraction thereof; tourists’ cars, lower berth, thirty-five
cents per night or fraction thereof; palace cars, upper berth,
seventy-five cents per night or fraction thereof; palace cars, lower
berth, one dollar per night or fraction thereof.”
“The rate of a section shall be twice that for a lower berth.”
“The charge for a drawing-room shall be three times that for
a lower berth. Within the limits of the postal electric and auto-
mobile service of the post office, additional fares of five per
centum to and from the different railway stations and the
traveler's domicile shall pay for the traveler's trip, house to
house.”
“ Baggage may either be forwarded from house to house under
the rules relating to Ordinary parcels, or it may be checked from
the station of departure to the station of destination by the service
adopted by the traveler. There shall be no free baggage, except
such as the rules of the department may allow the traveler to
carry with him in the passenger car.”
“The rate per piece of baggage of regulation size and shape,
not above one hundred pounds in weight, placed in a baggage
car, shall be five cents per trip, station to station, of the Owner.
For pieces above one hundred pounds and not over two hundred
pounds, the charge shall be ten cents. For pieces above two
hundred pounds, the charge shall be ten cents for each hundred
pounds or fraction thereof.”
“The department may limit the size and weight of pieces which
it will carry as baggage over two hundred pounds.”
“Bicycles may be carried as baggage, subject to a toll of five
cents per trip of the owner. Any baggage not called for within
twenty-four hours after its arrival at a Government station shall
be charged a demurrage fax of ten cents for each succeeding
twenty-four hours or fraction thereof.”
“Parcels, within dimensions to be determined by the Post Office
Department, shall be cared for by the station agents for one cent
each for the first twenty-four hours, and for ten cents per parcel
for each succeeding twenty-four hours or fraction thereof.”
And then follow rates for special service trains and regular trains
and special cars and private cars on regular trains. One section is
58
devoted to parcels service collected at the house of the sender and
delivered to the person for whom it is intended. For a parcel which
weighs two hundred pounds and does not exceed four cubic feet in
dimensions, the rate will be twenty-five cents for the entire transac-
tion, while a parcel which does not exceed one pound in weight and
measures not more than one by six by twelve inches will be carried
from the door of the man in Maine to the door of the man in southern
Arizona for one cent. The bill deals as liberally with freight and
provides rebated postage in case there shall be failure in prompt de-
livery. The private freight cars and revision of the registry regula-
tions and a number of other things complete what may be regarded as
the most extraordinary measure ever seriously presented for the con-
sideration of the Congress of the United States. -
WORKMEN'S COMPENSATION
All members of Congress are not inclined to wait for the findings
of the Employers' Liability and Workmen’s Compensation Commission
before there is any serious framing of legislation.
A comprehensive and drastic measure of fifty-two pages has been
introduced by Representative Sabath, which plans to raise revenue
from persons engaged in and carrying on occupations subject to the
regulative powers of Congress, and to create a fund to pay compen-
sation to employes and public servants injured on post roads and mail
routes and to change existing general law as to the recovery of dam-
ages for personal injuries.
Under the terms of this bill there is to be a new board in the De-
partment of Commerce and Labor, the chief of which board is to be
known as the “Commissioner of Injury Awards.” The Commissioner
will have great latitude in procedure. It is proposed that the Commis-
sioner will have power to make general regulations or orders making
effective the provisions of the Act and he may award to any beneficiary
or annuitant — after hearing or rehearing — such compensation or
amended compensation as he may deem proper in accordance with a
schedule which is set forth in minute details. With respect to the in-
jury records and accounts of all common carriers and carriers trans-
porting mail he will specify a form of accounting records and mem-
oranda for carriers and has, as to injuries to employes, authority which
is parallel to that of the Interstate Commerce Commission and sub-
ject to the action of the United States Circuit Courts and the Supreme
Court of the United States.
The projected method of operation is that upon being notified by
any corporation or natural person subject to his jurisdiction that an
employe has been killed or injured, the Commissioner will “promptly
notify the person injured, or his widow, personal representative, or
next of kin, of their right to compensation ” under the Act and shall
take all proceedings necessary or proper to make the law effective;
59
which means that in accordance with the table of damages there will
be an award by the Commissioner of the sum to which the beneficiary
is alleged to be entitled. That surn will be paid by the carrier if the
carrier accepts the provisions of the Act and that payment will estop
any action at law contemplated by the person compensated. Avoidance
of the terms of the Act by any contract, agreement or device relating
to the employment or re-employment of the servants of a carrier is to
be made impossible by the declaration that such a contract, agreement
or device shall not be valid or enforceable. The funds which are to be
at the disposal of the Commissioner are to be secured from taxes
levied as follows:
I. Ten cents on each one hundred dollars face value of all securities
issued by corporations or persons subject to the Commissioner and
the same tax on all sales or agreements to sell or transfers or memor-
anda of agreements to secure the future payment of money or for the
future transfer of stock; or if the evidence of transfer is shown only
on the books of the company the stamp shall be placed on such books.
2. One cent for each thousand dollars value of freight, express,
messages or money-orders sent; stamps to be attached to bills of lad-
ing, manifests or other memoranda of messages by telegraph or dupli-
cate thereof.
3. An excise tax of sixty dollars per vehicle per year on every loco-
motive and tender and every other vehicle used on the lines of every
common carrier by steam railroad, and on each and every motor, trol-
ley or electrical vehicle used by any electrical railway, when any such
vehicles are used on a mail route or on a post road.
4. An excise tax of five dollars per mile on every mile of its single
wire mileage within the United States by every telegraph company
operated along the line of or connected with any telegraph line built,
constructed, or maintained along the line of any railroad and telegraph
line to which the United States has granted subsidies, or which tele-
graph line shall have accepted the provisions of Title 55, Revised
Statutes.
Exemption from the foregoing taxes may be had by accepting and
abiding by the provisions of the projected statute.
For those corporations or carriers that decline to accept the provi-
sions of the Act, trouble in large quantity is provided.
I. The Postmaster General is forbidden to enter into any contract
with them for the carriage of mail.
2. It shall be unlawful for them to transport any passenger for hire
over any line of railway heretofore made and declared to be a post
road or by this Act said to be a mail route, “ and no court of the
United States shall entertain a bill or bills for injunctive relief on the
ground that the carrier, or any person directly or indirectly suing on
its behalf, is engaged in interstate or foreign commerce, or that it is
operating on or over a mail route when its employes shall have
60
started to impede its hauling freight or the mails or shall have entered
On a strike,” and all laws and regulations in conflict with that sen-
tence shall be deemed to have been suspended until the carrier consents
to be governed by the Act.
3. The doing of business with the United States Government is ren-
dered impossible by a section which forbids the Comptroller of the
Treasury from auditing or permitting the payment for any service for
the carrying of the mails or for transportation of any kind or for
travel in sleeping cars or for chargés for express matter or any cable
or telegraph or telephone service by any company “that shall not have
accepted the clauses of this Act by a certificate in form to be prescribed
by said Comptroller.” -
It is a most remarkable measure. It invites the voluntary co-oper-
ation of the carriers and then assures them that if they will not volun-
teer they will be put out of business. It reminds us of a South Amer–
ican situation when two nations were at war and when “volunteers ”
were brought into the training camps roped together in squads of ten.
The military authorities invited an alcalde in the mountains to send
them additional “voluntarios " to which he responded, “Send me more
rope and I will send you more ‘voluntarios.’” Which seems to prove
rather conclusively that the legislators of this supposedly civilized and
highly intelligent land are not above the crude but somewhat effective
methods of those who are alleged to be more nearly savage than we.
The Sabath bill, and other measures, the details of which may be
deemed worthy of careful study, will be found in the appendix of this
report. g
In dealing with an important feature of damage suits Representative
Clayton has put in bill form a court-instructing proposition which
comes home to all of us. That bill provides that any actions hereafter
brought in or removed to Federal courts for negligence causing per-
sonal injury or death, questions of negligence and contributory negli-
gence, shall be for the jury. It shall be reversible error for the trial
court to refuse to submit these questions to the jury, and no case shall
be reversed by the appellate court because these questions are left to
the decision of the jury.
With respect to the Employers' Liability and Workmen’s Compensa-
tion Commission, it may be enough to say at this time that the Com-
mission has held many hearings and is considering a number of briefs.
If it be practicable your Committee will endeavor to see that member
companies are supplied with the volumes of testimony and argument
published and to be published.
ARBITRATION
A number of men prominent in national administrative and legisla-
tive life, who have been much interested in the more conspicuous
phases of the labor problem, are, since the recent strikes in England,
61
more intent than ever on bringing into existence some board or court
which will have authority to search out the inwardness of each trouble-
some situation and at the same time to bring about a reasonable de-
gree of harmony between the employer and the employed. No one of
the measures which will be carefully considered and perhaps pushed
vigorously next session contains even an intimation of compulsory
arbitration, but all are strong with respect to investigating powers, and
one — by Representative Foss — provides that the “National Arbitra-
tion Tribunal * may require of each of the parties to a submitted con-
troversy an indemnity bond to abide by the decision of the tribunal.
LABOR
The House Committee on Labor has a few measures waiting con-
sideration. These deal with the hours of labor ; with the number of
men who must be assigned to duty with each switching locomotive;
with prohibition of the transpºrtation of wares manufactured wholly
or in part by convict labor or in any prison or reformatory; and with
prohibition of the transportation of the products of any factory, mine
or mill in which are employed children under the age of fourteen.
RATES
With respect to rates there is practically nothing to be considered
save some unimportant measures which would amend the Hepburn
Act by giving free or reduced transportation to bona fide members of
the Grand Army of the Republic, the Women's Relief Corps, and the
Ladies of the Grand Army of the Republic whenever attending annual
encampments; authorizing the interchange by carriers and publishers
of newspapers and periodicals of transportation for advertising and
printing; and permitting railroad companies to grant free transporta-
tion to “agents, emmissaries, and employes engaged in the Co-oper-
ative Farm Demonstration work, carried on under the jurisdiction of
the Department of Agriculture of the United States’’ — the latter in-
teresting principally because a department of the United States Gov-
ernment (which government is legislatively and oratorically opposed to
any form of discrimination) practically asks that there be discrimina-
tion in its favor.
MISCELLANEOUS
Efforts of the miscellaneous sort present some interesting pictures of
the legislative mind. One bill requires interstate carriers to adjust
and pay all claims for overcharges on freight and for loss and injury
to property committed to their care within ninety days from the date
of the filing of claims. Another forbids the transportation of any
sheet and plate iron and steel which does not conform to a standard
gauge (set forth in nine tabulated columns) which it is proposed to
establish. Another would divest whiskey of its interstate commerce
62
character in certain cases; these cases, however, not being cases in
which the whiskey is packed. Another would make mileage tickets
practically universal in character.
With respect to Safety devices there is practically nothing new, al-
though block system operation is demanded in three bills; clearance
between cars and structures is the subject of one measure; the trans-
portation of explosives is dealt with ; the use or production of acety-
lene on cars is sought to be prohibited ; and a good deal of stress is
several times laid on the substitution of steel for wood in the con-
struction of all passenger-train rolling-stock.
Perhaps the most important bills relating to safety are the two
which provide that the American Railway Association shall be author-
ized to frame and report to the Interstate Commerce Commission a
standard code of rules for the operation of trains. Your Committee
recommends that the President of this Association, either in person or
by committee, be authorized to confer with the American Railway As-
sociation as to this or any other matter which may be of mutual and
common interest to the end that such rules, should they be framed, be
suitable for electric railway use.
CONCLUSION
Your committee would most emphatically urge member companies
to take deep, practical interest, local and general, in tentative legisla-
tion by Congress. It is that body which establishes precedents for
rulings by State commissions. On Congressional propositions and de-
bate there should be a concentration of association and individual
thought and action, for out of them must necessarily come the issues
of national health or disease.
Respectfully submitted,
GEO. H. HARRIES, Chairman,
FRANK R. FoRD,
C. S. SERGEANT,
RICHARD MCCULLOCH,
F. W. BROOKs,
L. S. CASS,
R. I. ToDD,
L. S. STORRs,
Committee on Federal Relations,
APPENDIX
[H. R. I28 II.]
JULY 26, 191 I.
Mr. ADAMSON introduced the following bill; which was referred to the Committee on
Interstate and Foreign Commerce and ordered to be printed.
A BILL
To provide for the physical valuation of railroad properties and to secure information
concerning their stocks and bonds and boards of directors.
Be it enacted by the Senate and House of Representatives of the United States of America in
Congress assembled, That the Interstate Commerce Commission shall proceed immediately
upon the passage of this Act to make an accurate and fair valuation of all the properties
owned by each railroad company in the United States, designating separately that which
is actually used in transportation and that which is held as an investment or for specula-
tion, and also that which is held as nonproductive. Together with such valuation the
commission shall ascertain, and report in detail, what each piece of property cost the
present owners, how it was paid for, where the money came from, to whom it was paid,
and for what purpose. If any railroad company has been reorganized and the property
is now in the hands of any company other than the original incorporators, the valuation
shall also show what the property originally cost, where the money came from, to whom
it was paid, and for what purpose, and how much the capital stock was increased or dimin-
ished in the reorganization. If the capital stock was decreased, the valuation shall show
who lost the nominal decrease, and if the capital stock was increased, how the additional
amount was paid for and by whom, and what was done with the money or property put
in for that purpose. The said valuation shall also show the amounts and dates of all
bonds outstanding against each railroad company, how much was paid therefor, by whom
and to whom, and how the money was spent. If a company has been reorganized or the
property has passed into other hands, the commission shall ascertain and report all the
facts as to any previous company which held the same property, and especially show the
amount of bonds issued by the original company, how much money they brought in, to
whom it was paid, and what was done with it. As far as practicable such report shall
also give the names of all stockholders and bondholders, with the amount held by each, .
and also the name of each director on each board of directors. The commission is hereby
authorized to require and compel the production of books and papers and the attendance
of any witness to testify upon any such questions; and it shall be the duty of all officers
of every railroad company in the United States to respond to any call of the commission to
testify in person to any or all such facts within their knowledge and to produce, for the use
and information of said commission in making said valuation, all books and papers. The
same duty is hereby imposed upon all holders of stocks or bonds in any such company.
All laws now in force under which the appearance of witnesses and the production of papers
and books before the Interstate Commerce Commission may be compelled are hereby
made applicable for the same purpose in making investigations for such valuation.
SEC. 2. That the report of such valuation, when made as provided in section one of this
Act, shall be published on the order of the commission in book form, and it shall be admis-
sible as prima facie evidence of the facts stated therein in all investigations or trials before
the Interstate Commerce Commission or in any court.
SEC 3. That upon the completion of the work herein provided for the commission shall
thereafter, in like manner, keep itself informed of all extensions and improvements or
other changes in the condition of the property used for the convenience of the public by every
common carrier subject to the provisions of this Act, and shall ascertain the value thereof,
and also the particulars as to each additional bond issue floated or attempted, and new
stock issued, and shall, from time to time as may be required for the proper regulation of
such common carriers under the provisions of this Act, revise and correct its valuation
of property and statement of stocks and bonds, stockholders, bondholders, and directors.
Ec. 4. That, to enable the commission to make such changes and corrections in its
valuation, every common carrier subject to the provisions of this Act shall report cur-
rently to the commission, and as the commission may require, all improvements and changes
in the property used by it for the convenience of the public, and shall file with the com-
mission copies of all contracts for such improvements and changes at the time the same
are executed, as well as all increases of capital stock, to whom issued, how and how much,
and by whom paid, and all particulars of any new bond issue floated or attempted, with
the names of new stockholders, new bondholders, and new directors.
61
[S. 262.]
APRIL 6, 191 I.
Mr. LA FOLLETTEintroduced the following bill; which was read twice and referred to the
Committee on Interstate Commerce.
A BILL
To amend an Act entitled “An Act to regulate commerce,” approved February fourth,
eighteen hundred and eighty-seven. and all Acts amendatory thereof, and to enlarge
the powers of the Interstate Commerce Commission.
Be it enacted by the Senate and House of Representatives of the United States of America
in Congress assembled, That section nineteen of an Act entitled “An Act to regulate com-
merce,” approved February fourth, eighteen hundred and eighty-seven, and all Acts
amendatory thereof, and to enlarge the powers of the Interstate Commerce Commission,
be amended by adding thereto a new section, to be known as section nineteen a, and to
read as follows:
“SEC. Ig a. That the commission shall investigate and ascertain the value of the prop-
erty used for the convenience of the public by every common carrier subject to the pro-
visions of this Act. For the purpose of such investigation and ascertainment of value,
the commission is authorized to employ such engineers, experts, and other assistants as
may be necessary, who shall have power to administer oaths, examine witnesses, and take
testimony. The value shall be ascertained by means of an inventory which shall list such
property so used by every common carrier subject to the provisions of this Act in detail,
and shall classify the physical elements of such property in conformity with such classi-
fication as the commission may prescribe.
“The commission shall have power to prescribe the method of procedure to be followed
in the conduct of the investigation, the form in which the results of the valuation shall be
submitted, and the classification of the elements that constitute the ascertained value;
and such investigation shall show the value of the property used by every common carrier
ias a whole and the value of such property in each of the several States and Territories
and the District of Columbia.
“Such investigation shall be commenced not later than January first, nineteen hundred
and ten, and shall be prosecuted with diligence and thoroughness, and the result thereof
reported to Congress at the beginning of each regular session thereafter until completed.
“Every common carrier subject to the provisions of this Act shall furnish to the com-
mission, or its agents, from time to time and as the commission may require, maps, pro-
files, contracts, reports of engineers, and any other documents, records, and papers, or
copies of any or all of the same, in aid of such investigation and determination of the value
of the property used by said common carrier, and shall grant to all agents of the commis-
sion free access to such property, its right of way, and its accounts, records, and memo-
randa, whenever and wherever requested, by any such duly authorized agent, and every
common carrier is hereby directed and required to cooperate with and aid the commis-
sion in the work of such valuation of property in such further particulars and to such ex-
tent as the commission may require and direct; and all rules and regulations made by the
commission for the purposes of administering the provisions of this section and section
twenty of this Act shall have the full force and effect of law.
“ Upon the completion of the work herein provided for the commission shall thereafter,
in like manner, keep itself informed of all extensions and improvements or other changes
in the condition and value of the property used for the convenience of the public by every
common carrier subject to the provisions of this Act, and shall ascertain the value thereof,
and shall, from time to time as may be required for the proper regulations of such common
carriers under the provisions of this Act, revise and correct its valuation of property.
“To enable the commission to make such changes and corrections in its valuation, every
common carrier subject to the provisions of this Act shall report currently to the commis-
sion, and as the commission may require, all improvements and changes in the property
used by it for the convenience of the public, and file with the commission copies of all
contracts for such improvements and changes at the time the same are executed.
“Whenever the commission shall have completed the valuation of such property so
used by any common carrier, and before said valuation shall become final, the commis-
sion shall give notice by registered letter to said carrier, stating the valuation placed upon
the several classes of property used by said carrier, and shall allow the carrier thirty days
in which to file a protest against the same with the commission. If no protest is filed
within thirty days, said valuation shall become final.
“If notice of protest is filed by any common carrier, the commission shall fix a time for
hearing the same, and shall proceed as promptly as may be to hear and consider any matter
relative and material thereto which may be presented by such common carrier in support
of its protest so filed as aforesaid. If after hearing any protest of such valuation under
the provisions of this Act the commission shall be of the opinion that its valuation is in-
correct, it shall make such changes as may be necessary, and shall issue an order making
such corrected valuation final. All final valuations by the commission, and the classifi-
cations, thereof, shall be prima facie evidence relative to the value of the property in all
proceedings under this Act.
“The provisions of this section shall apply to receivers of carriers and operating trustees.
In case of failure or refusal on the part of any carrier, receiver, or trustee to comply with
any of the requirements of this Act and in the manner prescribed by the commission such
earrier, rcoeiver, or trustee shall forfeit to the United States the sum of five hundred dollars
65
for each such offense and for each and every day of the continuation of such offense, such
forfeitures to be recoverable in the same manner as other forfeitures provided for in this
“That the circuit and district courts of the United States shall have jurisdiction, upon
the application of the Attorney General of the United States at the request of the commis-
sion, alleging a failure to comply with or a violation of any of the provisions of this Act
by any common carrier, to issue a writ or writs of mandamus commanding such common
carrier to comply with the provisions of this Act.”
SEc. 2. That this Act shall take effect and be in force from and after its passage.
[H. R. 772.]
APRIL 4, 191 I.
Mr. MADDEN introduced the following bill; which was referred to the CC mmittee cri In
terstate and Foreign Commerce and ordered to be printed.
A BILL
Providing for the physical valuation of the properties of railroad companies engaged in
interstate commerce.
Be it enacted by the Senate and House of Representatives of the United States of America
in Congress assembled, That the Interstate Commerce Commission is hereby authorized
and directed to proceed forthwith to investigate and ascertain the value in money of all
the property of every railroad company in the United States subject to the laws of the United
States governing railroad companies engaged in interstate commerce in force when such
valuation is made. The value of each species of such property shall be ascertained, speci-
fied, and reported separately. In passing upon the value of property the commission is
authorized and directed to ascertain the original cost of construction, the amount expended
in permanent improvements, betterments, and extensions, what portion of the earnings
have been invested in permanent improvements, betterments, and extensions, and the
extent to which such earnings are represented by stocks and bonds. It shall also ascer-
tain the original cost and value of the right of way and terminal grounds and the present
value of the right of way and terminal grounds, and the present value thereof exclusive
of improvements, also the value of the improvements. For the purpose of such investi-
gation and ascertainment of value the commission is authorized to employ such engineers,
experts, and other assistants as may be necessary, who shall have power to administer
oaths, examine witnesses, and take testimony.
SEC. 2. That every common carrier subject to the provisions of this Act shall furnish
o the commission or its agents, from time to time as the commission may require, maps,
profiles, contracts, reports of engineers, and any other documents, records, and papers,
or copies of any or all of the same, in aid of such investigation and determination of the
value of the property used by said common carrier, and shall grant to all agents of the com-
mission free access to such property, its right of way, and its accounts, records, and memo-
randa, whenever and wherever requested, by any such duly authorized agent, and every
common carrier is hereby directed and required to cooperate with and aid the commission
in the work of such valuation of property in such further particulars and to such extent
as the commission may require and direct.
SEc. 3. That upon the completion of the work herein provided for the commission shall
thereafter, in like manner, keep itself informed of all extensions and improvements or
other changes in the condition and value of the property used for the convenience of the
public by every common carrier subject to the provisions of this Act, and shall ascertain
the value thereof, and shall, from time to time, as may be required for the proper regula.
tion of such common carriers under the provisions of this Act, revise and correct its valua-
tion of property.
• SEC. 4. That to enable the commission to make such changes and corrections in its
valuation, every common carrier subject to the provisions of this Act shall report currently
to the commission, and, as the commission may require, all improvements and changes
in the property used by it for the convenience of the public, and file with the commission
copies of all contracts for such improvements and changes at the time the same are executed.
SEC. 5. That the value of the property of a common carrier as found by the Interstate
Commerce Commission shall be received as prima facie evidence of the value thereof in
all proceedings before the Interstate Commerce Commission and in all the courts of the
United States: Provided, That this provision shall not operate to prevent or prohibit the
commission from fixing rates and performing all the acts required or permitted under this
Act under such knowledge of values as they may now possess or may hereafter acquire
prior to such valuation.
[H. R. 9324.)
MAY I2, Igr I. -
Mr. MILLER introduced the following bill; which was referred to the Committee on Inter-
state and Foreign Commerce and ordered to be printed.
A BILL
To regulate the issue of securities by transportation, telegraph, and telephone companies
engaged in interstate commerce, for the purpose of better protecting the people against
unreasonable rates and charges. -
Be it enacted by the Senate and House of Representatives of the United States of America
in Congress assembled, That the provisions of this Act shall apply to all persons and cor-
3
66
porations which are subject to the Act to regulate commerce, approved February fourth,
eighteen hundred and eighty-seven, and the Acts amendatory thereof, and also to .#.
tions engaged in the transmission of intelligence by telegraph or telephone from one State
or Territory of the United States or the District of Columbia to any other State or Terri-
tory of the United States or the District of Columbia, or within any Territory of the United
States or within the District of Columbia. The provisions of this Act shall also apply to
corporations organized for the purpose of holding the securities of other corporations,
subject to this Act.
SEC. 2. That for the purpose of this Act the following words and phrases shall be deemed
to have the meaning specified in this section:
“Stock '' shall mean any share or shares of capital stock in any such corporation, whether
common, preferred, or otherwise classified.
“Evidences of funded indebtedness '' shall mean any bonds, debentures, coupons,
notes, or other evidences of indebtedness payable at any time after twelve months from
date thereof.
he term “securities '' shall include both stock and evidences of indebtedness as herein
above defined.
SEC. 3. That no corporation subject to the provisions of this Act shall issue any share
of stock unless at least the par value thereof has first been paid in cash into its treasury
or unless it is issued in exchange for property or securities at not to exceed their true and
actual value, equal in amount to at least the par value of such stock: Provided, That it
shall be lawful for such corporation to pay a commission to any person, if necessary as a
consideration to his subscribing or agreeing to subscribe for any shares or procuring or
agreeing to procure subscriptions for any shares, but no such commission shall be paid
unless expressly authorized by the Interstate Commerce Commission as necessary and in
the public interest: And provided further, That any company which has been in continuous
existence for more than two years may sell additional shares at a discount, if necessary
to procure their sale; but no shares shall thus be sold at a discount without the previous
i. approval of the Interstate Commerce Commission as necessary and in the public
interest.
SEC. 4. That no such corporation shall issue any evidences of funded indebtedness
which shall have a date of maturity exceeding fifty years from date of issue, or which shall
bear interest at a rate exceeding six per centum per annum. And in no case shall such a
corporation sell its evidences of funded indebtedness at a discount such that, taking into
consideration the rate of interest and the date of maturity thereof, the net return to the
investor thereon shall exceed seven per centum per annum. The amount of such evi-'
dences of indebtedness which may hereafter be issued by any corporation shall not, together
with evidences of funded indebtedness previously issued, at any time exceed, in all, the
capital stock of the corporation actually paid in at the time: Provided, however, That any
such corporation which at the time of the passage of this Act shall have evidences of funded
indebtedness outstanding in excess of its capital stock may refund any part of such funded
indebtedness in the future by issuing not to exceed an equal amount of evidences of funded
indebtedness. -
SEC. 5. That no such corporation shall issue any stock or evidences of funded indebted-
ness, nor apply the proceeds thereof, except for the following purposes, to wit:
First. For the acquisition or construction of property to be used in the operation of its
transportation, telegraph, or telephone business: Provided, That where any securities of
such corporation are issued for the purpose of raising money to defray the expenses of the
construction of any permanent line for transportation or for the transmission of intelli-
gence which can not be made profitable over a lengthened period, the company may pay
interest on so much of the cost thereof as is hereinafter specified out of the proceeds of its
stock, charging the same as part of the cost of construction. But no such interest shall be
paid out of the proceeds of stock unless the same shall have been expressly authorized by
the Interstate Commerce Commission as necessary for the purpose of enabling such con-
struction to be made, and the Interstate Commerce Commission shall determine for what
period of time interest may be paid in this manner, and such period shall in no case extend
beyond the close of the half year during which the construction shall have actually been
completed.
Second. For the improvement of the property employed in such operation.
Third. For the refunding, whether by the issue of evidences of funded indebtedness or
by the issue of stock of the evidences of funded indebtedness of the corporation previously
issued: Provided, That in no case shall the amount of securities outstanding be increased
by such refunding.
Fourth. Corporations themselves engaged in the actual operation of transportation,
telegraph, or telephone lines may, subject to the limitations in section six, issue stock or
evidences of funded indebtedness in exchange for the securities of other corporations
owning or operating transportation, telegraph, or telephone lines, or may apply the pro-
ceeds of the sale of either stock or evidences of funded indebtedness to the purchase of
such securities: Provided, That no such corporation shall hereafter acquire or hold any of
the securities of any other corporation which operates a parallel or competing line, nor
shall any such corporation hereafter acquire any of the securities of any other corporation
whose lines are not directly connected with the lines of the purchasing corporation, unless,
although not connecting, the lines of the corporation whose securities are acquired are so
related to the lines of the purchasing corporation as to permit operation of both lines as a
substantial unit and to the improvement of the service."
Fifth. Corporations organized for the purpose of holding securities of other corporations
owning or operating transportation, telegraph, or telephone lines may, subject to the
67
limitations of section six, issue their securities in exchange for the securities of any such
corporation, or apply the proceeds of the sale of their securities to the purchase of such
securities: Provided, That no such holding corporation shall hereafter acquire or hold
securities of any corporation owning or operating a line parallel to or competing with the
line or lines of any other corporation in which it also holds securities; nor shall any such
holding corporation hereafter acquire the securities of any corporation whose lines are
not directly connected with those of some other corporation in which it already holds
securities, unless, although not so directly connected, the lines of the two corporations
can be operated as substantially one unit and the service be improved thereby.
Sixth. Any corporation itself owning or operating a transportation, telegraph, or tele-
phone line, the actual, tangible, and physical value of whose property at time of the passage
of this Act shall exceed the amount of its securities outstanding, may, with the approval
of the Interstate Commerce Commission, at any time within five years after the passage
of this Act, issue an additional amount of securities to its stockholders equal to the excess
; sº value above the amount of securities outstanding at the time of the passage of
this Act.
SEc. 6. That no corporation subject to the provisions of this Act shall issue its securities
in exchange for the property or securities of any other such corporation, or shall purchase
the property or securities of any other such corporation at a rate or price in excess of the
true and reasonable value of the property or securities so acquired.
SEC. 7. That a corporation subject to the provisions of this Act shall issue only such
amount of stock and evidences of funded indebtedness as may be reasonably necessary
for the purpose for which such issue has been authorized; and no such corporation shall
apply the proceeds of any such stock or evidences of funded indebtedness to any other
purpose than that for which they were authorized.
SEC. 8. That no such corporation shall hereafter issue any preferred stock bearing a
rate of dividend exceeding eight per centum per annum.
SEC. 9. That before any corporation subject to this Act shall issue any securities it
shall make a full report of its proceeding in respect thereto to the Interstate Commerce
Commission. Such report shall show the amount and character of the securities which it
proposes to issue, the purpose for which the same are to be issued or to which the proceeds
thereof are to be applied, and the necessity for such issue; it shall state whether it is pro-
posed to issue the same in exchange for cash or for property or securities; and if the same
are to be issued in exchange for existing property or securities, or if the proceeds thereof
are to be applied to the acquisition of existing property or securities, the report shall con-
tain full information as to the location and character of such property, or the location
and character of the property represented by such securities, together with satisfactory
evidence as to the actual, tangible, and physical value thereof, and shall show, in case
the property is that of an existing company, or in the case of the securities of an existing
company, what part of the value of such property or securities is represented by the invest-
ment of surplus earnings of such company subsequent to the passage of this Act; and if
such securities are to be issued in exchange for or if the proceeds thereof are to be used
for the construction or acquisition of property not then existing, the report shall contain
a full description of such proposed construction or acquisition, together with reasonable
evidence as to the probable cost thereof. Such report shall also state what, if any, rate
of commission it is proposed to pay for securing the sale of any shares of stock, and at
what, if any, discount it is proposed to sell any such shares.
SEC. Io. That the Interstate Commerce Commission shall thereupon inquire fully into
the matter, taking such testimony as it may deem needful and giving all parties interested
a full opportunity to be heard. As soon as practicable the commission shall render a deci-
sion as to whether the proposed issue of securities is in conformity to this Act. Such decision
shall be in writing, shall assign the reason therefor, and shall specify the respective amounts
of stock or evidences of funded indebtedness which are authorized to issue for the respec-
tive purposes to which the same or the proceeds thereof are to be applied, in order that
such issue may conform to the requirements of this Act.
SEC. II. That whenever, for the purpose of better fulfilling the duties imposed upon it
by law, under this Act or under any other Act, the Interstate Commerce Commission
shall deem it necessary, it may make a determination of the actual, tangible, and physical
value of the property of any transportation, telegraph, or telephone company subject to
this Act; and for this purpose it shall have power to require from such company a report
setting forth, in such detail as the commission may prescribe, the cost and value of its
property; and the commission shall have the power to employ expert engineers and account-
ants to examine the statements in such report, or to examine the property and accounts
of such corporation; and it shall be the duty of such company to furnish such engineers
and accountants full access to the property and to the accounts of the company bearing
on such cost and value.
SEC. I2. That every annual or periodical balance sheet of any such corporation which
shall hereafter, in accordance with law, be filed with the Interstate Commerce Commission
shall distinguish securities issued under the provisions of this Act from securities previously
issued, and shall indicate as to each class of securities issued under the terms of this Act
the amount issued for cash, the amount of premiums or of discount, if any, thereon, the
amount of commission, if any, allowed on sales of stock, and the amount issued in exchange
for property and for securities, respectively. The Interstate Commerce Commission
shall prescribe such forms of accounts to such corporations and require from them reports
in such form as will disclose clearly the disposition of securities issued under the terms of
this Act and the application of the proceeds thereof. Every company subject to the
provisions of this Act shall, in its annual balance sheets, or other balance sheets hereafter
(3S
submitted to the Interstate Commerce Commission, distinguish among its assets the
amount of such assets acquired by the investment or surplus earnings subsequent to the
passage of this Act; and every such company which shall hereafter acquire the property
or the securities of any other such company shall, in its annual balance sheets, show what
part of the value of the property or securities so acquired represents the investment, sub-
sequent to the passage of this Act, of surplus earnings of the company whose property or
securities are acquired. -
Sec. 13. That if any corporation subject to this Act shall issue securities without the
approval of the Interstate Commerce Commission, as herein provided, such securities
shall be illegal, fraudulent, and void, and any official of any such corporation signing or
directing the issue of such illegal securities, or any official of such corporation directing
the application of the proceeds of the sale of any securities herein authorized to any other
purpose except that for which the same were authorized, shall be deemed guilty of a mis-
demeanor, and shall be subject, upon conviction in a court of the United States of com-
petent jurisdiction, to a fine of not less than five thousand dollars nor more than twenty
thousand dollars and imprisonment for a term not exceeding three years.
[H. R. 8083.]
APRIL 29, 191 I.
Mr. REILLY introduced the following bill; which was referred to the Committee on the
Post Office and Post Roads and ordered to be printed.
A BILL,
For the extension of the Post Office over the entire business of public transportation.
Be it enacted by the Senate and House of Representſ:tives of the United States of America
in Congress assembled, That the Interstate Commerce Commission be, and is hereby, con-
solidated with and made a part of the Post Office Department of the United States. This
department, thus consolidated, shall consist of the Postmaster General, who shall be the
head of the department, and of ten associates, including the present members of the Inter-
state Commerce Commission. The salary of each of the members of this department shall
be at the rate of ten thousand dollars a year. The present members of the Interstate
Commerce Commission shall hold office as members of this department during their terms
of office as Interstate Commerce Commissioners, the salary of each member being increased
to ten thousand dollars a year. The remaining members of the department and those
who may hereafter be chosen members of the department shall be appointed by Congress
and their tenure of office shall be at the will of Congress. All contracts made under this
Act shall be in the name of the United States of America and all such contracts as relate
to the guaranteeing of dividends and of interest on railroad or other transport securities,
as hereinafter provided, and all contracts involving amounts of more than five hundred .
thousand dollars or binding the Government of the United States for a longer period than
three years, shall be approved and signed by at least six of the members of this depart-
ment. It is, however, hereby provided that minor contracts made under this Act involv-
ing amounts of not more than five hundred thousand dollars, and contracts not binding
the Government of the United States for a longer period than three years, may be approved
and signed by the Postmaster General, by either of his ten associates, or by subordinates
duly authorized by a majority of the members of the department.
Sec. 2. That the Post Office Department thus consolidated is hereby empowered and
directed to assume the management of and to extend the postal business of the United
States as rapidly as in its judgment may appear consistent with the public interest under
the terms of this Act to cover the public transportation of persons, of baggage, of corre-
spondence, of parcels, and of general freight. For this purpose, under conditions herein-
after named and subject to the further provisions of this Act, this department is hereby
empowered and directed, for and in behalf of the Government of the United States, to
secure the control and management of such railroads and other transport agencies as are
now engaged in the transportation of the mails of the United States and as are therefore
post roads, and also to secure the control and management of such other railroads and other
transportation agencies as in the judgment of the department may be needed for the public
use under the proposed extension of the postal business.
SEC. 3. That this department may make temporary contracts for the use of any rail-
road or other transport agency which it may find a convenience or necessity in the trans-
action of its business, such contracts to be for a period not longer than three years. These
contracts shall secure to this department the absolute control of railway train schedules
and of railway equipment, as well as the determination of all rules as to the handling of
ordinary postal matter, of baggage, of parcels, of general freight, and of passengers. These
contracts shall secure to the owners of such properties an annual return on their invest-
ments equal to the average annual return of the ten years preceding the approval of this
Act, and the same is hereby guaranteed. - -
SEC. 4. That this department may take permanent possession of any railroad or of
any other transport agency which it may deem a public convenience or necessity under
the following conditions: -
First. At least six months' notice shall be given to the president, or, in the absence of
the president, to any other officer of the corporation owning such railroad or other trans-
port agency of the intention of the Government of the United States to take possession
of the same for the public use, as herein provided.
Second. In the case of dividend-paying properties this notice shall be accompanied by
the guaranty of the Post Office Department, made in behalf of the United States of America
69
that the owners of such properties shall receive an annual return on the bona fide securities
representing such properties equal to the average annual return of the ten years preceding
the approval of this Act: Provided, however, That where arrangements have been made
for the refunding of any class of such securities the interest guaranteed by the Post Office
Department in behalf of the Government of the United States shall not be greater than the
stated interest on such securities. &
Third. In the case of railroad or other transport agencies which may be taken possessio
of by the Post Office Department and which have only paid the stated interest on their
bonds during the ten years preceding the approval of this Act, this departnent, acting
in behalf of the United States of America, shall guarantee the continued payment of the
stated interest on such bonds. -
Fourth. Where railroad or other transport agencies which may have been taken posses-
sion of by this department have not more than paid expenses or have failed to pay expenses
during the ten years preceding the approval this Act, and in the case of railroad or other
transport agencies recently built or in process of construction that are taken possession
of by this department, such railroads or other transport agencies shall be valued at what
this department finds it would cost to reproduce them, and upon the order of this depart-
ment United States bonds, bearing five per centum interest and payable forty years from
the date thereof, shall be issued by the Secretary of the United States Treasury to the holders
of the bona fide securities representing such properties pro rata. -
Fifth. Any holder of any securities on which dividends or interest have been guaranteed
by this department in behalf of the United States of America, may, on reasonable notice,
convert his guaranteed securities into United States bonds, bearing five per centum in-
terest, and payable forty years after the date thereof.
Sixth. The stocks and the bonds of railroads or other transport agencies on which divi-
dends or interest are guaranteed by the department of the United States shall be duly
registered at the time the properties represented by such stock and bonds are taken pos-
session of by this department, and if at any time such stock and bonds are exchanged for
bonds of the United States they shall be duly accounted for and destroyed.
Seventh. If, before the passage of this Act, the value of any railroad or other transport
agency shall be diminished by the sale or assignment of any of the property belonging to
such railroad or other transport agency at any time during the ten years preceding the
approval of this Act, the guaranteed dividend on its stock, if the property be a dividend-
paying property, shall be estimated on the par value of said stock, less the value of the
property thus disposed of, as found by this department, and shall be divided among the
stockholders pro rata. If the railroad or other transport agency thus diminished in value
be represented by the bonds only, then the value of the property disposed of at any time
during the ten years preceding the approval of this Act shall be taken from the par value
of the total amount of the said bonds, and the guaranteed interest shall be estimated on
the balance and shall be divided pro rata among the bondholders. This department shall
not guarantee dividends or interest on the stock or bonds of car trust or other similar
associations. This department may lease equipment needed for the public use, but only
for a period of three years; or, it may purchase such equipment, or may construct new
equipment for its use, as may seem, in its judgment, for the public interest.
SEC. 5. That all the railroad companies in the United States which shall be duly notified
by the Post Office Department that their properties are needed for the use of the Govern-
ment of the United States are hereby required to turn over such properties to this depart-
ment within five years from the passage of this Act, and this department is hereby required
to accept the charge of any railroad which, in its judgment, the department can use to
the public advantage, within six months after the receipt of an offer of such road to the
department under the terms of this Act. - -
SEC. 6. That the working period for all employees of this department shall be eight
hours a day, or forty-eight hours per week. Overtime shall be paid for at the same rate
as for regular time, but overtime may only be allowed in case of delays or accidents, or
other extraordinary circumstances. Persons in the employment of railroads taken under
the control of the Government under this Act shall be continued in service during efficiency
and good behavior, so far as the business may require. All other persons applying for
employment shall be subject to examination as to fitness for the position sought by the
Civil Service Commission, and shall be received on probation for a period of six months,
after which they shall be continued in employment during efficiency and good behavior,
in so far as the business may require. New positions shall be filled by requisitions of the
Postmaster General upon the Civil Service Commission. These rules shall apply only
to regular employees. Irregular hands may be employed at the convenience of the depart-
ment. The employees in this department shall be paid for their services at least once in
two weeks.
SEC. 7. That all transport tolls, letters and parcels rates, passenger fare, and freight
rates must be prepaid. Stamps or checks issued by this department must be affixed or
attached to all letters, parcels, and baggage, and such stamps or checks shall be furnished
either directly by the department or at the different Government stations on payment
ºtherefor. The postage on general freight shall be paid either by stamps affixed to the various
articles or to the bills of lading, as the department may require. No passes or rebates or
reductions of tolls on persons or baggage or on parcels or on general freight shall be granted
either to private individuals or to public servants, with the following exceptions: All
Government supplies, troops, including equipage, and all publications of the Government
shall be transported free on all the lines of transportation under the control of the depart-
ment. The President and Vice President, the members of the President's Cabinet, the
justices of the Supreme Court and all Federal judges, and the Senators and Representatives
of the United States shall be entitled to travel free on all the lines of transportation of the
Post Office Department while engaged in the public service.
70
SEC. 8. That the transport tolls levied under this Act shall be collected by the duly
appointed officials and employees of the Post Office Department, and the funds thus ob-
tained and all other funds collected by this department in the course of its business, shall
be duly accounted for and paid over to the duly appointed officials of the United States
Treasury. The funds necessary for carrying on the general business of the department
under this Act shall be provided by appropriations made by Congress. If, however, the
Post Office Department shall at any time incur any indebtedness under the provisions
of this Act, the payment of which shall not be otherwise provided for, then the Secretary
of the Treasury of the United States may, upon the order of the Post Office Department,
issue bonds to cover such indebtedness bearing two and one-half per centum interest and
payable forty years from the date thereof.
SEC. 9. That the passenger service shall be classified as follows: Local post, express,
and fast post. The local post shall include railway trains stopping at all stations and trains
scheduled to stop for passengers within average distances of fifteen miles. The express
post shall include railway trains scheduled to stop for passengers within average distances
of from fifteen to forty miles, and to run at a speed of not less than thirty miles an hour.
The fast post shall include railway trains scheduled to stop for passengers at average
#ºnces of not less than forty miles, and to run at a speed of not less than forty miles an
OUIT. *
Railway passenger cars shall be classified as ordinary cars and palace cars.
Passenger fares shall be as follows: By local post, ordinary cars, five cents per trip; by
local post, palace cars, twenty-five cents per trip; by express post, ordinary cars, twenty-
five cents per trip; by express post, palace cars, fifty cents per trip; by fast post, ordinary
cars, one dollar per trip; by fast post, palace cars, two dollars per trip.
Children, except infants in arms, who shall travel free, shall pay the same fare as adults.
Those fares are only for continuous trips in one direction. No stop-overs shall be allowed.
Travelers beyond the run of the through car or train of departure shall be provided with
transfers dated on the day of departure, but these transfers shall only be good if used on
or before midnight of the day of departure. Holders of transfers must take the first serv-
ice of their class leaving the transfer station after their arrival. A fast transfer, however,
shall entitle the holder to proceed on his journey by either of the different services. An
express transfer shall only entitle the holder to proceed by express or local service. Local
transfers shall only be good on local services.
PASSENGER SERVICE.
SLEEPING CARS
An additional charge shall be made for the use of sleeping cars as follows: Tourists
cars, upper berth, twenty-five cents per night or fraction thereof; tourists 'cars, lower berth,
thirty-five cents per night or fraction thereof; palace cars, upper berth, seventy-five cents
per night or fraction thereof; palace cars, lower berth, one dollar per night or fraction thereof.
The rate of a section shall be twice that for a lower berth.
The charge for a drawing-room shall be three times that for a lower berth. Within the
limits of the postal electric and automobile service of the post office, additional fares of
five per centum to and from the different railway stations and the traveler's domicile shall
pay for the traveler's trip, house to house.
BAGGAGE.
Baggage may either be forwarded from house to house under the rules relating to ordi-
nary parcels, or it may be checked from the station of departure to the station of desti-
nation by the service adopted by the traveler. There shall be no free baggage, except
such as the rules of the department may allow the traveler to carry with him in the pas-
senger car. .
The rate per piece of baggage of regulation size and shape, not above one hundred pounds
in weight, placed in a baggage car, shall be five cents per trip, station to station, of the owner.
For pieces above one hundred pounds and not over two hundred pounds, the charge shall
be ten cents. For pieces above two hundred pounds, the charge shall be ten cents for each
hundred pounds or fraction thereof. -
The department may limit the size and weight of pieces which it will carry as baggage
over two hundred pounds.
Bicycles may be carried as baggage, subject to a toll of five cents per trip of the owner.
Any baggage not called for within twenty-four hours after its arrival at a Government
station shall be charged a demurrage tax of ten cents for each succeeding twenty-four hours
or fraction thereof.
Parcels, within dimensions to be determined by the Post Office Department, shall be
cared for by the station agents for one cent each for the first twenty-four hours, and for
ten cents per parcel for each succeeding twenty-four hours or fraction thereof. -
SPECIAL PASSENGER SERVICE.
All special services for cars and engines shall be at the convenience of the department.
The tax levied for such service may be determined either by time or by distance, but in
each case that method of taxation shall be applied which shall result in the largest revenues
for the department.
71
LOCOMOTIVES OR MOTOR CARS IN SPECIAL SERVICE.
The tax for the use of a passenger locomotive car or of an electric motor car on any special
service shall be eight dollars an hour or thirty cents a mile. No locomotive or electric
motor car shall be chartered on any special service for less than twenty-five dollars. Such
service shall include the entire round trip of the locomotive or motor car from the home
station to the return thereof.
SPECIAL-SERVICE TRAINS
On special-service trains the rates for the use of ordinary cars shall be thirty dollars
per day or one-half a cent per mile per seat up to the full capacity of the car. The rates
for palace cars of all descriptions, including sleepers, shall be thirty-five dollars per day
or forty cents per car mile. No train shall be chartered for less than fifty dollars for the
shortest service or for less than one hundred and sixty dollars per day, or for less than
one dollar and fifty cents per train mile. Where sleepers are used there shall be an extra
charge for berths equal to the charge on regular trains. The time and distance covered
by these rates shall include the entire round trip of the train.
SPECIAL CARS ON REGULAR TRAINS
The exclusive use of passenger cars on regular trains may be secured by the payment
of a tax of thirty cents a mile or thirty dollars a day for the use of an ordinary car and of
forty cents a mile or thirty-five dollars a day for the use of palace cars, sleepers, and the
like for the entire round trip of the car. Where sleepers are used there shall be an extra
charge for berths equal to the rates on regular trains.
PRIVATE CARS ON. REGULAR TRAINS.
Private cars, built and equipped according to department rules, may be hauled at the
convenience of the department at rates charged for the haul of similar department cars —
thirty cents a mile for cars similar to ordinary cars and forty cents a mile for palace cars.
Private cars repaired in department shops shall pay twenty per centum more than the
cost of a similar service done to department cars. Private cars on department sidetracks
shall pay a demurrage tax of ten cents an hour for the occupancy of such tracks.
PARCELS SERVICE.
PARCELS, SEALED OR UNSEALED, COLLECTED AND DELIVERED DOOR TO DOOR.
SEC. Io. That postal cards and parcels, sealed or unsealed, shall be forwarded by the
fastest services within the control of the Post Office Department. Wherever the collec-
tion and delivery service is provided with horse or power delivery, postal cards and parcels
shall be collected and delivered within the limits of the ordinary postal delivery at rates
hereafter determined, the number of collections and deliveries per day or per week to be
at the discretion of the department. Where the collection and delivery service is by foot
post no parcels will be collected and delivered over four pounds in weight, and larger parcels
must be delivered and collected at the nearest post office. **
The rates shall be as follows: On parcels up to one pound and one twenty-fourth of a
cubic foot in dimensions, one by six by twelve inches, one cent; on larger parcels up to five
pounds and up to one-fourth of a cubic foot in dimensions, two cents; on larger parcels
up to eleven pounds in weight and to one-half a cubic foot in dimensions, five cents; on
larger parcels up to thirty pounds, or one cubic foot in dimensions, ten cents; on larger
parcels up to sixty pounds, one and one-half cubic feet in dimensions, fifteen cents; on larger
parcels up to one hundred pounds, two cubic feet in dimensions, twenty cents; on larger
parcels up to two hundred pounds, four cubic feet in dimensions, the ordinary barrel,
twenty-five cents, with an additional rate of five cents for each additional thirty pounds,
or increase in dimensions of one cubic foot. These parcels rates shall include baggage,
bicycles, books, newspapers, and all kinds of merchandise not of a deleterious character,
and weight limit, dimensions, and method of packing to be determined by the department.
FREIGHT.
STATION TO STATION SERVICE, PARCELS SEALED OR UNSEALED.
SEC. II. That all freight transported by the Post Office Department shall conform,
both as to character and as to the form in which it is packed; to the general laws of the
United States and to the rules of the department. The rates per haul, station to station,
within the limits of the service of the Post Office Department of the United States, includ-
ing-loading and unloading at the stations, shall be as follows: On parcels freight, ten cents
for each two hundred pounds or four cubic feet space; on bulk freight, fifty cents per ton
or forty cubic feet space. No consignment of freight shall be received for less than ten
cents. The rates shall be the same whether the loading and the unloading shall be done
by the Post Office Department or by shippers and consignees.
LOCAL FREIGHT. *
The time for loading and for unloading shall be eight hours of daylight. The time for
transportation for each one hundred miles or part thereof in local service shall be twelve
hours; for each additional one hundred and fifty miles or fraction thereof, twelve hours.
7
2
EXPRESS FREIGHT
The time for transportation of express freight shall be twenty-four hours for each zone
of two hundred miles; on fast freight, twenty-four hours for each zone of three hundred
miles. Failure on the part of the department to deliver goods in accordance with these
schedules shall be attended with the forfeiture for each twenty-four hours' delay of five
percentum of the postage.
DEMURRAGE.
Shippers and consignees shall be allowed eight hours of daylight for, loading and un-
loading carload freight, after which there shall be a demurrage tax of ten cents an hour,
the demurrage time to be considered from the time the car is acceptable to shipper or con-
signee after due notice. The demurrage on cars held by shippers or consignees longer
than forty-eight hours shall be fifty cents an hour. Cars held by shippers or consignees
longer than ninety-six hours may be taken possession of by the department, and if there
be any freight on board, such freight may be unloaded by the department at the nearest
station at the expense of the shipper or consignee. All freight not taken from the station
within twenty-four hours after notice of its arrival shall be subject to a storage charge, to
be determined by the department rules duly published, or the department may deliver the
same at the consignee's address or at the address of the shipper, charging the cost of delivery.
The rates on freight handled by shippers and consignees shall be the same as that paid
in case the cars are loaded and unloaded by the department and for loads up to the capacity
of the cars used. On cars heated in winter and cooled in summer there may be—an extra
freight charge to cover the cost of the extra service.
PRIVATE FREIGHT CARS.
The rates charged for the transport of private freight cars of the size and capacity of
standard department cars, whether full or empty, shall be the same as that charged for
a loaded department car of a similar character in the same class of service. All repairs
made to private cars by the department shall be charged twenty per centum above the
cost of a similar service to a department car. All private freight cars shall conform to
department rules as to form, size, weight and equipment; and the department shall be at
liberty at any time, after due notice, to take possession of such cars on payment to the owner
of what the department finds to be the value of such cars. Private freight cars shall be
subject to a demurrage tax of five cents an hour for delay on Government sidetracks for
a longer period than twenty-four hours. Private cars employed in the conveyance of theat-
rical troups and circuses may be attached to freight trains and hauled at regular carload
rates, but the rate shall be the same, whether the car be full or empty.
SEC. I2. That the use of the post office for the transportation of ordinary postal
matter, or for the transportation of persons, baggage, or general freight shall be at the risk
of the correspondent, of the traveler, and of the owner of the freight transported. It is
hereby expressly provided that the Post Office Department shall not incur any legal
liability above ten dollars for the loss or damage of unregistered correspondence, baggage,
or freight, or above one hundred dollars for injury to the person of the traveler, either en
route or at stations, or for any loss or damage due to delay by reason of acceptance of the
tolls levied, except as hereinbefore provided.
On registered parcels of declared value the payment of a registry fee of five cents shall
carry insurance up to fifty dollars, and the payment of an additional fee of five cents for
each additional one hundred dollars shall carry insurance up to the full value of the regis-
tered parcel. A fee of five cents per day will insure the traveler against loss or damage
up to one thousand dollars and an additional fee of five cents for each additional thousand
dollars will carry insurance up to ten thousand dollars.
SEC. I.3. That all foreign railroads whose lines cross any portion of the United States
shall be subject to the rules and regulations of this Act in so far as relates to business in
the United States or between the United States and other States.
SEc. 14. That the postal territory of the United States is hereby divided into ten
postal districts, corresponding with the ten groups into which the railroad territory of the
United States has been divided by the Interstate Commerce Commission. Each of the
ten assoºiates of the Postmaster General in the Post Office Department of the United
States shall be at the head of and responsible for the management of the postal business
of one of these postal districts. The Territory of Alaska is hereby added to district num-
bered ten. Each of these postal districts is hereby subdivided into as many postal divisions
as there are States and Territories within such postal district. Each postal division shall
be under the management of a duly appointed postal director, who shall be responsible
to the head of his postal district for the faithful management of the postal business within
his jurisdiction. In cases where, in the judgment of the Post Office Department, the
successful management of the postal business requires more than one postal director in
a State or Territory, such State or Territory shall be divided into two or more postal
divisions, each of which shall be under the control of its duly appointed postal director,
Postal directors shall be expert in the business, transportation, and in the handling of
postal matter, and their qualifications shall be vouched for by the Civil Service Com-
mission. The salary of a postal director shall be five thousand dollars a year.
In addition to his general duties, each postal director shall be the postmaster and head
of the United States postal savings bank of the town in which it is located and shall receive
and disburse under the general direction of the Post Office Department not only such funds
as may be deposited by private individuals, but also such funds as may be collected and
paid out for the use of and support of the postal machinery within his postal division.
The payments of dividends on railway stock and interest on railway bonds guaranteed
73
by the Post Office Department under this Act may also be made through these divisional
postal savings banks. Postal directors shall choose their subordinates, the heads of the
various postal stations within their respective divisions, and other employees from a list
of persons found eligible for such position by the Civil Service Commission. Such sub-
ordinate postal employees shall hold office during efficiency in so far as the demands of
the business may require. Each postal director shall be the judge as to the efficiency of
his subordinates, but any subordinate dismissed by a postal director shall be entitled to
an appeal and hearing by a duly constituted board of review appointed by the Post Office
Department.
[H. R. 983r.]
MAY 18, 191 I.
Mr. SABATH introduced the following bill; which was referred to the Committee on Inter-
state and Foreign Commerce and ordered to be printed.
A BILL
To raise revenue from persons engaged in and carrying on occupations and trades subject
to the regulative power of Congress, and to create a fund to pay compensation to pub-
lic servants injured on post roads, and on mail routes, and to change the general law
heretofore enunciated in actions for the recovery of damages for personal injuries,
and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America
in Congress assembled, That this Act may be cited and referred to as the Federal compen-
sation Act of nineteen hundred and eleven.
SEC. 2. That in this Act, unless the contrary intention appears, words denoting and
importing the masculine gender shall include the feminine, and words in the singular shall
include the plural, and words in the plural shall include the singular. -
SEC. 3. That in this Act the words “employee '' or “employment '' shall mean and be
construed to refer to the employee of or to the employment by any common carrier as
hereinafter defined solely or only in respect of the service of that employee, in the move-
ment, handling, or expediting of interstate traffic, or of any instrumentality of interstate
and foreign commerce, or of foreign commerce, or while engaged in the movement, hand-
ling, or expediting of the mail or passengers in or on or about such mail train on a mail
route as hereinafter defined, or employed on, in, or about any vessels as defined hereafter,
or in any of the above conjointly, and any such work, labor, and services, of any such
employees while so engaged, is hereby declared to be a public service, and such employees
are, for all purposes of this Act, declared to be and they are public servants.
Sec. 4. That in this Act the words “carrier '' or “common carrier '' shall be held to
include and shall, in the proper case, apply to any person or persons engaged in the trans-
portation of persons or of property by a steam locomotive operated railroad, the owners
or operators whereof are in any respect subject to “An Act to regulate commerce,”
approved February fourth, eighteen hundred and eighty-seven, and in effect April fifth,
eighteen hundred and eighty-seven (Twenty-fourth Statutes at Large, page three hundred
and seventy-nine), as amended by an Act approved March second, eighteen hundred and
eighty-nine (Twenty-fifth Statutes at Large, page eight hundred and fifty-five), by an
Act approved February tenth, eighteen hundred and ninety-one (Twenty-sixth Statutes
at Large, page seven hundred and forty-three), by an Act approved February eighth,
eighteen hundred and ninety-five (Twenty-eighth Statutes at Large, page six hundred
and forty-three), by an Act approved June twenty-ninth, nineteen hundred and six (Thirty-
fourth Statutes at Large, page five hundred and eighty-four), by a joint resolution
approved June thirtieth, nineteen hundred and six (Thirty-fourth Statutes at Large, page
eight hundred and thirty-eight), and by an Act approved April thirteenth, nineteeen hun-
dred and eight (Thirty-fifth Statutes at Large, page sixty), and by an Act approved
June eighteenth, nineteen hundred and ten (Thirty-sixth Statutes at Large) and all
other Acts supplementary to or amendatory thereof, as well as any amendatory Acts
which are or may be passed at the present session of Congress, under the regulative power
of Congress extending under the Constitution of the United States, which Acts are referred
to herein as the Principal Acts: Provided, however, That the provisions of this Act shall
not apply to nor be construed to be a regulation of the transportation of passengers or
property, or to the receiving, delivering, storage, or handling of any property other than
that of the Post Office Department wholly within one State and not shipped to or from a
foreign country from or to any State or Territory, as aforesaid; but this proviso shall not
be deemed to affect the liability of any common carrier to pay compensation (as hereinafter
defined) in respect of any “ injuries in transportation '' as hereinafter defined while hauling
or handling the mail within the body of any State on or in or about any mail route as
hereinafter defined; nor shall it be deemed to affect the liability of said common carrier
to pay compensation to said employees of a carrier when said injuries shall have been the
result of any injury to any said employee in or about any said employment, or shall have
been caused by the wreck, collision, or mishap of a mail train on a mail route as defined in
this Act with any other train on said mail route.
(a) The term “common carrier '' as used in this Act shall also include telegraph or
telephone companies, express companies and sleeping-car companies operated on a mail
route or postal road of the United States, and shall apply to all telegraph companies which
shall have accepted the provisions of title sixty-five of the Revised Statutes. The term
“ railroad '' as used in this Act shall include, in addition to steam railroads, all common
carriers by electrical traction, whether by trolley or by underground contact, or by third-
74
rail, or by storage battery, which carry the United States mail or haul mail cars, as well
as all or any companies operating a union station at which the mail is handled or wherein
it is transferred or dispatched, and all companies owning, using, or operating terminals,
bridges, trestles, approaches, ferries, subways, conduits, or tunnels used or operated in
connection with any common carrier, and also all the road or railway in use by any cor-
poration operating a railroad, whether owned or operated under a contract, agreement, or
lease, and shall also include all corporations owning, operating, or using switches, Spurs,
tracks, and terminal facilities, platforms, hatchways, elevators, and chutes of every kind
used or necessary in the transportation of the mail, or of interstate or foreign traffic of
property, or in the movement of interstate or foreign commerce or any of the above con-
jointly, and also all corporations using, owning, or operating any freight depots, yards,
and grounds used or necessary in the transportation or delivery of any interstate or foreign
traffic or the mail, and all signal towers, places, or stations, or grounds used or necessary
in the dispatching, handling, or train movement, or delivery, or transportation of any
of the foregoing. -
(b) The term “injuries in transportation '' shall, for the purposes of this Act, include
any injuries, as defined hereinafter, and not excepted by section fourteen hereof, which
shall or may happen to any said employee while said employee shall be on or in or about
any locomotive, car, or other vehicle, or on or in or about any instrumentality or facility
of shipment of, carriage, transmission, electrical equipment, delivery, or handling of either
passengers, property, or messages, of any common carrier subject either to the principal
Acts or to this Act, irrespective of the ownership or of any contract, express or implied,
for the use thereof, and said term shall include, mean, and be construed to mean any
injuries (as defined hereinafter) occasioned by all services or labor in, or on, or about any
place, or places, where are rendered services in connection with the receipt, delivery, ele-
vation, and transfer in transit, lighterage, ventilation, refrigeration, or icing, storage, of
any property so collected or handled or transported. -
(c) The term “common carrier '' shall also be deemed to include every vessel, boat, or
ship engaged in coastwise or in interstate or foreign commerce, which vessel habitually
carries the mail or the post, or which vessel, ship, boat, barge, lighter, or floating dry dock
is in any respect subject to the admiralty jurisdiction of the United States or to any quar-
antine regulations, whether carrying the mail or not. The word “vessel ” for the pur-
poses of this Act shall be deemed to include any raft of logs that has begun to move in
interstate or foreign commerce on any navigable water of the United States.
(d) In the case of a vessel, injuries arising to the persons engaged in loading or unloading
while said vessel is made fast to the land or the pier, dock, repair yard, chute, gravity
dump, elevator, or lighter shall be deemed to have arisen on, in, or about said vessel:
Provided, however, That this Act shall not apply to any public vessel of the United States,
or of any foreign state.
(e) The term “common carrier '' shall be deemed to include or in the proper case to
mean any owner, operating trustee, receiver, or holding company of the corporation oper-
ating any railroad engaged in interstate commerce or operating a railway or an electric
railroad used as a mail route, by whatever scheme or device the ownership or management
is carried on.
SEc. 5. (a) That the term "mail " as used in this Act shall mean and shall also include
that portion of the postal traffic handled by the Post Office Department which is not
handled at letter rates and which is not included as first-class mail matter as defined in
the Postal Rules and Regulations, and which, though originating within and being sent
to another point within the body of a State and not passing through another State or
Territory, is subject to the regulative power of Congress.
(b) Provided, nevertheless, That in respect of all mail carriers hauling the mail by the
use of any animal power on or in or about or over any mail route, whether said mail route
be wholly within the body of a State or whether said mail route be a part of an interstate
highway or mail route other than a railroad or railway as defined hereinbefore in respect
of any injuries to the employees of said mail carriers while said employees are employed
in hauling the mail, said mail carriers shall be liable for all injuries done to any such employee
in consequence of any negligence of the employing mail carrier or his agent, or by any
mismanagement or negligence of his employees, as fully as though the said employee so
injured were a passenger on or about or in the vehicle of said mail carrier: Provided
further, That the foregoing proviso shall not apply to the mail carried on any rural free-
delivery route until and after the first day of July, nineteen hundred and fifteen.
(c) The term “mail route ’’ as used in this Act shall mean any railroad operated on a
railway, either by steam or electricity, or both, over or on or by which the mail is trans-
ported, and the definitions of railroad as used in connection with the definition carrier
shall be deemed to have been reenacted herein so far as applicable hereto.
(d) The term “mail route '' shall include any electrical generating works and all ma-
..chinery used in, on, or about any conduit, tube, or passageway along or by which the mail
is transported, and shall also include all works, appliances, generating works, poles, wires,
conduits, manholes, structures, on or in or about which telephone or telegraph companies,
or both telephone and telegraph companies, transmit messages either in interstate commerce
only or on or in or about any line of the railway of a railroad common carrier, pursuant to
any grant, permission, or regulation of any Act of this or any future Congress, and shall
also include the motive power for working the said conduits, tubes, or any passages, man-
hº º: cranes, and mail catchers of any kind used in, on, or about any place defined
in this Act.
(e) For the purpose of this Act any injuries to said employees occasioned by any pro-
jection from any overhead bridge or from any tunnel roof or a low tunnel roof, or by any
wires not strung twenty-five feet in the clear over the tracks of any railroad or electrical
* ,
75
*
road, or any violation or disregard or omission of any standard, clearance, or appliance,
prescribed pursuant to any act of Congress, or by any projection along the sides of any
railway of any common carrier hereinbefore defined, shall be deemed to be injuries in
transportation happening in or on or about a part of the said mail route.
SEC. 6. That the term “injuries in transportation,’’ ‘‘ injury,” or “injured,” as used
in this Act, shall be construed to have included in any case the following words: “or if
said injuries shall result or end in the death of such employee, then to the executor or
administrator of the estate of such deceased employee for the exclusive benefit of the
dependent widow or next of kin dependent in whole or in part on the earnings of said
injured and deceased employee,” as fully as though these words had been reenacted herein
in each and every such case.
SEC. 7. That whenever this Act requires any document to be served by post or mail,
unless the contrary intention appears, the service shall be effected by properly addressing.
prepaying, and posting a letter by registered mail containing the document or notice,
and unless the contrary is proven to be effected at the time at which the letter would be
delivered in the ordinary course of registered mail, and the registry mail receipt shall be
prima facie evidence of the receipt of such notice by the carrier in due course of mail.
SEc. 8. That where this Act repeals any other enactment, or suspends the operation
of any State law, or changes any decision or rule of the general law as heretofore enun-
ciated, or changes any classification, doctrine, or rule of the common law as declared or
enforced in or by any State court or the general law heretofore enforced in the courts of
the United States in respect of the subject matter herein enacted, then, unless the contrary
intention appears, the operation or effect of this Act shall not — (a) revive anything not in
force or existing at the time at which the repeal or change takes effect; or (b) affect the
previous operation of any enactment so repealed; or (c) affect any right, privilege, obliga-
tion, or liability, acquired, accrued, or incurred under any enactment so repealed; or
(d) affect any penalty, forfeiture, or punishment incurred in respect of any offense com-
mitted against any enactment so repealed; or (e) affect any investigation, legal proceed-
ing, or remedy in respect of any such right, privilege, obligation, liability, penalty, for-
feiture, or punishment as aforesaid; and any such investigation, legal proceeding, or remedy
may be instituted, continued, or enforced, and any such penalty, forfeiture, or punishment
may be imposed as if the repealing Act had not been passed.
SEC. 9 That the terms “ commission ” or “commissioner," as used in this Act,
means the Federal Commissioner of Injury Awards as hereinafter established.
SEC. Io. That the terms “annuity '' or “annuity compensation " or “compensation,"
as used in this Act, shall be held to mean the recurring monthly payment by a common
carrier, as defined herein or by the United States, for injuries to an employee or to his
widow or his personal representatives, as hereinafter defined, pursuant to an order of the
court or of the commissioner and terminable by the death of the beneficiary under said
order, or by the remarriage of his widow in respect of her share of said annuity, or by the
cessation of dependence of his dependent orphans over the age of sixteen years.
SEC. II. That the term “personal representatives or next of kin or dependents,’’ as
used in this Act, shall be held to mean and include the widow or the persons, whether
citizens or aliens, who, by the law of any State, Territory, the District of Columbia, or
possession beyond the seas, or by the laws of any foreign country or state, shall be entitled
to the succession in the rights of the decedent or to the proceeds of the property or to the
rights of action or to the estate of the deceased.
SEC. I2. That the word “person,” as used in this Act, means a human entity, citizen or
alien, and shall be held to include a corporation, partnership, or voluntary association
carrying on a quasi public business, or may in a proper case include the Government of
the United States.
SEC. 13. That whenever any said employee in the said employment of any common
carrier subject to this Act receives injuries in transportation or is injured on or in or about
any mail route or vessel as defined herein, the common carrier or vessel shall within thirty
days pay him or his personal representatives compensation after the injury without re-
quiring an action for personal injuries to be brought at law. If said person was in the
employ of the United States at the time of said injury or death, the United States shall
pay the compensation from the compensation fund, as set forth hereinafter. If said
person was employed by any such other employer than by the United States, then such
common carrier or vessel shall pay him or his personal representatives compensation
without requiring an action for personal injuries to be brought at law, and the payment
and the amount of compensation shall be in accordance with this Act and with the schedule
annexed hereto and made a part of this Act: Provided, however, That whenever the United
States shall be liable to pay compensation to any employee so killed or injured the com-
pensation so awarded shall be subject to any privileges and exemptions of a pension under
the pension laws heretofore enacted.
SEC. I4. That whenever the common carrier or vessel or the United States shall establish
the fact that the injured person was guilty of fraud in procuring rhe injuries, said injured
person and every person so aiding and abetting any fraud, perjury, or subornation of
perjury in any matter under this Act shall be deemed guilty of a misdemeanor, and shall,
upon conviction in any district court of the United States within the jurisdiction of which
such offense was committed, be liable to imprisonment not to exceed six months. No
. for compensation shall be paid when the employee shall have committed suicide
Willle Sarle.
SEC. I5. That for the purpose of carrying into effect the provisions of this Act there
shall be in the Department of Commerce and Labor a bureau charged with the execution
of all laws passed by Congress relating to the execution of all compensation payments
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under this or under any subsequent Acts, the chief officer of which bureau shall be called
the Commissioner of Injury Awards, and shall perform his duties under the general direction
of the Secretary of Commerce and Labor, and said commissioner shall be appointed by
the President, by and with the advice and consent of the Senate.
SEC. I6. That the commissioner first appointed under this Act shall continue in office for
the term of four years from the first day of January, anno Domini nineteen hundred and
twelve. Said commissioner may be removed by the President for inefficiency, neglect
of duty, or malfeasance in office. That no person on the pay roll of, employed by, or
holding any official relation to any common carrier subject to the provisions of this Act,
or owning stocks, securities, or bonds thereof, or in any manner pecuniarily interested
therein, shall enter upon the duties of or hold such office nor be employed by said com-
missioner. Said commissioner shall not engage in any other vocation or employment.
The principal office of the commissioner shall be in the city of Washington, District of
Columbia, where general sessions shall be held. Whenever the convenience of the parties
may be promoted or delay or expense prevented thereby, the commissioner may hold
sessions in any part of the United States.
SEC. I?. That the said commissioner may by one or more examiners prosecute any
inquiry necessary to his duties in the United States into any matter or thing pertaining
to or subject to this Act. The commissioner may conduct proceedings in such manner
as will best conduce to a proper dispatch of business and to the ends of justice. Said
commissioner shall have power to make general rules, regulations, or orders for the purpose
of carrying into effect the provisions of any section or schedule of this Act, and said com-
missioner shall, on application by verified petition of any employee injured or of any common
carrier required to pay compensation, alleging a change in the physical condition of such
person or of any beneficiary or annuitant, on due notice rehear the award heretofore made,
and shall after such rehearing award such compensation as the altered circumstances
warrant and as within this Act is lawful, but after such rehearing has taken place all subse-
quent rehearings shall take place only after twelve months shall have elapsed, and said com-
missioner shall have power to regulate all details of procedure before his office, and from
time to time amend any such general rules, regulations, or orders. In all cases where only
minor partial disability shall have resulted by any injury in transportation the commis-
sioner is authorized to permit, on the application of such injured person, a communication
of the annuity set forth in the annexed schedule into a lump sum. Any party may appear
before said commissioner or any examiner and be heard in person or by attorney. Every
official act of the commissioner shall be entered of record, and all proceedings of or before
said commissioner shall be public. Said commissioner shall have an official seal, which
shall be judicially noticed. The commissioner may administer oaths and affirmations,
sign orders and subpoenas. Said commissioner shall receive an annual salary of six thou-
sand dollars, payable monthly.
SEC. 18. That the commissioner shall have the power to appoint a secretary, who shall
receive an annual salary of three thousand six hundred dollars, payable monthly. The
commissioner shall at all times have access to all accounts, records, and memoranda kept
by carriers, subject to the principal Acts, and it shall be unlawful for such carriers to keep
any other accounts, records, or memoranda in respect of the requirements of this Act,
than those prescribed or approved by the commissioner; and he may employ special agents
or examiners, who shall have authority under the order of the commissioner to inspect
and examine any and all accounts, records, and memoranda kept by such carriers. This
provision shall apply to receivers of carriers and operating trustees. In case of failure or
refusal on the part of any such carrier, receiver, or trustee to keep such accounts, records,
and memoranda on the books and in the manner prescribed by the commissioner, or to
submit such accounts, records, and memoranda as are kept to the inspection of the com-
missioner or any of his authorized agents or examiners, such carrier, receiver, or trustee
shall forfeit to the United States the sum of five hundred dollars for each such offense,
and for each and every day of the continuance of such offense, such forfeitures to be recover-
able in the same manner as other forfeitures provided for in the principal Acts. Any
person who shall willfully make any false entry in the accounts of any book of accounts
or in any record or memoranda kept by a carrier, or who shall destroy, multilate, alter,
or by any other means or device falsify the record of any such account, record, or memo-
randa, or who shall neglect or fail to make full, true, and correct entries in such accounts,
records, or memoranda of all facts and transactions appertaining to the carrier's business
in respect to this Act, or shall keep any other accounts, records, or memoranda than those
prescribed in this Act or in the principal Acts shall be deemed guilty of a misdemeanor
and shall be subject, upon conviction in any court of the United States of competent
jurisdiction, to a fine of not less than one thousand dollars nor more than five thousand
dollars or imprisonment for a term not less than one year nor more than three years, or
both such fine and imprisonment. And to carry out and give effect to the provisions of
this Act the said commissioner is hereby authorized to employ special agents or examiners,
who shall have power to administer oaths, examine witnesses, and receive evidence. Any
such examiner who divulges any fact or information which may come to his knowledge
during the course of such examination, except in so far as he may be directed by the Com-
missioner or by a court or judge thereof, shall be subject, upon conviction in any court
of the United States of competent jurisdiction, to a fine of not more than five thousand
dollars or imprisonment for a term not exceeding two years, or both.
SEC. Ig. That the commissioner shall have authority to employ and fix the compen-
sation of such other employees as he may find necessary for the proper performance of
his duties and the enforcement of this Act. Until otherwise provided by law, said com-
missioner may hire suitable offices for his use and have authority to procure all necessary
77
office supplies and shall obtain four sets of United States Reports from the Department
of Justice, and may expend not more than two thousand dollars for books and periodicals
in any one year. The circuit and district courts of the United States shall have juris-
diction, upon the application of the Attorney-General of the United States at the request
of the commissioner, alleging a failure to comply with or violation of any of the provisions
of this Act by any common carrier, to issue a writ or writs of mandamus or any mandatory
injunction commanding such common carrier to comply with the provisions of this Act.
SEC. 20. That the commissioner shall, on or before the first day of December of each
year, make a report to the Congress, and copies thereof shall be distributed as are all
other reports transmitted to Congress. That said reports to the Congress shall contain
such information as may be considered of value in the determination of questions connected
with the enforcement of this Act, together with such recommendations as to additional
legislation relating thereto as the commissioner may deem necessary, as well as the names
and compensation of the persons employed by said commissioner. That the sum of two
hundred and fifty thousand dollars is hereby appropriated, out of any money in the Treas-
ury not otherwise appropriated, to carry into effect the provisions of this Act.
SEC. ... 21. That said commissioner is hereby directed, authorized, and empowered to
make all necessary rules, regulations, and orders necessary and proper to carry into effect
the provisions of this Act. The commissioner is hereby authorized to suspend or modify
such rules, regulations, or orders upon such notice and in such manner as he shall deem
proper. Any rule, regulation, or order made by said commissioner enforcing or carrying
out any provisions of this Act shall be published in such form as said commissioner shall
deem proper. Jurisdiction is hereby conferred on any district or circuit court of the
United States in which the said common carrier operates its line or has its home port or
enters or clears to hear and determine any proceeding brought by said commissioner to
enforce any rule or order so made.
SEC. 22. That it shall be the duty of every common carrier, its agents and employees,
to observe and comply with such orders of said commissioner so long as the same shall
remain in effect. Any carrier, any director, officer, representative, or agent of a carrier,
or any receiver, trustee, lessee, or agent of either of them having voluntarily accepted
the provisions of this Act who fails or neglects to obey any order made under the provisions
of this Act shall forfeit to the United States the sum of five thousand dollars for each
offense, and in case of a continuing violation each day shall be deemed a separate offense.
Any forfeiture provided for in this Act shall be payable into the Treasury of the United
States, to the credit of the Compensation Awards Fund, and shall be recoverable in a civil
suit in the name of the United States brought in the district where the carrier has its
principal operating office, or in any district through which the road of the carrier runs,
or in which the vessel enters or clears, or in which it has its home port, if in the same district.
That whenever any common carrier subject to this Act as employer refuses or neglects
to pay any award, or neglects to obey any lawful order of said commissioner, created by
this Act, it shall be lawful for said commissioner, on the relation of any person interested
in such order, to apply in a summary way, by petition, to any circuit court of the United
States for the judicial district in which the employer carries on his business, or in which
the employee resides, or in which the injury occurred, or in which the vessel clears or enters
or has its home port, alleging such failure or noncompliance, as the case may be. Said
court shall have the power to hear and determine the matter on such notice as the court
may deem reasonable. Said court shall hear and determine the matter as a court of equity
speedily and without the formal pleadings and proceedings applicable to ordinary suits in
equity, and to this end said court shall have the power to direct an inquest to carry this
Act into effect and to order the defendant to comply with the order of the commissioner
or of the court, by appointing a receiver if need be to collect the sums due or unpaid.
SEC. 23. That on such hearing before such court the findings of fact in the order of
said commissioner shall be prima facie evidence of the matters therein stated. If it be
made to appear to such court on said order or hearing that the lawful order or requirement.
of said commissioner has been disobeyed, said court shall issue any proper process, manda-
tory or injunctive, to compel obedience to such order or requirement of said commissioner.
Said court may in the proper case order any employer subject to this Act and disobeying
any order of the commissioner or process of the court to pay such sum of money not exceed-
ing one thousand dollars for each and every offense. Said sum shall be payable, as the
court may direct, either to the party complaining or into court, to abide the ultimate
decision of the court. Payment thereof may be enforced by any process of the court.
SEC. 24. That when any such petition shall be filed by the commissioner it shall be
the duty of any district attorney of the United States, under the direction of the Attorney
, General, to prosecute. And, upon the request of the commissioner, it shall be the duty
of any district attorney of the United States to whom the commissioner may apply to
institute in the proper court and to prosecute, under the direction of the Attorney General
of the United States, all necessary proceedings for the enforcement of the provisions of
this Act, and the costs and expenses of such enforcement shall be paid out of the appro-
priation for the expenses of the courts of the United States; and for the purposes of this
Act the commissioner shall have power to require, by subpoena, the attendance and testi-
mony of witnesses and the production of all books, papers, scales of wages, contracts,
agreements, and documents hereinafter termed documentary evidence relating to any
matter under investigation. Such attendance of witnesses and the production of such docu-
mentary evidence may be required from any place in the United §: at any designated
place of hearing. And in case of contumacy or of disobedience to subpoena the commis-
sioner, or any party to a proceeding before the commissioner, may invoke the aid of any
court of the United States in requiring the attendance and testimony of witnesses and
'78
production of documentary evidence under the provisions of this section. If the judgment
of the court shall be in favor of the employee, he shall be entitled to recover costs of court
and expenses connected with said proceedings, to be determined by the court, and collectible
as part of the costs in the case. Every violation, by commission or omission, or non-
feasance of this Act, shall be prosecuted in any court of the United States having juris-
diction of crimes within the district in which such crime was committed, or through which
the transportation was conducted; and whenever the offense is begun in one jurisdiction
and completed in another it may be dealt with, inquired of, tried, and determined, and
punished in either jurisdiction in the same manner as if the offense had been actually and
wholly committed therein. In construing and enforcing the provisions of this Act, the
omission, act, failure, or nonfeasance of any officer, agent, or other person, acting for and
employed by any common carrier subject to this Act, and acting within the scope of his
employment, shall in every such case be also deemed the omission, act, failure, or non-
feasance of such common carrier as well as that of the person. For the purpose of this
Act the circuit court of the United States shall be deemed to be always in session.
Sec. 25. That whenever an employee as hereinbefore defined subject to this Act has
been killed or injured on, or in, or about any work, or services, or on, or in, or about any
place, subject to this Act, or received any “injuries in transportation,” as hereinbefore
defined, it shall be the duty of the common carrier, or vessel, as hereinbefore defined, to
notify the commissioner in such form as the commissioner shall prescribe. Said notice
shall be under oath, and shall be sent to the commissioner on or before the tenth day after
the person so defined has been either killed or injured. The commissioner shall, upon
being so notified, by the common carrier or vessel, promptly notify the person injured or
his widow, personal representatives, or next of kin, of their right to compensation under
this Act, and shall take all proceedings necessary or proper to carry into effect this Act.
That the said commissioner shall on the demand of any claimant dissatisfied with the award
made by said commissioner bring, or cause to be brought, an action in the nature of a bill
of review in any said circuit court of the United States. Any expenses connected with
such proceedings, including a reasonable counsel fee to the prevailing party, shall be paid
out of the appropriation to enforce this Act.
SEc. 26. That the provisions of an Act to expedite the hearing and determination of
suits in equity pending or hereafter brought under the Act of July second, eighteen hundred
and ninety, entitled “An Act to protect trade and commerce against unlawful restraints
and monopolies,” and “An Act to regulate commerce,” approved February fourth, eighteen
hundred and eighty-seven, or any other Acts having a like purpose that may be hereafter
enacted, approved February eleventh, nineteen hundred and three (Thirty-second Statutes
at Large, page eight hundred and twenty-three), as well as an Act in relation to testimony
before the Interstate Commerce Commission, approved February eleventh, eighteen
hundred and ninety-three (Twenty-seventh Statutes at Large, page four hundred and
forty-three), as well as an Act defining the right of immunity of witnesses, approved
February eleventh, eighteen hundred and ninety-three, as amended by an Act approved
June thirtieth, nineteen hundred and six (Thirty-fourth Statutes at Large, page seven
hundred and ninety-eight), and the provisions of section twelve of the principal Act,
as far as it relates to witnesses and to depositions, payment of witness's fees, and process
shall, as far as applicable to this Act, be deemed to have been reenacted herein as fully as
though set forth at length. That any person or the next of kin of any person or the per-
sonal representatives of any person, whether he or they be alien or citizens of the United
States, claiming under the provisions of this Act or entitled by law or by any treaty to
commence or defend any suit or action, civil or criminal, in any court of the United States,
may, upon the Order of the court, commence and prosecute or defend to conclusion any
suit or action, or a writ of error, or an appeal to the circuit court of appeals, or to the Supreme
Court in such suit or action, including all appellate proceedings, without being required
to prepay fees or costs or for the printing of the record in the appellate court or give security
therefor, before or after bringing suit or action, or upon suing out a writ of error or appeal-
ing, upon filing in said court a statement under oath in writing that because of his poverty
he is unable to pay thr costs of said suit or action or of such writ of error or appeal, or to
give security for the same, and that he believes that he is entitled to the redress he seeks
by such suit or action or writ of error or appeal, and setting forth briefly the nature of his
alleged cause of action or appeal.
SEC. 27. That any employee subject to the provisions of this Act while in, on, or about
the work, employment, or occupation subject to the provisions of this Act, who is injured
or suffers injuries in transportation, as hereinbefore defined, which result in disability, either
temporary or permanent, shall be paid by such employer or common carrier, as indemnity
and compensation for such injury, an annuity, indemnity, or monthly pension in accord-
ance with the condition and scale of compensation hereinafter set forth: Provided, That —
(a) The employer under this Act shall not be required to pay for injuries sustained by
the employee which do not disable and incapacitate the employee for at least ten days,
but shall during said period of ten days be required to pay for all hospital, surgical, and
medical expenses incurred by such injured employee.
(b) The employer shall not be liable to pay an indemnity or compensation to an employee
where the injury was, caused by the deliberate and wanton and premeditated action of the
employee so injured. The determination of this defense shall in all cases whatsoever be a
question of fact solely for the jury in the action and shall not be determined by the court
or by the commissioner as herein defined. Nothing in this Act shall be deemed to prevent
the injured person or his personal representative from suing at law in place of taking
advantage of this Act.
(c) Where the injury to the employee is caused by the negligence or wilful act on the
part of the employer, or on the part of some person for whose act the employer is respon-
79
sible and accountable, nothing in this Act shall affect any civil liability whatsoever of the
employer: And provided further, That nothing in this Act shall be deemed to repeal the
provisions of the safety-appliance Acts nor affect the absolute duties of common carriers
by railroad to observe the requirements of any of the safety-appliance Acts approved
March second, eighteen hundred and ninety-three, as amended by an Act approved April
first, eighteen hundred and ninety-six, as amended by an Act approved March second,
nineteen hundred and three, or of any amendments thereto enacted by the Congress.
SEc. 28. That the employee or his personal representatives may, at his or their option
and election, either claim indemnity and compensation under this Act, or maintain an
action at law to recover damages in respect thereof independently of this Act; but in no
case shall the employee so injured, or in case of death of such injured employee, the widow,
the executor, or administrator of the estate of such deceased employee, claim indemnity
and compensation under this Act and maintain an action at law to recover damages for
injuries to the employee causing his death. -
SEc. 29. That if any action is brought in any court of general jurisdiction to recover
damages, not based on any provision or provisions of this Act, for injury caused by an acci-
dent, and it is determined in such action that the injury is one for which the employer is
not liable in such action, but that he would have been liable to pay indemnity and compensa-
tion under the provisions of this Act, the action shall be dismissed; but any court in which
the action is tried shall, if the plaintiff so elect, proceed to award such sum or sums of money
to which the plaintiff is entitled under and in accordance with the scale of indemnity and
compensation hereinafter provided under this Act, but may deduct from such sum or sums
any and all costs incurred by the plaintiff in bringing the action at law instead of proceed-
ing under this Act. For the purpose of enforcing this Act, in addition to the courts of
the United States, every court in any of the States exercising general jurisdiction at common
law shall hear and determine proceedings or actions brought to enforce any claim under or
pursuant to this Act. Jurisdiction is hereby conferred on any circuit court of the United
States in the district in which the State court shall refuse to exercise the jurisdiction hereby
; to issue mandamus requiring said State court to hear and determine any action
SO begun.
In any proceeding under this Act, when the court awards an annuity of compensation
under and in accordance with the scale of indemnity and compensation hereinafter provided
under this Act, after deducting any and all costs of the proceeding, it shall cause the clerk
of said court to issue and enter upon record a certified order of the sum or sums of money
so awarded to the plaintiff as indemnity and compensation, and such decree, judgment,
or order, when duly certified, shall have the force and effect of an award made by the com-
missioner under this Act.
SEC. 30. That proceedings for the recovery for an injury under this Act of compensation
shall not be maintainable unless notice of the accident has been given the employer by mail
within three months after the happening thereof, and unless the claim for indemnity and
compensation with respect of such accident has been made within six months from the
occurrence of the accident causing the injury, or, in case of death, within one year from the
time of death: Provided, always, That —
(a) The want of or any defect or inaccuracy in such notice to the employer shall not be
a bar to the maintenance of such proceedings. If it is found in the proceedings hereinafter
authorized for settling the claim that the employer is not, or would not, if a notice or
amended notice were then given and the hearing postponed, be prejudiced in his defense
by the want, defect, or inaccuracy, or that such want, defect, or inaccuracy was occasioned
by mistake, absence from the United States, or mental disability; and º
(b) The failure to make a claim, within the period above specified shall not be a bar to
the maintenance of such proceeding if it is found that the failure was occasioned by mistake,
absence from the United States, or mental disability.
(c) Notice in respect of an injury under this Act shall give the name and address of the
person injured, shall state in ordinary language the cause of the injury and the date thereof.
(d) Such notice may be served by delivering the same at or sending it by post or mail in a
registered letter addressed to the office or place of business of the employer on whom it
is to be served, or, if there be more than one office, any one of the offices of such employer.
SEC. 3I. That whenever any common carrier subject to this Act, more particularly
described in section four hereof (in this section referred to as the principal), while engaged
in the pursuit and carrying on interstate, coastwise, or foreign commerce, or the mail, or
express traffic hereinbefore mentioned, contracts with any other person or persons, partner-
ship firm, limited or otherwise, company, or corporation (in this section referred to as the
contractor), for the execution by or under the contractor of the whole or any part of the
work pertaining to and in the course of interstate, coastwise, or foreign commerce, or
mail, or express traffic undertaken by the principal, the principal shall be liable to pay
such employee solely engaged in interstate, coastwise, or foreign commerce, or mail, or
express traffic, as herein set forth, any indemnity and compensation under this Act which he
or it would have been liable to pay if that employee had been directly in its or his employ
whenever the indemnity and cornpensation is claimed from, or proceedings are taken
against, the principal, then, in the application of this Act, references to the principal shall
be substituted for references to the employer, except that the amount of indemnity and
compensation shall be calculated with reference to the wages and earnings of the employee
under the employer by whom he is immediately employed: Provided, That —
(a) Where the principal is liable to pay indemnity and compensation under this section,
he or it shall be entitled to be indemnified by any person who would have been liable to
pay indemnity and compensation to the employee, independently of this section, but under
this Act, and all questions as to the right to and amount of any such indemnity shall, in
default of agreement by or with the principal employer or contractor, be settled by the
commissioner.
SO
(b) Nothing in this section shall be construed as preventing an employee from electing
to recover indemnity and compensation under this Act from the contractor instead of
from the principal.
(c) This section shall not apply to or in any case where the accident or injury occurred
elsewhere than on, or in, or about premises on which the principal has undertaken to execute
the work, or which are otherwise under his or its control or management, except in cases of
emergency, or where the injury occurred in saving or attempting to save or safeguard the
principal's business or interests.
Sec. 32. That where the injury for which the indemnity and compensation is payable
under this Act was caused under circumstances creating a legal liability in some person
other than the employer to pay damages in respect thereof— &
(a) The employee may take proceedings both against that person to recover damages
and against any person liable to pay indemnity and compensation under this Act for such
indemnity and compensation, but shall not be entitled to recover both damages or in-
demnity and compensation; and,
(b) If the employee shall have recovered indemnity and compensation under this Act,
the person by whom the indemnity or compensation was paid, and any person who has
been called on to pay an indemnity under the section of this Act ralating to subcontracting,
shall be entitled to be reimbursed by the person so liable to pay damages as aforesaid, and
all questions as to the right to and amount of any such indemnity shall, in default of
agreement, be settled by the commission hereinbefore established. -
SEc. 33. “That no contract, agreement or device relating to the employment or
reengagement consequent to the injury of any employee subject to this Act, to waive any
of the provisions of this Act, or to contract out from any of its provisions or from any rule,
regulation, or order made by the Federal Commissioner of Injury Awards in relation thereto
shall be valid or enforceable.” That the foregoing words of this section shall be printed
in large and conspicuous type on the face of every contract, muster roll, or charter party
in respect of any work or employment subject to the provisions of this Act, and shall be
printed in large and conspicuous type on every notice whatsoever sent from the office of
the Federal Commission of Injury Awards.
SEc. 34. That the sections herein and hereinbefore numbered from section one to
section thirty-three and the schedule annexed hereto shall be known as the clauses of the
Federal compensation Act of nineteen hundred and eleven.
SEc. 35. That sixty days after the passage of this Act there shall be levied, collected,
and paid for, and in respect of the several matters hereinafter set forth, the several taxes
or sums of money set down in figures against the same, namely:
(1) Bonds, debentures, or certificates of indebtedness issued by any association, com-
pany, or corporation subject to the principal Acts or to this Act after the passage of this
Act shall be stamped on each hundred dollars of face value or fraction thereof ten cents,
and on each original issue, whether on organization or reorganization, of certificates of
stock by any such association, company, or corporation on each hundred dollars of face
value or fraction thereof ten cents, and on all sales or agreements to sell or memoranda of
sales or deliveries or transfers of shares or certificates of stock in any such association, com-
pany, or corporation, whether made upon or shown by the books of the association, com-
pany, or corporation, or by any assignment in blank, or by any delivery, or by any paper
or agreement or memorandum or other evidence of transfer or sale, whether entitling the
holder in any manner to the benefit of such stock, or to secure the future payment of money
or for the future transfer of any stock, on each hundred dollars of face value or fraction
thereof, ten cents: Provided. That in case of sale where the evidence of transfer is shown
only by the books of the company the stamp shall be placed upon such books; and where
the change of ownership is by transfer certificatc the stamps shall be placed upon the
certificate; and in cases of an agreement to sell or where the transfer is by delivery of the
certificate assigned in blank there shall be made and delivered by the seller to the buyer a
bill or memorandum of such sale, to which the stamp shall be affixed; and every bill or
memorandum of sale or agreement to sell before mentioned shall show the date thereof, the
name of the seller, the amount of the sale, and the matter or thing to which it refers.
(2) Any person or persons liable to pay the tax as herein provided, or anyone who acts.
in the matter as agent or broker for such person or persons liable to pay the tax as herein
provided, or anyone who acts in the matter as agent or broker for such person or persons
who shall make any such sale, or who shall, in pursuance of any such sale, deliver any such
stock, or evidence of the sale of any such stock, or bill or memorandum thereof, as herein
required, without having the proper stamps affixed thereto, with intent to evade the fore-
going provisions, shall be deemed guilty of a misdemeanor, and upon conviction thereof
shall pay a fine of not less than five hundred nor more than one thousand dollars or be
imprisoned not more than six months, or both, at the discretion of the court; and any
such fines and all other fines or forfeitures under this Act shall be paid to the credit of the
compensation fund. It shall be the duty of every common carrier subject to this Act to
issue to the shipper or consignor or to his agent or person from whom any goods or messages
are accepted for transportation a bill of lading, manifest, or other evidence of receipt and
forwarding for each shipment received for carriage and transportation or telegraphic
forwarding, whether in bulk or in boxes, bales, packages, or bundles, or not so inclosed.
And there shall be duly attached and canceled, as in this Act provided, to each of said
bills of lading, manifests, or other memorandum or message by telegraph, and to each
duplicate thereof, a stamp of the value of one cent for each thousand dollars' value of
freight, express, or messages or money order sent: Provided, That but one bill of lading
shall be required on bundles or packages of newspapers or of magazines sent as second-
class matter when inclosed in one general bundle at the time of shipment. That there
shall be levied, collected, and paid on every locomotive and tender, and on every other
81
vehicle used on the lines of any common carrier by steam railroad, and on each and every
motor, trolley, or electrical vehicle used by any electrical railway, when any such vehicles
are used on a mail route as defined herein or on a post road as established by the Act of
June fifteenth, eighteen hundred and sixty-six (Fourteenth Statutes at Large, page sixty-
six), an excise tax of sixty dollars per vehicle per year.
(3) There is hereby levied, and there shall be payable by every telegraph company
operated along the line of or connected with any telegraph line built, constructed, or main-
tained along the line of any railroad and telegraph line to which the United States have
granted subsidies, or which telegraph line shall have accepted the provisions of Title
Sixty-five of the Revised Statutes, an excise tax of five dollars per mile on every mile of
its single-wire mileage within the United States. Said excise or internal revenue tax shall
be due and payable by said corporations or carriers on the first day of May of each and
every year. That every common carrier or other person subject to the taxes prescribed
by this Act, who carries on business without having paid the car or vehicle stamp or the
excise tax hereby provided for, shall, besides being liable to the payment of the said tax, be
fined not less than one thousand and not more than five thousand dollars, and every distinct
violation shall be a separate offense, and in case of a continuing offense each day shall be
deemed a separate offense. And unless otherwise limited all fines, penalties, and forfeitures
imposed by this Act or by any section of the Revised Statutes may be recovered in any
court of competent jurisdiction. All laws relating to the collection, remission, and refund
of internal-revenue taxes, so far as applicable and not inconsistent with the provisions
of this section, are hereby extended and made applicable to the taxes imposed by this section
and all penalties, fines, matters of form and procedure, heretofore enacted for the collection
of the internal revenue under an Act to provide ways and means to meet war expenditures,
and for other purposes, approved June thirteenth, eighteen hundred and ninety-eight
(Thirtieth Statutes at Large, page four hundred and forty-eight) are made applicable to
the collection of the revenue and the enforcement of this Act as fully as though said Act
had not been repealed but had continued in full force and effect; and sections thirty-two
hundred and thirty-two, thirty-two hundred and thirty-three, thirty-two hundred and
thirty-six, thirty-two hundred and thirty-seven, thirty-two hundred and thirty-eight,
thirty-two hundred and thirty-nine, thirty-two hundred and forty, and thirty-two hundred
and forty-three of the Revised Statutes of the United States are, so far as applicable, made
to extend to and include and apply to the special excises or internal-revenue taxes imposed
by this Act, and to the persons, natural or corporate, upon whom they are imposed, as
fully as though they or any one of them were herein set forth at length: Provided, That the
provisions of the foregoing parts of this section in respect of taxation of vehicles on the lines
and of mileage taxation of telegraphic lines shall be, and they are, declared to be suspended
in respect of any carrier accepting this Act in the manner hereinafter set forth, and after
such acceptance abiding by and complying with the provisions of this Act.
(4) Whenever the commissioner shall have certified to the Secretary of the Treasury that
an y such common carrier has not complied with the orders of said commission in respect
of paying any annuity due, it shall be the duty of said Secretary of the Treasury to collect
the excise or internal-revenue taxes hereby imposed during or for such time or times as
said carrier is not complying with any lawful orders of said commissioner. Said excise
tax and all taxes derived from any stamps or stamp duties issued or taxable under the
provisions of this Act, when collected and paid into the Treasury of the United States,
shall be, and they hereby are, specifically reappropriated, shall constitute a permanent
appropriation to be called the “Federal compensation fund,” to pay any annuity com-
pensation not paid by any carrier or person subject to this Act, pursuant to any lawful
order of said commissioner, and all Acts heretofore passed in aid of pensioners of the United
States in respect of proof of claim, allowance, and payment and audit are hereby, as far
as applicable, extended to any funds exacted, collected, appropriated, and disbursed
pursuant to this Act. That from and after the pâssage of this Act it shall be unlawful
for the Postmaster General of the United States, at d he hereby is, forbidden to contract,
or by any means or device to permit any official on his behalf to contract, with any common
carrier for the carriage of the mail as defined in sections four hundred and ten, four hun-
dred and thirteen, four hundred and fourteen, four hundred and fifteen, four hundred and
sixteen, four hundred and eighteen, and five hundred and twenty-four of the Postal Laws
and Regulations, unless said carrier has agreed to assume as and for part consideration
for said contract of the carriage of the mail the clauses of the Federal compensation Act
hereinbefore set out.
SEC. 36. That in respect of any common carrier who or which shall not have accepted
the clauses above set forth in this Act, it shall be unlawful for said common carrier, its
officers, agents, or employees to haul, transport, or move or permit the hauling or trans-
portation of any passenger for hire upon, over, or along any line of railway heretofore
made and declared to be a post road or by this Act declared to be a mail route; and no court
of the United States shall entertain a bill or bills for injunctive relief on the ground that
the carrier, or any person directly or indirectly suing on its behalf, is engaged in interstate
or foreign commerce, or that it is operating on or over a mail route when its employees
shall have started to impede its hauling freight or the mails or shall have entered on a
Strike, and the provisions of sections twelve hundred and sixteen, sixteen hundred and
twenty-one, sixteen hundred and twenty-four, and sixteen hundred and twenty-five of the
Postal Laws and regulations, being sections thirty-nine hundred and seventy-nine, thirty-
nine hundred and ninety-five, thirty-nine hundred and ninety-six, fifty-four hundred and
seventy-four, and four thousand and thirteen of the Revised Statutes of the United States,
as well as sections of the Act approved March third, nineteen hundred and three (Thirty-
second Statutes at Large, page eleven hundred and seventy-six), as well as the Act of June
fifteenth, ēighteen' hundred and sixty-six (Fourteenth Statutes at Large, page sixty-six),
82
being section fifty-two hundred and fifty-eight of the Revised Statutes, shall be deemed to
have been suspended until such common carrier shall have assumed the clauses above set
forth. Whenever any railroad company common carrier shall have accepted the provisions
of this Act it shall be lawful for it to refuse to handle over any mail route or post-road,
established by the Act of June fifteenth, eighteen hundred and sixty-six (Fourteenth
Statutes at Large, page sixty-six), carried into the revised Statutes as section fifty-two
hundred and fifty-eight, any express matter tendered for transportation to the railroad
ºppany by any express company which shall not have accepted the provisions of this
Ct.
SEC. 37. That section thirty-nine hundred and eighty-one of the Revised Statutes of
the United States be, and it hereby is, amended to read as follows: -
“Any person who for himself or any corporation is concerned in carrying the mail or
uses the symbols “ U. S. M.” or United States Mail or Railway Post Office, or any similar
device or lettering on a car hauled on the line of a carrier which shall not have accepted
the clauses of this Act, or otherwise violates any Act of Congress, and who shall collect,
receive, or carry away any letter or packet, or shall cause or procure the same to be done
contrary to law, shall for every such offense be subject to a fine of not less than fifty
dollars nor more than five hundred dollars, and that the offense of the employee be also
deemed the offense of the employer, and, if a corporation, said corporation shall be fined
five hundred dollars for each and every letter or packet unlawfully hauled: Provided, That
this Act shall not be construed to forbid the passage nor the handling of letters or packets
§ . from or to any court or judge of a United States court, or of any ministerial officer
thereof.”
SEC. 38. That there is hereby conferred power on any common carrier as defined herein
operating on a mail route or postal road in respect of such mail traffic by contract with the
United States or in respect of the interstate or foreign commerce to assent to any contract
made lawful by this Act in respect of said mail traffic or the regulation of interstate or
foreign commerce, any limitation in the statutes of any State or foreign country to the
contrary notwithstanding. That the Comptroller of the Treasury be, and hereby is,
forbidden and enjoined from auditing or permitting the audit for payment of any service
under contract for the carriage of the mail by any persons as herein defined, or by any
common carrier whatsoever, subject to this Act, or any operating trustees, or holding
company thereof, which has not attached to the voucher for the payment for the carriage
of the mail a certificate under the seal of the corporation and acknowledged by the presi-
dent and secretary of the corporation, or, if a natural person, duly acknowledged, wherein
and whereby the said common carrier shall have accepted the clauses hereinbefore set
forth as part consideration for the carriage of the mail or permission to operate along or
on a mail route. The Comptroller of the Treasury is forbidden to audit or permit the
audit of any voucher or to permit payment to be credited to any voucher for transporta-
tion or for travel on any sleeping-car company, or for the charges for express matter by
any express company or association, or for the charges for any cable or telegraph service
or telephone service by any telegraph or telephone company that shall not have accepted
the clauses of this Act by a certificate in form to be prescribed by said comptroller. If
said common carrier is a corporation or membership association, and by any statute or by-law
there has been prescribed the proportion of stock necessary to vote, ratify, or confirm any
acts of said corporation or membership association, or of its directors or other officers,
the Comptroller of the Treasury is forbidden to accept said certificate unless there is
appended thereto an assent or ratification of the acceptance of the said clauses by said
common carrier by the stockholders entitled to vote at a general meeting of said body.
Said assent shall be certified by the officers of the corporation or membership association
in such manner as said comptroller may prescribe, but the assent of said stockholders
shall not be for a longer period than the term of the contract for the carriage of the mail.
. If no general rule, by-law, or statute exist, the assent of at least sixty per centum of the
stockholders at the annual meeting entitled by law to vote at a general or annual meeting
shall be deemed, construed, and taken to be the ratification of said corporation or member-
ship association for all purposes under this Act: Provided, That if the common carrier
is a membership association not incorporated the words “stockholder ’’ or “stock '' shall
mean and be deemed and construed to mean membership certificate holder, or member-
ship certificate. Authority is hereby given the Comptroller of the Treasury to prescribe
and amend necessary regulations in respect of the form of the said certificate, assent, or
ratification.
SEC. 39. That this Act (except section thirty-five) and the schedule hereunto annexed
and made a part hereof shall be in force from and after its passage.
I. SCHEDULE.
SCALE AND CONDITIONS OF COMPENSATION.
SECTION A. That whenever injury, as defined in this Act, or death resulting from such
injury in the course of the employment hereinbefore set forth and defined, is incurred,
said employee, or his surviving next of kin, or widow dependent on his earnings, shall be
entitled to the following indemnity: In the event of his death his dependents, as herein
defined, shall be paid by the employer an annuity in monthly installments equal to sixty
per centum of his monthly earnings, based on the actual monthly earnings for the twelve
months immediately preceding said injury or death, but not more than seventy-five dollars
per month: Provided, That he was continuously employed; but if he was not continuously
employed then the words “monthly earnings” shall be held and be construed to mean thirty
83
times the amount of his daily earnings, hereinafter termed “earnings." Whenever the said
earnings of any said employee shall have been less than two dollars per day on any day, the
percentages hereinafter set forth shall be increased twenty per centum; when the said earn-
ings are from two dollars to two dollars and fifty cents per day, the percentages shall be
increased fifteen per centum; from two dollars and fifty cents to three dollars per day,
the said percentages shall be increased ten per centum. Such annuity shall be apportioned
by said commission among the dependent widow, child, or next of kin within the maximum
herein described, and on the application of any common carrier obliga'ed to pay said annuity
it shall be reduced on the death of any dependents of said deceased, or as each dependent
child either dies or becomes sixteen years of age, in proportion to the cessation of said
dependence: And provided further, That if any such child be under sixteen years of age
and because of physical or mental disability unable to provide for itself the proportion of
such annuity shall be payable to such child while the said disability lasts: And provided
further, That if there be surviving a widow and no dependent child, thirty per centum shall
be paid: And provided further, That in the event of the remarriage of such surviving
widow a sum of money equal to fifty-two times the average weekly earnings of the deceased
shall be paid to such surviving widow within ninety days after her remarriage. Such annuity
charge shall be assumed by the said common carrier or its successors, or by the employer,
while the classes of persons above set forth, or any of them, are alive or entitled thereto.
Such funds or claims shall be a lien or charge on the property of said common carrier, and
in respect of any securities or obligations issued after the passage of this Act shall be subject
only to the payment of taxes. In all cases in which a corporation or common carrier
subject to the provisions of this Act shall be placed in the hands of a receiver or trusteeship,
Or, if an individual, becomes insolvent before any payments are made on account of any
debts whatsoever due the holders of any other obligations except taxes, it shall be the duty
of said receiver or trustee or assignee in bankruptcy to make provision for the payment of
all claims accrued or due or accruing under this Act in respect of any proceedings brought
or to be brought under this Act. The exact amount of such payment or annuity charges
shall be determined by the commission. In case there are no next of kin dependent on
such deceased employee, only the medical, surgical, and burial expenses in connection with
the injuries shall be paid by the employer. In all cases whatsoever the payment, by an
annuity, shall not be deemed to have relieved the common carrier from the obligation
hereby imposed on said common carrier to pay hospital, medical, surgical, and burial
expenses in connection with any said injury in transportation happening to its said em-
ployees. For total disability, or total impairment of his earning capacity for a period
not exceeding six months, one-half of the injured employee's wages, based on the maximum
monthly earnings for six months previous to said injury, as well as hospital and surgical
and medical attendance, shall be paid by the employer. Whenever the employee shall
have been disabled for a period beyond six months the following proportion of his weekly
earnings, as next hereinafter set forth, shall be paid to him by the employer. . Whenever
beyond said period of six months the earning capacity of said employee in such employment
is totally destroyed he shall be paid sixty per centum of his said earnings during the period
of the said impairment or injury, but in no event shall such compensation amount to more
than seventy-five dollars per month; when said earning capacity is materially but not
totally impaired, forty per centum of his earnings, and not to exceed forty dollars per
month; when said earning capacity is slightly impaired there shall be paid seventy-five
per centum of the difference between the amount of average earnings of the employee
before the accident and the average amount he is able to earn thereafter as wages in the
same employment or otherwise: Provided, That the impairment or injury hereinbefore
mentioned shall not be of a character covered exclusively by the injury as set forth in the
following scale of percentages of such employee's earnings. In all cases in which the
scale hereinafter set forth applies the employee shall receive not less than a sum based
on the following scale of percentages of his earnings, to be paid for the impairment or injury
in respect of the loss or total impairment of the, use of:
Loss of one eye, forty per centum; loss of both eyes, seventy-five per centum; loss of
sight of one eye, thirty per centum; loss of sight of both eyes, seventy-five per centum;
loss of hand, forty per centum; loss of right hand, sixty per centum; loss of both hands,
seventy-five per centum; total disability in right hand, fifty per centum; loss of one foot,
folty per centum to fifty per centum; loss of both feet, sixty-five per centum; total disability
in one foot, twenty-five per centum; total disability in both feet, sixty per centum; loss of
One hand and one foot, fifty per centum to seventy per centum; total disability in one hand
and one foot, fifty per centum; loss of an arm at or above the elbow or leg at or above the
knee, forty-five per centum to sixty per centum; total disability in one arm or leg, thirty-
five per centum to forty-five per centum; loss of either a leg at the hip joint or an arm at
the shoulder joint, or so near as to prevent the use of an artificial limb, forty per centum
to sixty per centum; anchylosis of shoulder, thirty per centum; anchylosis of elbow, twenty-
five per centum; anchylosis of knee, twenty-five per centum; anchylosis of ankle, twenty
per centum; anchylosis of wrist, twenty per centum; total deafness of one ear, twenty-
five per centum; total deafness of both ears, fifty per centum; total deafness of one ear
and severe of the other, thirty-five per centum; severe deafness of both ears, thirty per
centum; loss of palm of hand and all of the fingers, the thumb remaining, twenty-five per
centum; loss of palm of right hand and all the fingers, the thumb remaining, forty per
centum; loss of thumb, index, middle, and ring fingers, twenty-five per centum; loss of
thumb, index, middle and ring fingers of right hand, forty per centum; loss of thumb,
index, and middle fingers, twenty-five per centum; loss of thumb, index and middle fingers
of right hand, thirty-seven and j} per centum; loss of thumb and index finger, twenty
per centum; loss of thumb and index finger on right hand, thirty-three per centum; loss
84.
of thumb and little finger, twenty per centum; loss of thumb and little finger on
right hand, thirty-five per centum; loss of thumb, index, and little fingers, twenty-
three per centum; loss of thumb, index, and little fingers on right hand, thirty-
seven and one-half per centum; loss of thumb, twenty per centum; loss of thumb
on right hand, twenty-five per centum; loss of thumb and metacarpal bone, twenty-
five per centum; loss of thumb and metacarpal bone of right hand, thirty per centum;
loss of all the fingers, thumb and palm remaining, thirty-five per centum; loss of all the fin-
gers of right hand, thumb and palm remaining, forty-five per centum; loss of index, middle,
and ring fingers, twenty per centum; loss of index, middle and ring fingers of right hand,
thirty per centum; loss of middle, ring and little fingers, eighteen per centum; loss of middle,
ring, and little fingers of right hand, twenty-five per centum; loss of index and middle
fingers, fifteen per centum; loss of index and middle fingers of right hand, twenty-five per
centum; loss of little and middle fingers, fifteen per centum; loss of little and middle fingers
of right hand, twenty-five per centum; loss of little and ring fingers, ten per centum; loss
of little and ring fingers of right hand, eighteen per centum; loss of ring and middle fingers,
eight per centum; loss of ring and middle fingers of right hand, fifteen per centum; loss of
index and little fingers, eight per centum; loss of index and little fingers of right hand,
fifteen per centum; loss of index finger, six per centum; loss of index finger of right hand,
ten per centum; loss of any finger without complications, four per centum; loss of any finger
of right hand without complications, eight per centum; loss of all the toes of one foot,
fifteen per centum; loss of great, second, and third toes, twelve per centum; loss of great
toe and metatarsal, twelve per centum; loss of great and second toes, ten per centum;
loss of great toe, eight per centum; loss of any other toe and metatarsal, eight per centum;
loss of any other toe, five per centum; hernia, twenty per centum to fifty per centum.
Whenever the hand, arm, leg, thigh or foot shall in consequence of any injury in transpor-
tation have become so stiff or so lamed as to be completely useless for the purposes of the
usual avocations of the person injured it shall be, for the purposes of this Act, deemed to
have been a total impairment of his earning capacity.
The above percentages shall be deemed and construed to have been reversed whenever
the injured person is left-handed, so that the word “ left '' as used in this scale shall be
construed to mean the word “right '' in every such case.
[H. R. 5139.]
APRIL I4, IgEI.
Mr. Foss introduced the following bill; which was referred to the Committee on Labor
and ordered to be printed.
A BILL
To create a National Arbitration Tribunal and to define the duties and powers thereof.
Be it enacted by the Senate and House of Representatives of the United States of America
in Congress assembled, That there shall be created a National Arbitration Tribunal, to
consist of six members, one of whom as member ex officio shall be the Secretary of Commerce
and Labor, and the other members thereof shall be appointed by the President, by and
with the advice and consent of the Senate. The members of the tribunal first appointed
under this Act shall continue in office for the terms of two, three, four, five, and six years,
respectively, from the first day of July, anno Domini nineteen hundred and eleven, the term
of each to be designated by the President; but their successors shall be appointed for terms
of six years, except that any person chosen to fill a vacancy shall be appointed by the
President only for the unexpired term of the member whom he shall succeed. Any member
of the tribunal may be removed by the President for inefficiency, neglect of duty, or mal-
feasance in office. No vacancy in the tribunal shall impair the right of the remaining mem-
bers thereof to exercise all the powers of the tribunal as conferred by this Act: Provided,
That at least three of the appointive members of said tribunal shall constitute a quorum
necessary for the transaction of business. The Secretary of Commerce and Labor, who
shall be a member ex officio of the tribunal, shall have the same powers and perform the
same duties as the other members of the tribunal, but shall not have the power to cast a
vote. - -
Each member of the tribunal, other than the Secretary of Commerce and Labor, ap-
pointed in accordance with the provisions of this Act, shall receive an annual salary of
eight thousand dollars. - -
Sec. 2. That the tribunal shall without delay, after the appointment of its members,
organize by electing a president and a vice-president from among its members. , Said
tribunal shall employ a secretary, at a salary of four thousand dollars per annum, and such
clerks and other employees for both temporary and permanent service as may be necessary,
and such secretary, clerks, and employees shall perform such duties as said tribunal shall
direct; and said tribunal shall have the power to discharge such persons so employed as
it may deem expedient. Each of the members of the tribunal .#its secretary shall take
an oath before a justice of the Supreme Court of the United States, to support the Consti-
tution #: the United States and to honestly, fairly, and faithfully perform his duties as
such officer.
No member of the tribunal and no employee or agent of said tribunal shall accept, in
addition to his salary, any perquisite or gratuity of any kind whatsoever from any cor-
poration, association, partnership, or individual in any way interested in any matter or
thing pending or about to be brought before the tribunal in accordance with the provisions
of this Act. The accepting of such perquisite or gratuity by any of the persons mentioned
85
from any corporation, association, partnership, or individual shall be deemed a misde-
meanor, and the person guilty of such accepting shall be punished by a fine not exceeding
five thousand dollars, or by imprisonment for not more than two years, or both, in the
discretion of the court having jurisdiction of the offense: Provided, however, That no member
of said tribunal shall take part in the consideration or determination of any controversy
or petition in which he has any direct or indirect pecuniary interest, or when he has any
such interest in either of the parties thereto. And in case that any member of the tribunal
shall be so disqualified in any particular case, the President of the United States shall
appoint some disinterested person to take the place of such member for the particular case
in question, and such temporary appointee shall be paid at the same rate during his term
of service as are the members of the tribunal, and his expenses shall be similarly paid.
The tribunal shall prepare and adopt an official seal, which, when approved by the
President of the United States, shall be the seal of the tribunal.
The regular and permanent place of meeting of the tribunal shall be the city of Wash-
ington, in the District of Columbia; but the tribunal may hold its meetings elsewhere in
the United States, temporarily, when it may deem it expedient so to do.
There shall be assigned to the tribunal by the Secretary of Commerce and Labor suitable
rooms, vaults, furniture, and fixtures, with the necessary fuel, lights, and other proper
conveniences for the transaction of the business of the tribunal.
• SEc. 3. That whenever there shall arise a controversy within the United States con-
cerning wages, hours of labor, or conditions of employment between employer or employers,
being an individual, partnership, association, corporation, or other combination, and his,
their, or its employees, or any association or combination of such employees, in which
controversy a strike or lockout is threatened or exists, and in which controversy there is
involved any commerce with foreign nations, or among the several States, or with the
Indian tribes, or when such controversy arises within any of the Territories of the United
States or the District of Columbia, it shall be competent and lawful for either party to
such controversy to present to the tribunal a petition setting forth plainly and fully the
claims and demands of said party in the particular case in question, which petition shall
be made on a blank form in accordance with rules which shall be made in pursuance of
this Act by said tribunal, which forms shall, on application being made therefor by either
party, be furnished to the same, without expense, by the tribunal; and such petition shall
be duly sworn to by the party complaining, in accordance with the rules made in pursuance
of this Act. The petition, in addition to setting forth plainly and fully its said claims and
demands, shall in substance be a request to the tribunal to investigate all matters involved
therein, and to render a decision on the merits of the said claims and demands, in accordance
with the provisions of this Act; and said petition shall express also a full agreement, in
such form as shall be prescribed by said rules, on the part of the parties to said agreement
to accept and abide by the decision of said tribunal as to the matters involved in said peti-
tion, and to accept said decision as a final and binding award upon the parties thereto,
and to accept and submit to all the powers and authority of said tribunal as expressed
in this Act, and to all the rules and regulations made in pursuance thereof. And the tri-
bunal may require that the terms of submission to such arbitration shall include an agree-
ment as to the length of time for which the award of the tribunal shall remain in force:
And provided, That if the tribunal, in its discretion, deems the petition and subject-matter
involved therein to be such as to warrant the exercise of its functions in relation thereto,
it shall then be the duty of the tribunal, within a reasonable time after it shall have received
the petition, to transmit, in such manner as may be prescribed by the rules of the tribunal,
a true copy of the same to the other party to the controversy, requesting said other party
to make a sworn answer thereto within a number of days, to be determined by the rules
of the tribunal, and if said other party shall neglect or refuse to make said answer within
such number of days and to submit the matters in controversy to the arbitration of the
said tribunal in the form and manner above described, and to agree in such form and
manner to accept and abide by the decision of the tribunal as to the matters involved in
the said petition, the petition shall be made known to the public by the tribunal as pro-
vided hereinafter: Provided, however, That said tribunal shall have the power to correct
said petition in such manner as to secure a clear and definite presentation of the case in-
volved without, however, changing the substance of said petition.
SEC. 4. That if said other party, as named and described in the foregoing section,
shall make a complete and full sworn answer to the petition therein provided for and shall
so submit in such manner and form said controversy to the arbitration of the tribunal and
shall so agree to accept and abide by the decision of the tribunal as to the matters involved
in the said petition and answer, then the tribunal shall without delay proceed in accordance
with the provisions of this Act and the rules thereunder which it shall hereafter adopt to
investigate privately (unless both parties consent to a public investigation) the matters
and things involved in the said controversy, determine the merits of the same on the basis
of right and equity, and render its decision thereon, which decision shall be definitely and
distinctively an affirmative or negative decision on each of the claims of both parties to
the controversy, respectively: Provided, however, That said tribunal, of its own motion,
may also make additional findings and recommendations for the purpose of adjusting such
controversy.
And if the parties to the controversy shall accept the decision of the tribunal thereon
rendered, and act in accordance therewith, then the petition, the answer, the testimony,
and the entire record of the tribunal in relation to the controversy shall be held and kept
private forever and shall not be made public by the tribunal without the consent of both
parties to the arbitration; and such consent shall be expressed to the tribunal in accord-
ance with the rules which it shall hereafter adopt. If such consent is so expressed, then
86
the petition, the answer, and so much of the testimony and of the record of the proceedings
of the tribunal in relation to the controversy as the tribunal shall deem best, shall be made
public as hereinafter provided. If one of the parties to the controversy, having agreed to
accept the decision of the tribunal and to act in accordance therewith, neglects or refuses
so to act, the petition, the answer, and so much of the testimony and of the record of the
proceedings of the tribunal in relation to the controversy as the tribunal shall deem best,
shall be made public as provided hereinafter: Provided, however, That the approval of
the consenting party to such publication shall be expressed to the tribunal in accordance
with the rules which it shall hereafter adopt: And provided also, That such consenting
arty acts in accordance with the decision, or in good faith endeavors or offers so to do.
f both of the parties to the controversy, having agreed to accept the decision of the tri-
bunal and act in accordance therewith, neglect or refuse so to act, the petition, the answer,
and so much of the testimony of and of the record of the proceedings of the tribunal in
relation to the controversy as the tribunal shall deem best, shall be made public as pro-
vided hereinafter. Each of the parties to the controversy shall have the right, at any time
while the tribunal is investigating the matters and things involved in the same and before
its decision is finally announced, to modify or otherwise amend (subject to the rules of
said tribunal) any of its claims theretofore presented to the tribunal, and thereupon such
proceedings shall be had as may be provided for by the rules of the tribunal.
SEC. 5. That whenever it shall appear to the tribunal that there exists in the United
States a controversy concerning wages, hours of labor, or conditions of employment between
an employer or employers, being an individual, partnership, association, corporation, or
other combination, and his or their employees or any association or combination of his
or their employees, in which controversy a strike or lockout is threatened or exists, and
in which controversy there is involved any commerce with foreign nations or among the
several States or with the Indian tribes, or when such controversy arises within any of
the Territories of the United States or the District of Columbia, it shall be competent
and lawful for the tribunal to request both of the said parties to such controversy to submit
in writing their respective claims and demands to arbitration and accept and abide by the
decision of the tribunal as to the matters involved in the said controversy in accordance
with the foregoing provisions of this Act and with the rules made thereunder, which decision
shall be definitely and distinctly an affirmative or negative decision on each of the claims
of both parties to the controversy, respectively: Provided, however, That said tribunal,
of its own action, may also make additional findings and recommendations for the pur-
pose of adjusting such controversy. The said tribunal shall keep a record of all requests
so made, and, in the event of neither of the said parties replying and acceding to a request
so made, a record of such fact shall be made and kept and published in the manner pro-
vided in section seven of this Act. In the event of but one of the said parties replying
and acceding to a request so made, the same action shall be taken by said tribunal as is
provided for similar cases in sections three and four of this Act: Provided, however, That
in all cases under this Act if any party against whom a petition is brought, or to whom such
request of the tribunal as provided in this section is made, believes that the controversy
is one which is not within the jurisdiction of the tribunal, or one which for any reason
the tribunal should not take cognizance of, such party may first present a preliminary
answer setting forth such belief and the facts upon which it is based, which preliminary
answer shall be considered by the tribunal, and said tribunal shall then take such further
action in view thereof and under the provisions of this Act as to the dismissal of further
consideration of the case as the tribunal shall deem just and equitable.
SEC. 6. That during the pendency before the tribunal of any petition and answer thereto,
or claims and demands submitted in accordance with the provisions of section five of this
Act, the parties having made such petition and answer, respectively, or having so submitted
such claims and demands, shall refrain from ordering or participating in any strike or lock-
out, and shall resume and continue their former relations with each other as though no
controversy existed between the said parties. If at any time during the pendency before
the tribunal of any petition and answer thereto, or claims and demands submitted in ac-
cordance with the provisions of section five of this Act, one of the said parties shall refuse
or neglect to refrain from ordering or participating in any strike or lockout, and shall refuse
or neglect to resume such former relations with the other party as though no controversy
existed between the said parties, then the proceedings of the tribunal in relation to the
controversy shall be terminated, and thereupon the petition, the answer, and as much of
the testimony and of the record of the proceedings of the tribunal in relation to the con-
troversy as the tribunal shall deem best shall be made public as provided hereinafter:
Provided, however, That the approval of the consenting party to their being so made public
shall be expressed to the tribunal in accordance with the rules which it shall hereafter
adopt: And provided further, That if, in the opinion of the tribunal, either party shall use
any of the provisions of this section for the purpose of unjustly maintaining a given cor-
dition of affairs through delay, the said tribunal may, in its discretion, exempt the other
party to said controversy from the operations of this section. If at any time during the
pendency before the tribunal of any petition and answer thereto, or of claims and demands
submitted in accordance with the provisions of section five of this Act, both of said parties
shall so refuse or neglect to refrain from ordering, commencing, or participating in any such
strike or lockout, all the proceedings of the tribunal in relation to the controversy shall be
terminated; and thereupon the petition, the answer, and so much of the testimony and of
the record of the proceedings of the tribunal in relation to the controversy as the tribunal
shall deem best shall be made public, as provided hereinafter.
SEC. 7. That the tribunal shall prepare and publish periodically, as it may determine,
a bulletin for public circulation, in which shall appear the record of all its decisions as made
87
from time to time, and all sworn petitions hereinbefore provided for and duly presented
to the tribunal to which no answers shall have been made in accordance with the provisions
of this Act, and such communications, written correspondence, papers, and documents
relating to the subject-matter of the said last-named petitions as the tribunal in its discretion
shall determine, and all requests made by the tribunal in accordance with the provisions
of section five of this Act, and also the petitions, answers, and so much of the testimony
and of the records of proceedings as the tribunal shall deem best and the publication of
which is authorized under the provisions of sections four and five of this Act.
SEc. 8. That the parties to a controversy shall be entitled to be represented before the
tribunal in such manner as shall hereafter be determined by the tribunal in such rules of
procedure as it may adopt. The decision of the tribunal on any controversy shall relate
to the controversy as it existed on the date of the filing of the petitions, and shall be oper-
ative as of that date: Provided, That if said tribunal shall find that the conditions involved
in the controversy have materially changed subsequent to the filing of the petition, said
tribunal may modify its decision so that said decision, when rendered, shall, in equity and
justice, be in accordance with such change in conditions.
SEc. 9. That the tribunal, or any one member thereof, shall have power to administer
oaths and affirmations and to sign subpoenas, and for the purposes of this Act said tribunal
shall have power to require by subpoena the attendance and testimony of witnesses, and
the production of all books, papers, tariffs, contracts, agreements, and documents relating
to any matter under investigation, such attendance of witnesses, and the production of
such documentary evidence, as may be required from any place in the United States at
any designated place of hearing. And in case of disobedience to the subpoena the tribunal
may invoke the aid of any court of the United States in requiring such attendance and
testimony of witnesses and such production of books, papers, tariffs, contracts, and agree-
ments. Any circuit court of the United States within the jurisdiction of which such in-
quiry is carried on may, in case of contumacy or refusal to obey a subpoena issued subject
to the provisions of this Act to any person, issue an order requiring such person to appear
before said tribunal, and produce books and papers if so ordered, and give evidence touch-
ing the matter in question, and any failure to obey such order of the court may be punished
by such court as a contempt thereof. No persons shall be excused from attending and
testifying or from producing books, papers, tariffs, contracts, agreements, and documents
before the tribunal, or in obedience to the subpoena of the same, whether such subpoena
be signed or issued by one or more members of the tribunal, on the ground or for the reason
that the testimony or evidence, documentary or otherwise, required of him may tend to
criminate him or subject him to a penalty or forfeiture. But no person shall be prosecuted
or subjected to any penalty or forfeiture for or on account of any transaction, matter,
or thing concerning which he may testify, or produce evidence, documentary or otherwise,
before said tribunal, or in obedience to its subpoena or the subpoena of any one of the
members thereof, or in any case or proceeding: Provided further, That no person so testi-
fying shall be exempt from prosecution and punishment for the perjury committed in so
testifying. The witnesses summoned before the tribunal shall be paid the same fees and
mileage as are paid to witnesses in the courts of the United States.
Upon the request of the tribunal it shall be the duty of any district attorney of the United
States to whom said tribunal may apply to institute in the proper court and to prosecute,
under the direction of the Attorney-General of the United States, all necessary proceedings
for the enforcement of the provisions of this section, and for the punishment of all violations
thereof, and the costs and expenses of such prosecutions shall be paid out of the appro-
priations for the expenses of the courts of the United States.
he testimony of any witness may be taken, at the instance of a party in any proceed-
ing or investigation pending before the tribunal, by deposition at any time after a cause
or proceeding is at issue on petition and answer. The tribunal may also order testimony
to be taken by deposition in any proceeding or investigation pending before it at any stage
of such proceeding or investigation. Such depositions may be taken before any judge
of any court of the United States, or any commissioner of a circuit or any clerk of a district
or circuit court, or any chancellor, justice, or judge of a supreme or superior court, mayor
or chief magistrate of a city, judge of a county court or court of common pleas of any of
the United States, or any notary public, not being of counsel or attorney to either of the
parties nor interested in the event of the proceeding or investigation. Reasonable notice
must first.be given in writing by the party of his attorney of record, which notice shall
state the name of the witness and the time and place of the taking of his deposition. Any
person may be compelled to appear and depose and to produce documentary evidence
in the same manner as witnesses may be compelled to appear and testify and produce
documentary evidence before the tribunal as hereinbefore provided.
Every person deposing as herein provided shall be cautioned and sworn (or affirm, if
he so request) to testify the whole truth, and shall be carefully examined. His testimony
shall be reduced to writing by the officer taking the deposition, or under his direction, and
shall, after it has been reduced to writing, be subscribed by the deponent.
f a witness whose testimony may be desired to be taken by deposition be in a foreign
country, the deposition may be taken before an officer or person designated by the tribunal,
or agreed upon by the parties by stipulation in writing to be filed with the tribunal. All
depositions must be promptly filed with the president.
Witnesses whose depositions are taken pursuant to this Act, and the magistrate or other
officer taking the same, shall severally be entitled to the same fees as are paid for like
services in the courts of the United States.
SEC. Io. That the tribunal, or its duly appointed agents, may, whenever it deems it expedi-
ent, after an agreement for arbitration between the parties to the controversy has been made,
8S
enter and inspect any institution, establishment, factory, workshop, or mine belonging
to either party, and may employ competent experts to examine the accounts, books, and
official reports of either party, and to examine and report on any matter material to the
investigation, but shall not disclose such reports or the results of said inspection or ex-
amination under this section without the consent of both the parties to the controversy
except as provided in section four of this Act.
SEC. II. That the tribunal may, from time to time, make such rules and orders not
inconsistent with this Act as may be deemed proper for the regulating and conducting of
its investigations and proceedings, and for the providing of blank forms for petitions and
all other necessary blank forms, and for making petitions and answers, and for the pre-
scribing of the method of serving copies of petitions, notices, and all other papers upcn
the parties, or a party, to any controversy of which it shall take cognizance under the pro-
visions of this Act, and from time to time may make such other rules as may be necessary
for the proper enforcement of this Act.
SEC. I2. That the tribunal shall make an annual report to Congress at the commence-
ment of its regular session.
SEC. I.3. That all expenses of the tribunal, including all necessary expenses for trans-
portation incurred by the members thereof, or by its employees under its orders, in making
investigations under this Act, or upon official business in any other places than the city
of Washington, salaries of employees and agents, and fees and mileage of witnesses shall
be allowed and paid upon the presentation of itemized vouchers therefor, approved by the
president of the tribunal.
Sec. I4. That a decision by a majority of the voting members of the tribunal engaged
in the consideration of a case shall constitute a decision of the tribunal. In cases where
either of the parties has in a previous controversy failed or refused to abide by the award
of the tribunal, and in such other cases as the tribunal shall deem to be exceptional in their
nature, the tribunal may, in its discretion, require that both parties to the controversy file
with the tribunal a proper bond conditioned for the performance of the award of the tri-
bunal, made payable each party to the other party in the sum fixed by the tribunal, and
in case the conditions of said bond be broken by either party, the penalty shall be for-
feited to the other party and shall be recoverable in an action at law in any court of the
United States in the district where the plaintiff resides, and an order of the tribunal declar-
atory of such forfeiture shall be taken and held as prima facie evidence thereof.
No new petition between the same parties and upon the same subject of controversy
shall be received or acted upon within less than one year after the rendering of a decision
by said tribunal as between such parties and on such subject-matter, except with the con-
currence of both of such parties.
SEC. I5. That whenever a controversy of such special character or difficulty arises as
to call for such action as hereinafter set forth, it shall be lawful for the President of the
United States, in his discretion, and it shall be his duty when so requested by the tribunal,
in its discretion, to appoint, without confirmation by the Senate, two additional persons
as members of said tribunal for the purposes of such particular controversy. The tribunal
so enlarged shall have, for all the purposes of said controversy, all the powers and duties
hereinbefore set forth, except the power of further enlargement, and except that four
appointive members shall then constitute the necessary quorum for the transaction of
business. The two additional members shall be paid at the same rate as the other members
for the time of their service until final award and decision, and their expenses as such
members shall be similarly paid. -
In any controversy of minor importance the tribunal, in its discretion, may delegate to
any member thereof the power and duty of hearing and considering the same and of making
an award thereon, subject, however, to a right of appeal, under such rules as the tribunal
may prescribe, in favor of either party, to the full tribunal, and such appeal may relate to
and include the award or the facts upon which it is based, or both.
Sec. 16. That this Act shall take effect upon its passage.
[H. R. 54.)
APRIL 4, 1911.
Mr. BEALL of Texas introduced the following bill; which was referred to the Committee on
Interstate and Foreign Commerce and ordered to be printed.
A BILL
To provide for the investigation of controversies affecting interstate commerce, and for
other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America
in Congress assembled, That whenever within any State or States, Territory or Territories
of the United States a controversy concerning wages, hours of labor, or conditions of employ-
ment shall arise between an employer being an individual, partnership, association, cor-
poration, or other combination, and the employees or association or combination of em-
loyees of such employer, by reason of which controversy the transportation of the United
§. mails, the operations, civil or military, of the Government of the United States,
or the free and regular movement of commerce among the several States and with foreign
nations is, in the judgment of the President, interrupted or directly affected, or threatened
with being so interrupted or directly affected, the President shall in his discretion inquire
into the same and investigate the causes thereof.
Sec. 2. That to this end the President may appoint a special commission, not exceeding
seven in number, of persons in his judgment specially qualified to conduct such an investi-
gation.
89
SEc. 3. That such commission shall organize, with all convenient dispatch and upon
giving reasonable notice to the parties to the controversy, either at the seat of disturbance
or elsewhere, as it may deem most expedient, shall proceed to investigate the causes of such
controversy and the remedy therefor.
SEc. 4. That the parties to the controversy shall be entitled to be present in person or
by counsel throughout the continuation of the investigation, and shall be entitled to a
hearing thereon, subject always to such rules of procedure as the commission may adopt;
but nothing in this section contained shall be construed as entitling said parties to be
present during the proceedings of the commission prior to or after the completion of their
investigation.
SEc. 5. That for the purpose of this Act the commission, or any one commissioner, shall
have power to administer oaths and affirmations, to sign subpoenas, to require the testi-
mony of witnesses either by attendance in person or by deposition, and to require the pro-
duction of such books, papers, contracts, agreements, and documents as may be deemed
material to a just determination of the matters under investigation; and to this end the
commission may invoke the aid of the courts of the United States to compel witnesses to
attend and testify and to produce such books, papers, contracts, agreements, and docu-
ments; and for the purposes of this section it shall be vested with the same powers, to the
same extent and under the same conditions and penalties, as are vested in the Interstate
Commerce Commission by the Act to regulate commerce, approved February fourth,
eighteen hundred and eighty-seven, and the Acts amendatory and in addition thereto;
and it shall be the duty of the said courts of the United States to render said commission
the same aid to the same extent and under the same conditions as is provided by said Acts
in aid of said Interstate Commerce Commission; and witnesses examined as aforesaid
::A; subject to the same duties and entitled to the same immunities as is provided in
said Acts. -
SEc. 6. That for the purposes of this Act the commission may, whenever it deems it
expedient, enter and inspect any public institution, factory, workshop, or mine, and may
employ one or more competent experts to examine accounts, books, or official reports, or
to examine and report on any matter material to the investigation in which such examina-
tion and report may be deemed of substantial assistance.
SEc. 7. That, having made such investigation and elicited such information of all the
facts connected with the controversy into which they were appointed to inquire, the com-
mission shall formulate its report thereon, setting forth the causes of the same, locating
so far as may be the responsibility therefor, and making such specific recommendations
as shall in its judgment put an end to such controversy or disturbance and prevent a recur-
rence thereof, suggesting any legislation which the case may seem to require.
SEc. 8. That the report of such commission shall forthwith be transmitted to the Presi-
dent and by him communicated, together with such portions of the evidence elicited and
any comments of further recommendation he may see fit to make, to the principal parties
responsible for the controversy or involved therein; and the papers shall be duly trans-
mitted to Congress for its information and action.
SEC. 9. That the commission may, from time to time, make or amend such general
rules or orders as may be deemed appropriate for the order and regulation of its investi-
gations and proceedings, including forms of notices and the service thereof, which shall
conform as nearly as may be to those in use in the courts of the United States.
SEC. Io. That the President is authorized and empowered to fix a reasonable compen-
sation to be paid to the members of the commission from the Treasury at such times and
in such manner as he shall direct. The commission shall have authority to employ and
fix the compensation of such employees as it may find necessary to the proper performance
of its duties, subject to the approval of the Secretary of the Interior.
The commission shall be furnished by the Secretary of the Interior with suitable offices
and all necessary office supplies. Witnesses summoned before the commission shall be
paid the same fees and mileage that are paid to witnesses in the courts of the United States.
All of the expenses of the commission, including all necessary expenses for transporta-
tion incurred by the commissioners or by their employees under their orders, in making
any investigation under this Act, shall be allowed and paid on the presentation of itemized
Yº. therefor approved by the chairman of the commission and the Secretary of the
nterior.
SEC. II. That no commission appointed under this Act shall continue for a period of
Over three months from the date of the appointment thereof, unless at any time before
the expiration of such period the President shall otherwise order.
[H. R. I.238.]
APRIL 4, 191 I.
Mr. GARDNER of New Jersey introduced the following bill; which was referred to the
Committee on Labor and ordered to be printed.
A BILL
To authorize the appointment of boards of investigation and arbitration, and to define
their powers and duties.
Be it enacted by the Senate and House of Representatives of the United States of America
in Congress assembled, That whenever the President of the United States shall be informed,
by petition or otherwise, that there exists in any State or States of the United States a
dispute in connection with which any strike or lockout has occurred or is threatened
90
between any employer and employees, either of whom are engaged in the business of inter-
state or foreign commerce, it shall be lawful for him, if he shall deem such action necessary
and expedient, to appoint a board of investigation and arbitration to investigate the mat-
ters in difference between such employer and employees, and to make report thereon.
The report of such board shall be made to the President, and shall be accompanied by the
evidence taken during such investigation, and shall (together with all other things which
the board, or any member thereof, may decide to report) include full statements upon the
following points, namely: -
First. A comprehensive account of the matters in dispute between the parties concerned.
Second. An account, in detail, of the wages offered to such employees, and of the cost
of living in the locality in which they reside.
Third. The investigation of the business carried on by the employer shall cover such
period of time and such of the operations and resources of such business as are necessary
for the proper investigation and consideration of the questions involved in any threatened
or accomplished strike or lockout.
Fourth. The opinion of each member of the board upon the justice of the demands and
claims made by each party to the dispute, and the recommendation of each member of
the proper course to be pursued by each party. -
The existence of each board shall terminate with the filing of its final report upon the
matter referred to it. The members of said board shall each receive ten dollars for each day
that they are actually engaged in the discharge of any duties prescribed by this Act. All
expenses of the board shall be allowed and paid on the presentation of itemized vouchers
therefor, approved by the chairman of the board.
SEc. 2. That each board of investigation and arbitration shall be composed of five
members. If an employer concerned in such dispute shall designate a person whom he
desires appointed to such board, the President shall appoint the person so designated.
If the employees shall (either by the action of a majority of them, taken at a meeting or
meetings called for that purpose, or through the officers of any labor organization of which
a majority of such employees are members) designate a person whom they desire appointed
to such board, the President shall appoint the person so designated. Such designation
shall be made only upon request made by the President. If either or both parties to any
dispute shall not, when requested so to do, designate a person to be appointed to such
board, the President shall fill the vacancy caused by such failure to designate. Each of
the members of such board shall, before entering upon his duties, take and subscribe to
an oath or affirmation that he will faithfully and impartially examine the matters in dis-
pute and make report in accordance with the provisions of this Act, which oaths or affirma-
tions shall be annexed to the report of such board.
Sec. 3. That each board shall hold its first meeting at such time and place as shall be
designated by the President, and shall determine the rules of its proceedings and appoint
such officers and agents as may be necessary for the transaction of its business. It shall
be lawful for any district court of the United States, upon application for that purpose
made by the chairman or any member of such board, to issue process to compel the attend-
ance of witnesses to give evidence and the production of books and papers before such
board. Disobedience to such process shall be adjudged a contempt of the court issuing
the same. The board shall summon as a witness any person whose testimony is desired
by any member of the board, and each party to any dispute shall be entitled to be repre-
sented by counsel, who may examine witnesses and present printed arguments under such
rules as may be made by the board. Witnesses shall be entitled to the same fees that are
provided for witnesses attending a district court of the United States.
SEc. 4. That each board shall conclude the taking of testimony within twenty days
after its first meeting, and shall report to the President within five days after the testi-
mony is closed: Provided, That the President may extend the time within which testi-
mony may be taken upon application of said board.
Sec. 5. That if, after the appointment of said board, the parties to any dispute between
employer and employees shall desire to end such dispute by arbitration it shall ibe lawful
for them to submit all matters in difference to the arbitration of such board, which sub-
mission shall be made under such rules as may be adopted by the board. Upon the sub-
mission of any matter in dispute, as authorized by this section, the board shall consider
the testimony offered by the parties and shall give judgment upon all matters submitted.
Each side to any dispute thus submitted shall be represented by counsel, and a copy of
the findings of the board shall be served upon the counsel of the respective parties within
ten days after the closing of testimony. A report of all proceedings had under this section
shall be made to the President.
Sec. 6. That oaths and affirmations shall be administered by the chairman or clerk of
the board, and any person who shall testify falsely shall be deemed guilty of perjury. The
term “employer " as used in this Act shall be held to include “employers,” “association,"
“ company,” and “corporation '' as fully as if each of said terms had been herein expressed
in each place where the term “employer '' is used. No person shall be prosecuted or
subject to any penalty or forfeiture for or on account of any transaction, matter, or thing
concerning which he may testify or produce evidence, documentary or otherwise, before
said board or in obedience to its subpoena.
9 1
[S. 2895.]
JUNE 27, 191 I.
Mr. TAYLOR introduced the following bill; which was read twice and referred to the Com-
mitte on Interstate Commerce.
A BILL
Requiring railroads and other common carriers engaged in interstate commerce to make
prompt acknowledgment and adjustment of claims for overcharge on freight, and for
loss and injury to same.
Whereas railroads, transportation companies, and other common carriers engaged in inter-
state commerce usually require the payment of charges assessed on freight before
the delivery of same; and
Whereas these railroads and common carriers, when claims are made upon them for over-
charges on and for loss, damage, or injury to property committed to their care, fre-
quently and unjustly delay the acknowledgment and adjustment of , such claims,
extending the time into months and sometimes into years, thereby subjecting claim-
ants to unnecessary and unwarrantable inconvenience and loss: Therefore
Be it enacted by the Senate and House of Representatives of the United States of America
in Congress assembled, That all railroads, transportation companies, and other common
carriers engaged in interstate commerce are required, and it is hereby made their duty,
to acknowledge within ten days receipt of all claims which are presented or filed with said
railroad or common carriers for overcharges on freight, or for loss, damage, or injury to
same while in the possession of said carriers or connecting lines; said receipt to specify
the number of said claim and date filed.
SEc. 2. That said railroads and common carriers are also required, and it is made their
duty, to pay all just and lawful claims within ninety days from the date of filing same
with said railroads and common carriers, and failing so to do they shall be liable to the
penalties hereinafter imposed.
SEc. 3. That the failure to acknowledge such claims as is required in section one hereof
shall subject such railroads and common carriers to a penalty of one per centum on the
amount of such claim, and the failure to pay, as required in section two of this Act, shall sub-
ject them to a further penalty of ten per centum. Both of these penalties and also reason-
able attorney's fee and such other costs as may be necessarily incurred in the collection
of said claims by suit shall be included in the judgment for said claims when recovered in
any court in which suit may be brought.
SEC, 4. That this Act shall be enforced and take effect from and after its passage.
[H. R. 4663.]
APRIL I3, 191 I.
Mr. FRENCH introduced the following bill; which was referred to the Committee on Inter-
state and Foreign Commerce and ordered to be printed.
A BILL
To promote the safety of travelers and employees upon railroads by compelling common
carriers engaged in interstate commerce to adopt uniform rules for the operation of
railroad trains and to use a uniform system of signals for authorizing the movement
of railroad trains.
Be it enacted by the Senate and House of Representatives of the United States of America
in Congress assembled, That the provisions of this Act shall apply to every common carrier
engaged in the transportation of passengers or property by railroad in the District of
Columbia or any Territory of the United States, or from one State or Territory of the
United States or the District of Columbia to any other State or Territory of the United
States or the District of Columbia, or from any place in the United States to an adjacent
foreign country, or from any place in the United States through a foreign country to any
other place in the United States. The term “railroad '' as used in this Act shall include
all bridges and ferries used or operated in connection with any railroad, and also all the
road in use by any common carrier operating a railroad, whether owned or operated under
a contract, agreement, or lease.
SEC. 2. That the American Railway Association is hereby authorized to designate to
the Interstate Commerce Commission, within six months from the passage of this Act,
a standard code of rules for the operation of railroad trains, both under the time interval
or train dispatching system and the space interval or block system, including a code of
hand, lamp, flag, and whistle signals for authorizing the movement of trains, locomotives,
or cars, and for indicating the classification of trains. Upon a standard code of rules and
signals, as provided in this section, being certified to the Interstate Commerce Commission
by the American Railway Association, said commission shall at once give to all common
carriers subject to the provisions of this Act notice of same, accompanied by an order of
said commission requiring the adoption and use of said code of rules and signals by all
common carriers subject to the provisions of this Act, within six months from the date
of said order of the commission; and thereafter it shall be unlawful for any common carrier
subject to the provisions of this Act to use or permit to be used in the operation of trains
92
upon its line of railroad any other code of rules and signals than that so designated by
said notice and order of the commission, the intent being to require uniformity in respect
of the rules and signals governing the movement and operation of trains upon railroads
engaged in interstate commerce.
Sec. 3. That should the said American Railway Association fail to designate a standard
code of rules and signals as provided in section two of this Act, it shall be the duty of the
Interstate Commerce Commission to do so within nine months from the passage of this
Act, such code to be established by the commission after hearing, and to be served upon
the carriers by the commission in the manner provided in section two of this Act: Pro-
vided, That should it become necessary for the commission to designate the said code of
signals and rules under the provisions of this section, said code shall become effective
ninety days from the date of the commission's notice and order; and thereafter it shall be
unlawful for any common carrier subject to the provisions of this Act to use or permit to
be used in the operation of trains upon its line of railroad any other code of rules and sig-
nals than that designated by said notice and order of the commission.
SEc. 4. That after a uniform code of rules and signals shall have been established as
provided by this Act such code shall not be changed, modified, or varied in any respect
except upon an order of the Interstate Commerce Commission after hearing; and no hearing
for the purpose of changing, modifying, or varying said code of rules and signals shall be
held by the commission except upon application of the American Railway Association or
other association authorized to represent generally the carriers subject to the provisions
of this Act. Any change, modification, or variation of said code of rules and signals made
under the provisions of this section shall apply uniformly to all carriers subject to the
provisions of this Act and not to any particular carrier or carriers.
Sec. 5. That any common carrier subject to the provisions of this Act failing to comply
therewith shall be liable to a penalty of one thousand dollars, each day of failure to comply
with said provisions to be deemed a separate offense, said penalty or penalties to be recov-
ered in a suit or suits to be brought as provided in section six of the Act of March second,
eighteen hundred and ninety-three, as amended April first, eighteen hundred and ninety-
six, commonly known as the “safety-appliance Acts.”
Sec. 6. That it shall be the duty of the Interstate Commerce Commission to execute
and enforce the provisions of this Act, and all powers heretofore granted to the Interstate
Commerce Commission are hereby extended to it in the execution of this Act.
PHYSICAL VALUATIONS.
By O. T. CROSBY, President.
Wilmington & Philadelphia Traction Co., Wilmington, Del.
You have been told, in able papers heretofore presented, how to make
a physical valuation of a public utility property. It remains, therefore,
that now we need consider only this — why make a physical valuation
of these properties? Is any good purpose served thereby P And we
may also consider the almost identical question — JWhen shall a phys-
ical valuation be made?
The inquiry may be further sub-divided ; who is interested in phys-
ical valuation — stockholders or creditors, or the general public, or all
these ? -
We must weary a little those who are impatient with rigorous
definitions, by pointing out that the term “physical value,” may have
two widely different meanings, leading to much confusion of argu-
ment, unless agreement at the outset be clear as to the exclusion
of one or the other of these two meanings. Thus, shall we, or shall
we not, include the cost of the several possible rebuildings of a given
plant? Or, is replacement value the true and only physical value?
Merely for the sake of clarity, let us in this discussion take the
words in the former sense. When we thus include the honest, and
riskful expenditures for things that were good in their day, and were
then thrown away, we might well use the term, 1ſt Oral value, instead
of physical value. He who would treat the early risks of capital as
though they never were, is a repudiator and a kill-thrift.
So far as the interests of the investors are concerned, a sharp dis-
tinction exists between the case of a new enterprise and an old one,
as to whether or not strict attention need be paid to the physical (or
moral) value of the thing that is to operate.
Thus, if a long-established property, having a known, and relatively
stable earning capacity, should go into the market for one million or
five million dollars, the money would be lent (or otherwise invested)
chiefly on the basis of the known earning capacity and a reasonable
assurance that the new funds are to go to betterments, not to be
wasted. -
It would not be very important to go at length into the question of
the replacement value of the property, as it exists at the moment, or
to closely investigate the past with a view to determining how much
money may have been spent on what is now the scrap-heap. A
going concern, by presumption, has sufficient plant to earn so much
net profit. Additional funds are required for some specific purpose
which, at worst, can not be thought to diminish, and in fact will
94
probably increase this net profit. A given factor of safety satisfies
the investor. This factor of Safety must always rest upon earning
capacity, and can never be guaranteed by the mere brutal fact that
such a sum of money has been spent. One dollar wisely spent and
wisely managed, may earn many times more than two dollars in the
hands of fools.
In a new enterprise, however, the investor wants to know, as nearly
as possible, the real cost of the venture. He wants to know how
much profit is probably to be had in order to determine the degree
of his risk and to settle the terms of his partnership with the orig-
inators and administrators whose work, alone (or whose work and
capital) will be combined with his own capital. The necessary cost
may, of course, include money paid for rights of various kinds which
are “physical,” only in an indirect way. But such rights as may be
necessary to the use of physical property may be taken, for the pur-
pose of the venture, as part of the material structure, and, as your
earlier papers show, the cost of such necessary rights generally, is,
and must be, considered as integral with the cost of iron or cement.
Both investors and administrators desire also to establish the costs
of their material property in order to be furnished with a convenient
formula for expressing an insidious, and sometimes neglected, element
of operating expenses. I mean the cost of depreciation. It is true
that the formulae which express depreciation as a percentage of
present physical value, are often enough erroneous; yet they should not
be discarded. They offer helpful suggestions. It is probable that in the
long run, they will be replaced by formulae based upon Some unit of
operative work, as upon a car-mile movement, rather than upon the
mere cost of material, constituting the operating system. Naturally,
we shall not have a perfectly accurate expression without including
an impossible number of factors. The task need not here be essayed.
From the point of view of the interest of investors and administrators,
considered alone, I shall go no further into the subject. We, and
our allied financiers, have recently been keener about the matter of
depreciation than heretofore. It is being carefully studied. The
balance-sheet relation of physical valuations, and all others having to
do with the conduct of a street railway as a private enterprise, will
be left, so far as this discussion goes, to the tireless effort of intel-
ligent self-interest.
The relation which is now most puzzling — which in Some cases, is
almost baffling — springs from the fact that a street railway is not a
private enterprise so far as its conduct is concerned, though it is
strictly private from the point of view that money invested in it is
wholly risked by the investor. It is this relation which I shall today
endeavor to analyze. From this point of view, the question of physical
valuations becomes the whole question of our fiscal relations to the
State. We must now ask ourselves —“For what purpose are various
95
Commissions seeking to establish replacement values?” And out of
this flows the general question — “What treatment are we to expect in
all respects from the public authorities?” It is this large aspect of the
matter which shall control my remarks to-day.
The present status is abnormal and necessarily temporary. It can-
not be permanent. In effect, the public now says to the investor in a
public utility – “You shall operate your investment as I may deter-
mine. I refuse to guaranty any return on your money, but I shall fix
at my will and from time to time, as suits my pleasure, the percentage
of profit which may be declared on — ”, On what? On the whole in-
vestment, including past and gone experiments P Or on replacement
value? Or on outstanding securities? The utter confusion in which
the subject lies may be best understood by referring to the decisions
which have been given in cases not controlled by a rate fixed in the
basic contract (or charter) of the public utility. It has actually been
necessary to go to the Courts to obtain a ruling that the rate-fixing
power shall not be used to confiscate a threatened investment. The
Courts, in some well-known cases, have gone further and stated that
rates should, if possible, be maintained at such figure as would give a
so-called reasonable return on the capital invested. Whether, in such
rule of so-called reason, there should be taken into account years of
no dividend in the past, with a view to giving Some so-called “reason-
able * return on an average of many years, and whether or not exper-
imental expenses, and part replacements, are to be always taken into
account, — as to these important questions, we have no clear rule.
Legislators are groping, many of them in an honest endeavor to be
fair, others, groping only to do the thing that will be popular at the
next election. Commissioners are embarrassed by the possession of
vague powers; if they go too far the Courts may check them ; if they
go not far enough, the public, necessarily ignorant of the specific rights
of corporations, will demand prosecution which may rapidly deteriorate
into persecution. And investors are groping.
The trouble arises from the fact that at the very beginning of public
utility enterprises the bargains made with the public were not suffi-
ciently definite. All who have had experience in working over an
European concession will remember how at first the American, accus-
tomed to the quick and easy going methods that were in vogue twenty
years ago, rather shies at the long, precise and apparently embarrass-
ing provisions which go to make up a contract with the public author-
ities.
Some of us would be glad now to be able to fall back on anything
specific, rather than to be buffeted by the caprice of official guesses as
to what sort of returns should be permitted to money ventured in the
public service. Even in Europe, however, there has not been any very
general settlement of the question as to just what the public is willing
to permit in the way of profit to private money invested in public
utilities. -
96
If there were no limit whatever; if nobody demanded that there
should be either a direct limit expressed in the rate of dividend, or
imposed by way of fixing rates, the subject, of course, would scarcely
need treatment. And it was this point of view which prevailed among
many who went into public utilities 30 or 40 years ago.
It may be taken as perfectly certain that few of the enterprises estab-
lished years ago would have attracted one dollar of capital if it had
been known that the implied rate-making power of the State would be
afterward used to limit the returns of capital thus invested to six or
seven or eight or ten per cent. -
Every one over forty can remember when all these things went, only
because a certain “hurrah '' could be created and a hope of large prof-
its held out, to those who ventured their funds. That the public
through its officials and through the general assent of the whole body
of people, and through the known advertisement of such stock when
presented for subscription, became a party to this theory, cannot well
be doubted. -
Of course, it is now easy to state that everybody must have known
that there exists always, and must exist always, in the State the power
to fix rates so that a “reasonable * return (and perhaps only a reason-
able return) should be allowed to capital. But such was not the the-
ory then. -
That this is evident is due to the facts above mentioned, and the
further fact that, in order that such a theory should have any prac-
tical application, it must be determined as to whether the implied limi-
tation of dividend shall be on replacement value fixed at any particular
time, or on the total investment, much of which may have been lost.
And it would also be ‘necessary to determine whether or not an
average or an occasional dividend was contemplated. With rare ex-
ception we know full well that this subject was not so much as
broached in the charters out of which were born a great majority of
the public utilities of this country. Furthermore — and this is very
important — it would be necessary to express a rule to guide in con-
demnation proceedings, or to guide in the liquidation at the end of a
fixed-period franchise. We all know that the State may take the hats
off our heads, provided a due compensation be made. But that due
compensation should not be a matter of ex post facto judicial deter-
mination. Let us know beforehand whether earning capacity, or
physical values only, shall be considered. Investors therefore are enti-
tled to say, “If there was an implied limitation, what was it, exactly?
At least, what were its elements?” To this question there is as yet
In O 31] SW CI.
If, therefore, the rate-making power be now so employed as to make
an extremely narrow possibility of profit, it is a very plain case of
repudiation. The word is an ugly one, but I use it advisedly. At the
same time I use it quite without bitterness, and with full recognition
97
of the fact that no State can exist without occasionally exercising the
Sacred right of repudiation. -
Every conquest over wrong has been made by repudiating “recog-
nized rights” that have degenerated into wrong. The French Revo-
lution was a bloody repudiation of rights that had been fully acknowl-
edged for a thousand years. The word is ugly because it represents
a kind of act that should be done even by the State only in the direst
necessity. If a Supreme and sovereign remedy, as that of electrocution
or repudiation, be too commonly applied, then madness lies that way.
We can avoid even the probable necessity for such an act in respect
to new franchises, if we but clarify some of the doubtful points about
which so much contention is now raging. Let us suppose that the
public, you and I and John Smith, make up our minds that we shall
not permit more than twenty per cent. profit to be made as an average
return on the cash investment made in a public utility. We may add
a condition that the rate shall not at any time exceed a fixed max-
imum. Let us say that when the twenty per cent profit is reached,
Operative companies must recognize our partnership in the enterprise
by diminishing rates, but that while working within this allowed limit,
an operative company shall be left to carry the burden of working out
the best way of producing traffic.
It goes without saying that this becomes at once a permanent rate
regulation. It also goes without saying that few enterprises would be
found making such a profit, even when allowed; and it again goes
without saying, that it will often be easier to make IO or 20 per cent,
by having a relatively low rate rather than a relatively high rate.
The electric light company which might today try to charge twenty-
five cents per kw-hour, if permitted to do so, or the ordinary street
railway company which should try to charge a fifteen-cent fare, if per-
mitted to do so, would, in both cases, become heavy losers and wind
up as bankrupts without any assistance from the public commissions.
What would be secured by this limitation would be this ; that only a
certain maximum rate, found to give most nearly the maximum return
on the investment within the agreed limit, would ever be charged by
the Operating company. -
It should be borne in mind that any such limitation at once differ-
entiates a public utility investment from a private investment. There,
it is not twenty per cent., but two thousand per cent. Or twenty thou-
sand per cent. which is the possible return on investment. It would be
probable, however, that in spite of a limitation at some such figure as
that suggested, a sufficient amount of money could be obtained to make
the needed development of public utilities. Indeed, it may be safely
stated that the promotor who endeavored to borrow, in the usual clas-
sical way, all the money required for his project in the shape of a
bond issue, will be able to get the money; other things being equal, if
4
&
98.
he can demonstrate to bankers, the high probability that his enterprise
will earn say three times the interest charges on the actual cash in-
vested.
Fifteen to twenty per cent. may seem a high margin for those who
have not tried this very often ; but when it is remembered that it is
the fashion for bond houses to require a showing from established
companies of at least twice the bond interest in net earnings, it will
be seen that the relative conservatism of today would probably de-
mand, of an entirely new venture estimates indicating a good deal
higher earning capacity than two to one over the bond interest.
This is quite reasonable, since estimates after all are only estimates.
Hopes are only hopes. But bond interest is hard cash. It will not
be necessary on this occasion, however, to sharpen our pencils in an
endeavor to fix exactly what would be an inviting rate to cover cases
of entirely new ventures.
I want particularly to urge, however, that we should always and al-
ways cry out for something definite, something precise in regard to
limitations which the public desires to place upon the earning capacity
of money invested in public utilities. This limitation should then be
further defined as to whether or not it shall cover honest mistakes of
the pioneer in regard to the purchase of plant, and that necessary ob-
solescence which must be faced, even if the highest wisdom be used
in plant purchase.
Let us, once for all, have a definition in our charters of “physical,
valuation ” in that sense; let us find out what this yard stick of “phys-
ical valuation ” is intended to measure. It is not improbable that in
clarifying this subject, it would be quite reasonable to establish a dif-
ferent percentage of return for money going into new ventures as
compared to that which goes to increase an existing or prosperous
public utility. - e
The public is, of course, a partner with the investor and adminis-
trator of every public utility. If by its growth it has given a firm
establishment to the outstanding securities of a given concern, if those
securities have earned five or six per cent. on their average market
valuation during say the preceding four or five years, then the partner-
ship interest of the public may express itself by limiting additional
profits to such amounts as are necessary to assure only a comfortable
margin, beyond the payment of five to ten per cent on all fresh capital
required for extensions and betterments and from five to fifteen on
past investments. -
I am aware that there is some suggestion of repudiation from the
point of view above indicated, even in such treatment of such existing
companies, but the practical wrong done would not be great if the
market value during the four or five years previous to any new regu-
lation should be taken account of when dealing with outstanding stock
and, on the average of such value, should be placed a limit of future
stock dividend.
99
It might be questioned that such a rule could be constitutionally ap-
plied. As a matter of fact it would not be, in legal effect, different
from the rate-regulating that is now resorted to in all such cases; and
would be, in fact, a rate regulation applied, with far greater simplicity
than is now done through the various Commissions operating in this
country. *
And it is not improbable that numerous companies would be glad to
waive any technical objection which they may be able to set up to the
fixation of such definite limits in order to be free from the vexatious
inquiries and valueless determinations which must be made in the ef-
fort of society to exercise its share of the partnership, if that exercise
be done only by the present methods.
In contemplating the industry in which we are engaged, it may be
stated, fortunately, that in most cases the rate has been fixed once
for all in our charters. Considerations such as we are now giving are,
however, of great importance even in such cases. There are many re-
quirements which are being attempted, and will be attempted, against
companies whose rates are protected by a charter, and which in the
end would have the same effect as if it were possible to lower the rate
directly.
I need not remind you of the fact that endeavors will be made to ex-
tend transfer privileges which may mean a substantial lowering of
rate. There will also be endeavors made to extend the length of ride
covered by the charter rate of fare, and there will be endeavors made
to impose construction charges of various sorts on street railway com-
panies, all of which endeavors will be in the end, when successful, of
like effect as if the traditional five-cent piece which should be rendered
unto Caesar were clipped to four or three.
We must, therefore, be as much alive to the wisdom of proper gen-
eral relations between ourselves and the public as if we did not have,
in most cases, this special position, in regard to rate, considered as a
sole factor. -
As a matter of fact there are many more points of contact between
the street railway companies and the governmental authorities than
between the steam railway companies and those authorities. It will be
easier, therefore, to make indirect charges upon a street railway com-
pany in proportion to its income than would be the case with steam
railway companies whose rates are usually not fixed in their charter,
Certain it is that as against all these various endeavors, which are
likely to be increased rather than decreased, it would be most desira-
ble to have had, or to obtain now, a definite understanding that such a
percentage of profit may be made on all money now invested in our
enterprise.
Many theoretical rights, of difficult application, might be traded off
with advantage to us and to the public, for some perfectly definite
understanding with the public in respect to our possible profits. And
100
if, in fact, no great progress be made toward an actual and formal
re-drafting of contract relations with the public, we may the more
Successfully resist some of the unjust attacks which will be made
against us if, by constant public discussion and occasional formal
adoption of definite rules, there shall finally be established a tradition
more just and more definite than that which now surrounds the sub-
ject when it reaches the Court.
We should also have in mind the fact that in some cases even those
charter rights in respect to fares, which have been accepted for
years as indisputable, may be challenged and, by some unexpected
judicial inspiration, perhaps actually set aside. The possibility of find-
ing ourselves in the position of utilities whose rates are now subject
to regulation requires us to familiarize ourselves with conditions that
would then have to be met.
We have also to consider that a number of street railway franchises
are of limited duration; expirations are occurring from time to time,
and at times conditions become so embroiled that it is found best on
both sides to take out a new charter even if the old be not definitely
ended.
We should, therefore, from every point of view, be prepared with
some fairly definite ideas as to what would be a proper relation to
establish between a public utility and the public. This is best had by
considering a new case. Let the modification and the complications
arising in the older case be for the moment set aside, remembering
that they can be the more readily solved if we agree upon some ideal
relations which would govern a new case.
Now, as indicated above, I should consider that a definite state-
ment of the allowed average percentage of profit should be one of
the fixed elements of the contract and the thing upon which that
profit is to be calculated should be definitely stated. Such an agree-
ment in regard to a limiting profit, it must always be pointed out, is,
in fact, a substantial rate regulation, free from the petty complexities
surrounding the effort to regulate rates by those who cannot possibly
have the familiarity with them which comes only through the experi-
ences of operation.
The next question of importance arises in considering how we shall
represent the possible earning capacity allowed to an enterprise. And
here we reach a source which has been fruitful of misunderstanding
on the part of the public.
I have met a great many men, properly called educated men, who
are absolutely ignorant of the things with which we must be familiar,
and that is the capitalization of earning capacity. The general outcry
against watered stock is found to be as pronounced among many pro-
fessional men as among the uneducated people of the country.
One of my objects in addressing you today, is to endeavor to purify
watered stock in the public mind. That is to say I want to endeavor
101
to establish the “convenience value * to society of perfectly pure
watered stock. I mean also its moral value, its inspirational value.
In order to have this value, however, its character should be
known, it should be bottled under the pure food law, and labelled
“water.” Most of you within the sound of my voice know the story
of how this stock comes into being. You know how a few men, usually
in the untempered zeal of youth, work day and night getting fran-
chises and rights of way, making estimates, securing contracts and
spending the little money which they may have gathered together, in
preliminary survey, and altogether performing work which I am sure
is as hard work as is done in this world.
I speak from knowledge as one who has had to do nearly every
possible kind of hard work done in this world, including that just
mentioned. Now, when it has been accomplished you know that the
next step is to convince some people who control large sums of money
that they may invest it with reasonable safety in the enterprise which
was conceived in the busy brain of the promoter and which has now
been laid out, ready for the actual creation of “physical value.”
Let us suppose that Some such understanding as is above mentioned
has been made with the public authorities, granting the charter or
franchise under which the activity is to be performed. Let us sup-
pose that it has been stipulated that an amount not exceeding I5 per
cent shall be made on the cash money actually invested from time
to time in the enterprise. Let us suppose what is, of course, the usual
case, that no kind of guarantee is given by the public in connection
with the enterprise. It is all plain risk.
We must then suppose our young men to be able to indicate that the
full I5 per cent can be easily earned by their operations, in order that
they may borrow the necessary money to establish the much talked of
physical value. - w
You know the rest of the usual story. To outline it for the sake of
those who may not be familiar with it, let us omit discount on bonds
and suppose that the project has been estimated to cost a million dol-
lars; that one million dollars is borrowed and that the borrowing of
the company is expressed in its fifty year mortgage note, bearing
5 per cent interest. This is a process known as selling bonds.
Strange as it may seem to you, yet the fact is that this unfortunate
phrase “selling bonds " has misled a great many people who imagine
that the bond is in itself a thing of value. However, passing that
point, we come now to this : that the company of men who have the
enterprise in hand have convinced others to join them by investing
one million dollars and taking the organizations' fifty year 5 per cent
note to represent this million dollars.
But they are not satisfied; those who have the money say “This is
not enough. You who have the enterprise in hand are required to pay
us only 5 per cent interest on these notes. You may earn, according
102
to your contract, with the State, up to 15 per cent. . We shall not be .
willing to become partners with you on that basis. You would get
two-thirds, and our money would get one-third of the possible profit.
We should get two-thirds and you one-third — or, at least, it should be
half-and-half.” For simplicity’s sake let us say that the half-and-half
agreement is made. .
Now we come to the point, how shall we represent this earning
capacity over 5 per cent? How shall we represent the possibility of
the enterprise earning more than $50,000 a year? How shall we repre-
sent it so that such an excess, if earned, shall be distributed inde-
pendently of the ownership of the 5 per cent notes?
Those who have the money say, “We want the 5 per cent notes
separate from everything else, because we may, when the enterprise
is well established, be able to sell them to other people who have had
no trouble of investigation and who may buy small amounts and thus
limit their risk say to $1,000 each.” º
It is convenient thus to keep the 5 per cent notes in a class by them-
selves. Their separate character from any other form of security
stands out boldly in this : That if the 5 per cent be not paid, whether
through failure to earn it or not, then the whole property that has
been created by the money, and the work of the originator, goes over
to those who may at the time be the owners of the 5 per cent notes.
Here is the first preference. Here is the highest form of security
which this enterprise can give. Let it stand alone.
How shall we represent the remaining earning capacity so that the
first layer of 5 per cent having been allocated to these note holders,
the other possible Io per cent may be separately dealt in 2 The issue
of stock for this purpose is convenient, and when thoroughly under-
stood by all concerned in its issue, is just as moral as any other pos-
sible business transaction. -
It should be borne in mind that those who have organized such an
enterprise, together with the representatives of those who have 'fur-
nished the money, must now carry out all the activities involved in creating
the heretofore imagined situation. Now they must do the work without
which capital would never have any return whatever, either 5 per cent
or I per cent. The mere brute investment of money which is not
afterward nursed by intelligence and industry can never guarantee a
dividend even of I per cent, and usually means the loss of both prin-
cipal and interest.
To bind these men together to a common rule of action for the en-
terprise, to bring it into being, in fact, as a commercial existence, a
stock company is organized, and pieces of paper are printed represent-
ing various fractions of ownership in the hope of earning more than
$50,000 per annum on the million dollars that has been borrowed.
The hope thus cherished is the inspiration for all that follows.
It is the same kind of hope and the same kind of inspiration which
is back of the young farmer who borrows money to buy a farm and
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in five years has paid off his mortgage. A public utility cannot ordi-
marily succeed as rapidly as the young farmer, but the men who throw
themselves into this work may, if successful, make large amounts
because they handle large amounts. The farmer borrows $5,000;
those who co-operate in the enterprise I have imagined borrow one
million. -
Now, when they shall have made this project earn only IO per
cent on this million dollars, instead of the allowed I5 per cent; when
they shall have done this for a number of years; when they shall have
convinced the inquirer that this rate will in all probability be indefi-
nitely continued, then they will have committed the modern crime of
creating, with a million dollars, an equal value in a separately-repre-
Sented earning capacity. That is to say, if the original physical valu-
ation of a million dollars can earn, under the guidance of the men in
question, $100,000 every year, it is possible, by the means indicated, to
satisfy the investors (who have no trouble whatever) with the first
$50,000 annually and to thus divide among others another $50,000
every year.
For the sake of participating in such a division of indefinite con-
tinuance, other men, wanting quiet enjoyment without trouble, are
willing to pay another million. If the term of such enjoyment is lim-
ited to a relatively short period, and there be no certainty as to the
allowances that will be made to stock at the end of a franchise period,
then the estimate of cash value for this earning capacity will be corre-
spondingly diminished. - - - - -
That which has confused the people who do not deal in these things
is the capitalization of that second layer of 5 per cent profit. Let us
cry these things on the house top, therefore, and let us put it straight
to the public. “Do you or do you not intend to limit us to some par-
ticular amount of annual profit on the actual money invested? If so,
state it. Then further state whether you have any objections to the bor-
rowing by those who conceive and organize a new enterprise, of all the
money necessary for that enterprise? If you do not object to this,
then can you object to the distribution among ourselves of the profit
which we may earn over that exacted by the lenders of the money.”
We will further say to the public, “ordinarily, these money lenders,
although expressing their loan, in so far as it is protected by mort-
gage, in 5 or 6 per cent notes, also in the beginning very justly re-
quire that we, the originators of the enterprise, shall turn over to
them about one-half of the possible earning capacity beyond that
pledged with the notes.
“We do this by giving them one-half of the stock, all of which
may represent only the labor of the originators and some few thou-
sand dollars in preliminary work. Now let the public keep track of
all the money that goes into this enterprise, and see that, all told,
there shall not be declared out of it, in bond interest and stock divi-
dend, more than the amount originally agreed upon.
104
“If you have no objection to such a program, it can be carried out
so that no one on earth need be deceived. We may, in the million
dollar enterprise, print stock certificates bearing, all told, nominal value
of one or two million dollars. It need be of no concern, provided
you, the public authorities and all inquiring individuals, are put on
notice of just what the situation really is. You then may buy our paper
hopes or not, just as you choose. No one has been harmed, since
all are aware of the conditions. On the other hand, a great good
has been done, since extremely convenient methods have been estab-
lished by enterprising men that they may throw themselves into an
enterprise, and may work for themselves and for society in the hope
of creating an earning capacity for invested money greater than that
which they are required by lenders of that money to pay over to
them,
“It is plain that this cannot be done save through the establish-
ment of some conveniences to society itself. No street railway, no
lighting company, no public utility of any . kind, indeed, no news-
stand or fruit-stand, or John Wanamaker Store, can make a profit
save through the fact that it serves society in some way. We are all
familiar with the enormous development which follows in any territory
where any skillful promoter has established himself, and by his cour-
age and imagination and his persuasion has struck out new lines along
which human energy may expend itself.”
Let our stand be this, that men will not work as men must work in
public utility ventures without the expectation of liberal rewards;
that we prefer to have the upper limit of these rewards made definite
rather than to be continually in contention with public authorities be-
cause they are indefinite; and before giving up the convenience of the
modern share capital company with bonus stocks, let us demand that
something better shall be contrived by virtue of which it will be pos-
sible, as it will always be desirable, to represent capital and earning
capacity either separately or combined. And if finally the public rules
against liberal rewards, and also against convenient methods for their
distribution, let all of us, as citizens, recognize that such ruling must
inevitably result in making the strong stronger, the weak weaker.
Every new construction must then be but an extension of an old and
prosperous company. In the rigid regime of 6 per cent there is no
place for the daring promoter who risks all to gain or lose much.
And I venture to say that when his voice shall no more be heard in
the land many there will be to deplore his departure. Good and bad
he is, like prophets and presidents, like winds and waves, like dogs
and drinks, but in the main, whether dreaming a transcontinental line
or a modest inter-village trolley, he is a true empire builder, personifi-
cation of the hope and vigor of our race. He is the Ponce de Leon
of commercial progress. He ventures into a thousand hardships,
makes a thousand discoveries, while seeking a perennial spring whence
105
shall flow rejuvenating streams watering the stock born of his undying
hope and his prophetic vision. The source of the stream indeed is
ours — is the State’s — but ’tis he who discovers it. Let him bottle
it legally; let him sell it under the pure food law, specifying its con-
tents, giving a statement of what is in it. He can then go to a person
and say: “There you are; there are the facts. This paper represents
money. This other paper represents work.” And, after all, what is
capital but the fruit of work performed yesterday? Let the work of
today and tomorrow also be watered into fruit by the zeal and the
intelligence of ‘the man with the hoe — and ideal
As an explorer it has fallen to my lot to observe mankind in almost
all stages of development from the most primitive to the most com-
plex. In the darks of Africa and in the wide waste spaces of Central
Asia, wherever men have ceased to live absolutely isolated lives, and
have gathered in communities, one may observe in operation the work-
ing of a blessed Trinity. - -
The elements of that Trinity are:
First : The body of people taken as a whole — that is to say, or-
ganized Society.
Second : The man with the energetic idea.
Third : The man in control of those physical things needed by the
man with the idea for the production of things desired by Society.
Now, the first of these elements is the sovereign. A composite sov-
ereign, made up, in fact, of individual subjects, such is the State. As
such it must work for the common good. . It must use the man with
the energetic idea, and it must use the man who has been permitted
to control things physical. The time may come when this third ele-
ment, the man in control of things physical, shall cease to exist and
when the Trinity shall become a duality.
But today we must reckon with a state of affairs in which private
property is fully recognized, and in which it is believed by a majority
to be able to serve best the purposes of Society. Even when the prom-
ises of socialism may have become reality and when no man shall
say, “This is my house’’ or “This is my land,” it will remain, that
the man with the energetic idea must be reckoned with if Society is
in any way to progress, if indeed, it is to continue to exist. Nothing
is plainer than that in those climes, called by us the temperate zones
of the earth, man could not make headway against the attacks of
nature were it not that, in the masses of men, there is an occasional
superior man. We must always have him in our employ in some way
or other.
The problem now is while these three — Society — the Sovereign,
the man with the idea and the man with the money, constitute the
working Trinity, that they shall have a perfectly clear understanding
as to their partnership.
Now that understanding is to be fixed solely by the Sovereign.
However, it may be fixed, the two partners of Society, the two indi-
106
viduals or groups who must be partners (if there is to be progress)
must, of course, submit to any conditions whatever that may be pro-
posed.
What we must ask ourselves, however, is always this: “Will the
usefulness of these individuals diminish P Will their activities be
atrophied ? Are the conditions proposed by the senior partner too bur-
densome or too confusing?” Above all let us, I repeat, urge, day in
and day out, that there should be as much definiteness as possible in-
troduced into these relations. Let us point out that no rule which is
unknown and which is variable can be fairly called a “reasonable”
rule.
Physical value constitutes the contribution of one of the three per-
sons just described, of one of the junior partners. Let us point out
that the two junior partners can easily arrange between themselves
as to what shall go to physical valuation, or money, and what shall
go to the energetic idea, if only the senior partner shall have deter-
mined how much he will allow as a possible profit to the money and
the idea when they shall have been united in the holy bonds of matri-
mony. Now in this marriage contract, only the contribution of capital,
money, physical value, can be definitely measured. So it may be taken
as the basis for expression of the relative interests of the three par-
ties in the profits of their joint enterprise. But it should not be so
used as to obscure the fact that the man with the energetic ideas is
also making a real contribution, and Society is making a real con-
tribution. Let that interest be expressed in the limitation of return
on physical value. Let the interest of the man with ideas and energy
be expressed in some way definitely and separately from the interest
of the man with money.
Nor is this new in the world. How many fruitful private partner-
ships have been formed on that basis P. One man puts up the money,
another puts up the idea and the work. This second man gets a por-
tion of the profits. He is in fact, a holder of the watered stock of the
partnership. He is the driving power of the world. We hear much
of a demand for the Initiative, Referendum and Recall, yet to be
acquired. But let us not forget that we now exercise a precious
power of this sort in the habitual course of business. Let us not lose
that which we possess in the search for an unknown value. Yet
Surely, if you shackle the forms of enterprise, or if you shroud its
results in a vague nimbus of “reasonable ’ returns on narrow “physi-
cal valuation,” you will destroy the Initiative of our Eager Youth —
the Nation’s hope. You will destroy the Referendum by which relative
personal capacity is measured in returns graduated to effort and intel-
ligence. You will destroy the Recall of power and privilege from the
hands of the listless second and third generation heavy in the “uncon-
scious insolence of conscious wealth " — into the hands of the man
with the hoe — and with an idea.
OVERHEAD CHARGES
By PROFESSOR MoRTIMER E. CoolEY.
Dean, Department of Engineering,
University of Michigan, Ann Arbor, Mich.
Mr. President and gentlemen of the Association. Since coming to
Atlantic City and listening to some of the papers and reading extracts
from others, I have been convinced that there was really almost no
necessity for the preparation of my paper. Nearly everything that
I had in mind to say in the way of conclusions has already been said.
President Brady, in particular, has emphasized many of the points that
for a number of years I have felt particularly belonged in my ter-
ritory; and I am very glad indeed to find that even by keeping silence,
the ideas which it pleased me to think were original have really be-
come quite generally disseminated. I had in mind to speak to you ex-
temporaneously until I arrived and spent the first day with the Associa-
tion in its meetings. The many speeches which I heard were so deliber-
ate in character and showed so much thought, and withal those thoughts
were so well expressed, that I really did not dare to come before you
without some sort of preparation, and I have, therefore, reduced a
portion of my remarks to writing. .
In the valuation of the property of public service corporations ag-
gregating more than $1,000,000,000, I have had the honor to serve both
the public and the corporation. By far the greater part of my work
along these lines has been done for the public. Having in the be-
ginning and for about seven years worked exclusively for the public,
I naturally began my study of the problem from the side of the public,
and it might be said, as against the corporation. It very soon became
apparent, however, that either the contentions of the corporations
were sadly at variance with the facts or the public was densely
ignorant of the true state of affairs; and henceforth the real problem
was to discover as nearly as might be the common ground upon
which there could be no serious disagreement.
It must be said at the outset that the responsibility for misunder-
standing rested largely if not wholly with the corporations. Their
business is of a technical character not readily understood by the
layman without explanation, and the corporation officer has not in the
past felt called upon to make explanations, at least not the kind
inspiring confidence in the public mind. This is now seen to be true,
and while not too late for correction, the failure to comprehend its
importance, even its necessity, at an earlier date has led to the very
serious controversies of to-day, wars they might be called between
the public and the public service corporation. The public. is fighting
108
for what it honestly believes its rights and the public service cor-
poration is fighting for existence. -
Putting aside the mistake which has been made in the past of keep-
ing the affairs of the corporation in a sealed book as it were any
fair minded man who will make a study of the problem with all the
information now available must inevitably reach the conclusion that
the present attitude of the public toward the public service corporation
is as much at fault and quite as blamable as was the secre-
tiveness of the corporation in the past. The public, slow to wrath,
is a mighty force when once aroused, and can no more be resisted
than the ocean tide. The tide however, reaches its height and be-
gins to ebb in due course; so with public opinion, it remains to be
seen whether in the future when our vision has become cleared we
shall profit by the experience we are now having and establish
a more stable relationship between the public and the public service
corporation, so stable in fact that a similar situation cannot again
arise.
Much swifter progress could be made in bringing the war to an
end if the fight could be carried on by the master minds on both sides.
History reveals that unfortunately that is not the way wars are
conducted. Politics has prolonged many a war, and delayed the re-
establishment of peaceful conditions after the war itself was ended.
The political charletan thrives at such times and seeks to maintain
the conditions necessary to his nefarious existence. But he is not
the only parasite; there is also the unprincipled expert, scientific expert
he calls himself, whose expertness lies in being able to set up an array
of figures in apparent proof of any result desired or required of him,
by his boss. If anything he is more dangerous than his boss, because
his weapons, figures, are juggled to suit his purpose, and are only
to be refuted by an expert on the other side who however honest he
may be, is sure to be considered by the partisan equally unprincipled.
The real forces effective to end the conflict between the public and
the public service corporation are the accountants and the engineers —
not to end it perhaps but to point the way so that the man who really
desires to be fair may have before him the facts upon which to base
his judgment. The public as a whole is honest and fair, it is only
individuals who are dishonest and unfair — and once the ignorance of
the public has been dispelled, the true and correct solution will be in
sight. But the engineer and the accountant, while in the main, honest
enough, are not to escape responsibility in some measure for this
ignorance.
The engineer has not always dared to tell the whole truth, fearing
it would not be believed, and that his reputation would thereby suffer.
He has therefore told but a part of the truth, and now when the
necessity for the whole truth is imperative his task is greatly in-
creased being obliged to explain his earlier position. In many, and it is
109
to be hoped in most cases, the earlier position of the engineer was due
to ignorance of the real facts, or more likely to a knowledge of only
a part of the facts. It is only comparatively recent that the engineer
has been called upon to work with the accountant and the financier in
the development of all the facts in connection with the creation of the
property of a public utility corporation. When engineers have failed
from timidity or ignorance, or both, to disclose all of the facts is it
to be wondered at that the public has remained in ignorance?
The accountant’s share of the responsibility cannot be said to be
due to ignorance or to any fear that his reputation might suffer from
a disclosure of all the facts; his is a different mistake. It is re-
pugnant to the average mind to wrestle with the array of figures re-
quired in setting up the details of accounts. It should be possible for
the man of average intelligence to enter an account and find there the
essential things required in comprehending the cost and the value of
a property, and the expenses of operating and maintaining it. It
should not be necessary for an expert accountant to spend months dig-
ging through accounts for the necessary data upon which to base
costs and values. This criticism, it is pleasing to say, does not bear
to-day with the force it did in earlier years because of the study
which has been given the subject and the effort on the part of ac-
countants for a number of years past to devise methods or systems of
accounting which will afford almost at a glance any particular kind
of information desired. The accountant has rather in the past been the
custodian of facts, the keeper of the storehouse as it were, but now
he must perform the additional task of preparing the facts for con-
sumption. The facts required by the public at this time are in them-
selves simple enough ; the difficulty lies in devising means to disclose
them so that they can be easily comprehended.
The public therefore, desiring to inform itself as to the cost and value
of a public utility property, requires an appraisal to be made, that
being the simple and obvious way to go about it. Prior to IOOO
the principal appraisals.of this class of property were of water-works.
In practically all cases this investigation was made to discover the
value of the plant with a view to taking it over from private to
municipal ownership, the conditions for the transfer being usually
set up in the franchise. These appraisals were usually made by engi-
neers, it being customary for the municipality and the company each to
choose one or two and these to choose another who should act as chair-
man and cast the deciding vote in case of a tie. All too frequently
the appraisers entered upon their work as advocates each for the side
choosing him, and the appraisal became a controversy, which had finally
to be settled in the courts. The decisions handed down have become
the law of the land which, while remarkably good in the majority of
cases are not altogether applicable as precedents to many of the cases
arising to-day.
110
The chief object in those days was to obtain the value of the property,
which included the so-called “going value” of the property. “Good-
will” was another element frequently considered. But to-day, and since
1900, appraisals are made not alone to discover the value of the prop-
erty, but the cost as well. The object to-day is not so much for the
purpose of transferring the property from private to municipal owner-
ship, although that is the alleged object in a few cases, but for the
purpose of taxation and rate making, and, to determine the extent
to which the issuance of securities can be authorized. Obviously it is
to the interest of the corporation to have a low value for taxation and
a high cost for rate making and the issuance of securities; but of
course both cannot be had except as the facts justify them. And
right there is the first obstacle encountered by the public and the cor-
poration in coming to an understanding. The public fails to see any
difference between the cost and the value and argues, not without some
show of reason, that if the property has a certain value for taxation
it surely ought not to be different for rate making and the issuance
of securities. The fact that the corporation fights to keep its figures
down in the one case and up in the others no doubt contributes in no
small degree to the attitude of the public toward it. It is, therefore,
important to discover first if there can justly be any difference in the
two cases, and second, if so, to what extent such difference can properly
exist.
In the appraisal of properties, if made for the purpose of taxa-
tion, a corporation naturally desires that it should not be unneces-
sarily high : on the other hand if made for the purpose of justifying
an issuance of securities, or for rate making, it should not be
unnecessarily low. Some have been very slow to realize that
they are between Scylla and Charybidis, and that a low value
for taxation argues for a low value for capitalization and for
rate making. Not long ago it was necessary to tell the presi-
dent of a large corporation the following story before beginning
an appraisal of his property. It was in the earlier days of my experi-
ence in patent cases, and in undertaking to foresee all the questions
and answers on cross examination, I would, at the noon hour, when the
cross- examining attorney was not present, lay imaginary questions be-
fore counsel for whom I was working and ask him what answer he
would suggest ought to be made in such and such a case; the questions,
of course grew more and more difficult until finally we came to the
crux. “Now,” I said, “Mr. Attorney, what answer should I make
in case that question is asked P” After deliberating for some time, he
said, “Well, Mr. Cooley, if he should ask you that question I rather
guess you had better tell the truth.”
That story has really helped me a great many times. One gentle-
man to whom I told that story came back at the end of two days and
said: “You have asked for certain information. I was not going to
111
give it to you, but I can see the force of what you said and I have
given orders that every scrap of information that can be had shall be
turned over to you.”
It is not so much my purpose in what follows to say what ought or
ought not to be done as to indicate the things which must receive con-
sideration in determining what ought or ought not to be done, in finding
the cost and value of a property and the relation of cost to value. The
average individual thinks of the value of a public utility property as
consisting merely of the things which can be found and inventoried;
in other words he thinks of the value as being made up of the physical
elements only. For many individuals it is quite a long step to add any
intangible elements, or to consider the capacity of the property to earn
a return on the investment. The farmer, for instance in placing a
value on his land unconsciously considers how much of the different
things can be raised; the first element of value being its earning ca-
pacity. Then he considers the physical structures, house, barns, fences,
drainage, equipage and stock, and other things which he has had to add
from time to time and for which he has had to invest capital in one
form or another. I venture to say that if a complete analysis of a
farming property could be had, starting from the beginning, many of
the elements or their equivalents, would be found thre same as in a
public utility property. The first thing, therefore, is to realize that the
value of such a property does not lie in the physical elements alone
independent of their earning capacity. - - -
It aids materially in quickness of understanding to assume one's
self to be the corporation, and then to take the steps successively as
they come in building up the property, putting it into operation and
carrying it along until it becomes self-sustaining. One readily com-
prehends the outlay necessary to acquire the rails, the ties, the over-
head work, and the power plants, and the labor involved in their instal-
lation. One does not however, so readily comprehend the other outlays
which although they are not seen as tangible elements are just as much
present as the tangible elements themselves. These other outlays are
in general grouped under the name of “Overhead Charges.” The term
is somewhat elastic, its scope being greater or less depending on the ex-
tent to which certain charges are considered as a part of the physical
structure itself. For instance, the two items, contingencies and con-
tractors' profits, if not included in the cost of the physical structure it-
self, would have to be considered as overhead charges; both are pres-
ent and must appear in the cost somewhere. The practice of valu-
ators is not uniform, some preferring to include those two items in the
cost of the physical structures, and others to separate them, and add
them as a percentage. Occasionally, an appraisal has been made with no
separate charge appearing to cover contractors’ profits, but in such
cases the unit costs have included them, or the items have been taken
from the contracts awarded on bids invited for the work. The con-
112
tractor's bid includes, of course, both his allowance for contingencies
and for profits. -
A usual allowance for contractors’ profits is Io per cent on the cost
of the work. The item of contingencies varies with the nature of the
work. There should indeed be two items of contingencies, one a con-
Struction charge, the other an inventory charge. The former may
vary from 2 per cent, to as much as 20 or 25 per cent. An example
of a low percentage for this item may be found in the cost of a power
unit, the contract for which calls for the unit completely installed and
operated for a time before acceptance; but in such a case the contract
price includes a liberal charge for contingencies, as no contractor would
think of undertaking the work without protecting himself against un-
foreseen expenses incident to such work. The same thing is true in
the case of cars which are delivered on a contract. An example of the
higher percentage may be found in a foundation on quicksand, or in a
job of piping or station wiring. Making due allowance for varying
conditions an average charge of 5 per cent on the cost of all items to
cover construction contingencies is as low as it is safe to go. In the
same way and for similar reasons, another 5 per cent should be added
to cover inventory contingencies, making a total charge of IO per cent
for contingencies. It has been frequently argued that little or no allow-
ance should be made to cover omissions from the inventory, the rea-
sons given being that the construction work has been done and all the
items can be found and listed. But such is not true in fact. When the
costs were figured in the first place complete plans and specifications
were at hand, and quantities could be taken off and the difficulties of
construction studied in detail. In making the inventory almost always
no plans and specifications are to be had and there can be no compre-
hensive study of how the work was done; therefore to obtain results
comparable with those obtained from a study of the plans it is neces-
sary to make a liberal allowance to cover contingencies. Indeed it
frequently has been found desirable, if not necessary, to recreate the
plans from the structure itself before undertaking to value the struc-
ture. Numerous instances might be cited to show that even a total of
Io per cent is an insufficient allowance to cover all kinds of contingen-
cies. The use of a smaller percentage can be justified only when the
unit costs have been determined from similar plants the actual cost of
which was known; and in such cases the contingency item or a part of
it, will be found in the unit costs themselves. But even when the unit
costs are such as to cover construction contingencies, there remains the
inventory contingency which must be added to complete the cost of the
physical structure as it is listed in the inventory.
The charge for engineering likewise is a divisable item. Engineering
usually covers the making of surveys, plans, specifications and estimates,
inspection of materials and the supervision of actual construction work
as it progresses. There should be added a charge for engineering in
113
connection with each general item of the inventory which, depending
on the nature of the work, may vary from I or 2 per cent up to Io per
cent and even more. Then there should be added to the total cost of
construction a general item of 2 per cent or more to cover engineering
not assignable to individual parts of the inventory. The total charge
for engineering will in some localities not exceed 4 or 5 per cent,
but in other localities it will go much higher.
Many of the earlier appraisals went no further than to include the
cost as determined from an inventory to which were added an al-
lowance for contingencies and engineering. The depreciation of the
physicial elements due to wear and exposure to the elements was then
determined, usually, by assigning to each element a total life and con-
sidering its age at the time of the appraisal. The result thus obtained
was called the physical value of the plant; and to this was added any
“going value * if it could be determined, and sometimes another value
that of “good will.” The appraisal was then considered complete.
While such a value, an approximation at best, might have sufficed in
the older days of liberal dividends and little or no scrutiny of the
affairs of a corporation, it in no way meets the conditions as they
exist in these days of public demand. The pubfic service corporation
is no longer free to do merely the things which its management con-
siders advantageous to do from the standpoint of increasing dividends.
It is compelled to do things which involve so much money that in some
cases, not only are the profits reduced to a point of practically no divi-
dends, but there is insufficient net earnings to pay the interest on the
bonded debt. It is this condition of things which renders it all im-
portant both, for the public and the corporation that the elements
of cost and of value in a public utility property be made perfectly
clear. This is the great problem of the day, and it is all important
in that it affects the life itself of the public utility. It is equally im-
portant whether the utility be owned and operated by a municipality
or by a corporation. The public service corporation is but the agent
or servant of the municipality, and what affects one must of course
affect the other.
The first thing necessary, therefore, for the man who would attempt
to regulate the conduct of his agent or servant is to fully comprehend
what he requires of him. If a man has been successful in his own
business it was due to careful study and a mastering of details. It
passes comprehension that such a man should assume to direct or con-
trol a business about which he has but a smattering of real knowledge.
If every man would apply, or allow to be applied, to a public utility
the same principles which he applies to the conduct of his own affairs,
there would be little to complain of.
What then are the things which the honest man should understand
if he is to act wisely in the regulation of a public utility. Let that
man put himself in the place of the public service corporation and see
114
for himself the things it would be necessary to do. Imagine that he
starts at the beginning. He is an active, perhaps a prominent, man in
his community. He conceives that an electric street car systern would
be a good thing for the community. He talks it over with some of
his friends, the matter is carefuly canvassed and the public sounded
to discover whether there is any real demand for street cars. This
may have taken several months, and required considerable time to
be given to the project either by the man himself or someone employed
for the purpose. Thus is a preliminary expense incurred.
It having been determined that a street car system is desirable in
the interests of the public, its promoters must consider whether it
would be desirable in the interests of the man who has money to in-
vest. That is settled at once by the rate of return likely to be realized
by the investment. Such a rate must be sufficiently attractive to di-
vert money from other channels, and moreover the rate must be
sufficient to meet any additional hazard not encountered in the or—
dinary channels of investment. A careful study must then be made
of the routes, and the necessary surveys and general plans worked out
preparatory to obtaining a franchise. Thus, are further items of
expense incurred. . The franchise having been obtained it is necessary
to obtain options on property and consents from property owners, and
these may be a very heavy item of expense. All of this work may
have taken a year or several years. It is the development period of
the project, and all items of expense legitimately incurred during this
period are proper elements of cost to be charged to the property.
Such items of expense do not appear in the inventory of the physical
elements of a property, and they are therefore an overhead charge.
The extent of this charge necessarily varies greatly with the locality.
Property consents alone have been found in Some localities to run as
high as $2.50 per front foot. In such a case the preliminary or develop-
ment charge might easily reach a figure which would represent a per-
centage q(lite beyond belief by the average man. In most cases it is not
yet practicable to separate the items of expense incurred during the de-
velopment period so as to discover whether they might fairly be rep-
resented by a percentage of the cost varying between any definite limits.
This item is altogether too frequently ignored even by experienced ap-
praisers; or, if not ignored, it is included in the item of organization
expenses, which item also frequently includes legal expenses. When
so included the combined items may vary from 2% per cent to 5
per cent and more, depending on locality.
The items of insurance both fire and casualty are now quite gen-
erally recognized as proper charges, the amount varying usually from
% to I per cent.
Interest during construction curiously enough does not appear
to have been thought of in the earlier days of appraisals; but the
man of business knows without any argument that money cannot be
115
borrowed without interest. The only question is on the time it should
run. Six per cent is accepted ordinarily as the rate, and the time
as one-half the construction period. If therefore the construction .
period be one year the rate would be 3 per cent of the total amount
expended, assuming that the expenditures start from zero, and
mount uniformly to the total at the end of the year. The construc-
tion period in a street railway system is ordinarily taken as the
time required to complete the power-plant. This in a plant of any
magnitude may be from two to three years, in which case the interest
charge would be from 6 to 9 per cent. Along with interest the taxes
must be included or set up separately; and it should not be forgotten
that the interest item must also include the interest on the expenses
incurred during the development period, if not already included in the
charge for that period.
I was once working with a gentleman of wide experience in the
appraisal of a water works, and the usual elements having been con-
sidered there came the question of interest charges. He would not
allow it; he would not think of it. He said, “I have been engaged
in this work twenty-five years and I have never allowed any interest
charges yet.” It then was necessary to put him in the place of a man
building a property and make him take each step successively; but
he had not proceeded very far before he held up his hands and said,
“I believe in interest,” and interest went in. It does not seem possi-
ble that an engineer and a very intelligent man could have engaged in
appraisal work for twenty or twenty-five years and not comprehended
the fact that interest is a real charge in the cost of property. -
At this point we have reached what may be said to be the comple-
tion of the property, ready to put the same into operation. It now
becomes necessary to add further overhead charges before this prop-
erty can be transferred from an inactive state to an active state. The
first thing after the property has been completed is to procure the
necessary stores and supplies so that one may have on hand every-
thing necessary to keep the property going. After stores and supplies
comes a working capital. The property cannot be made to go without
money being available to pay the bills as they are incurred. There-
fore, there must be at hand a sum of money not only to buy the
stores and supplies and keep them on hand, but also to pay the bills
as they are incurred before the property begins to earn for itself.
These items I also call, and I think they may be properly so called,
overhead charges. After the property has been put in operation there
is frequently a long period — a very long period in some cases of
public utilities — during which the property fails to earn any adequate
return, and it is necessary to borrow money from time to time to make
good the deficiencies in earnings. After a while — it may be five,
ten or fifteen years — the earnings are sufficient to take care of the
property and it becomes a self-sustaining property. It has then reached
116
the point which determines it as a going property. All of the de-
ficiences which have been incurred prior to the time of its becoming
self-sustaining may be called the cost of procuring a going value;
they are the items which enter into the going value of the concern.
I doubt whether any particular element in the cost or value of a
property is more difficult to analyze and set up than this very same
element of going value. I have preferred to think of this overhead
charge as not the going value itself but as the cost of procuring a
going value, or as the cost of establishing the business. If, after
the property has become fully established, the municipality desires to
take the property over from the corporation, or if another company
desires to come in and acquire the property from its original owners,
the property has a going value which the purchaser can well afford
to pay, and that going value is then precisely equivalent to the cost
which the purchaser would have to incur if he were to start and build
for himself an entire new property and bring it up to the condition in
which he finds the property when he attempts to purchase it. That
is the going value of the concern. The going value of the concern
already doing business is the cost of procuring a going value to the
concern contemplating the establishment of a similar new business.
I believe that all of these necessary costs in connection with a public
utility are properly overhead charges. I do not pretend to say this
morning that they should be included in the bonded debt. There is a
great difference of opinion, I find, in respect to these moneys that are
borrowed to keep the property going during its early days, how it shall
be taken care of. Some believe that it should go into the bond issue,
others that it should be carried as debt and wiped out gradually. I
do not think I am ready to pass my opinion on the respective merits
of the two methods. This money has got to be raised, of course, if
the property is to be kept going, and if it is a public utility demanded
by the public, or necessary in the interest of the public, the public
should recognize that it becomes a charge which it must meet in one
form or another. Whether put into capital or carried as a floating
debt, the interest must be paid ; and if carried as a floating debt, the
principal must also be paid or funded sooner or later.
Closely allied to going value is good-will. In general, it may be said
that the element of good-will is not found in the value of public utility
properties. It is, however, a common element in the value of some
other kinds of property, as, for example, the business of a merchant,
a manufacturer and a hotel. Such property may include both going
value and good-will as elements, or both may be included under either
name, preferably under going value if but one name is to be used.
Differentiated, the going value would include the costs of establishing
the business after being put into operation and it might also include
favorable location, making for the convenience of patrons; good-will
would then be the value which comes from the satisfaction obtained by
117
customers or patrons which leads them to continue their patronage.
Good-will not infrequently becomes a large element of value in the
transfer of property. Thus differentiated good-will might be an ele-
ment of value without being an element of cost; but going value, par-
ticularly as relates to public utility properties, includes or depends
On COSt.
It is altogether necessary that there should be taken into considera-
tion, not only the elements named, but many other items which to-day
are often completely ignored; as, for example, the disappearance of
elements of property cost which cannot be found and inventoried,
although their cost and value still remain in the property as much as if
they were present. It is these things which it is absolutely necessary
the public should understand before the public and the public service
corporation can get together on any equitable footing.
Then, finally, all these expenses having been incurred, there comes
the cost of financing. There again is found a difference of opinion as
to whether the cost of financing should be permitted in capital. I do
not propose to discuss that, it being a question of economics. Everyone
knows, of course, that except in most exceptional cases it is impossible
to dispose of securities at anywhere near their par value. There is al-
ways the element of discount, particularly in a new business, and that
discount has got to appear somewhere. If not in the capital, then it
must be paid out of the earnings of the company in one way or another.
Now how much is it proper to allow for discounts? That question
has come up many, many times, and I have myself conducted investi-
gations to determine the amount. In some cases, particularly steam
railroads, the securities have been sold as low as 60 per cent. The
highest figure I have ever encountered in my own work was 92 per
cent. At my request, Mr. R. B. Rifenberick, who is present, examined
the reports of the Public Service Commission of the Second District
of New York with a view of finding what had been authorized in
the State of New York by that Commission, and I have here the re-
Sults of his investigation. It covers a large number of cases during
the years IQ08 and IQ09. In 1908, there was a total of sixty-three
and a half millions of bonds authorized to be issued. The interest
rate averaged 4.29 per cent. The amount of annual interest was
$2,700,000. The mean value, for which the bonds were authorized to
be sold was 88 per cent.
In the year 1909 there were thirty-nine millions of securities au-
thorized to be issued at an average rate of 4.8 per cent and the mean
value for which the bonds were authorized to be sold was 87.6 per
Cellt.
It would, therefore, seem to be beyond any further argument, as-
suming that the experience in New York State is the experience else-
where, that at least Io per cent should be allowed for the cost of
getting the securities on the market. And yet, the average man
118
cannot be made to believe that he should pay this Io per cent. It
is difficult for him to comprehend it. I do not believe the men who
are intimately connected with the street railway business, for instance,
fully comprehend just the difficulties which the average mind en-
counters. There is necessity for a campaign of education.
In promulgating the facts it will be necessary to avoid as far as
possible the technical language of accountants and use the language
which the average man can comprehend and understand. This is very
important, even more important perhaps than the fact itself. You
should study the means of getting that fact to market. Your market
is the public. g
While the difficulties pointed out are real, so far as the public is
concerned, they are many times magnified when it comes to compre-
hending the possible total of overhead charges which may apply to
a property. Depending on locality and whether certain of the items
discussed may or may not be included in the cost without being sep-
arately stated, the total of overhead charges may vary from 20 or
25 per cent to 50 or 60 per cent of the cost as determined by the in-
ventory; that is to Say, the total cost of the property will vary from
I.20 or I25 per cent to I50 or I60 per cent of the cost as determined
from the inventory of the physical elements alone. The larger per-
centages will usually be found in the larger cities.
Thus far I have discussed mainly the cost of property; it is the
cost of a property which must be considered in determining rates and
the amount of securities to be issued; it is the value of the property
which should be considered in all cases of taxation. Are these the
same or are they different? I think it may be said, in general, that
the value of property for purposes of taxation does not include all
of the elements which appear, and which properly appear as elements
of cost to be used in determining rates and capital. It is no part of
this paper to discuss those cases in which there is a large element
of value due to earnings and which is non-physical in character.
Now another point in that connection — it is always absolutely neces-
sary to obtain the cost of building the property new, that is, with new
elements, before any accurate determinimation can be made of the
present value of the property. För in determining the present value
of property it is necessary to discover to what extent the different
physical elements have depreciated, and what elements are to be trans-
ferred from the cost column to the value column without any de-
preciation whatever. That is another matter the public does not
understand.
The following items or elements in the cost of a property are trans-
ferred from one column to the other without change; that is, they
suffer no depreciation: Development charges, organization and legal
expenses and engineering. These are fundamental to the life of a
property. They exist as long as the property itself exists. They
119
cannot suffer depreciation. Right-of-way cannot suffer depreciation;
indeed, it may appreciate very considerably. Insurance, interest and
taxes during the construction period, stores and Supplies, working
capital and the cost of establishing the business, are all items which
stand at IOO per cent. -
It will be interesting for you to know what percentage of the total
cost of construction has been found to be represented by the present
value of different kinds of property. I am sure you will be surprised
when I tell you that they do not differ so very greatly in different
classes of property. Of all the railroads in Michigan, aggregating
rather more than Io,000 miles of tracks, the cost of reproducing all
of the elements new was in 1900 in the neighborhood of $200,000,000.
When the elements had been subjected to depreciation determined by
actual inspection in the field by experienced men, it was found that
the value remaining in the physical elements was about 82 per cent.
That is to say, the railroads of Michigan in 1900, good and bad, stood
with their physical elements at about 82 per cent of what it would have
cost to put those elements in new in 1900, including such overhead
charges as were allowed at that time. But I900 was fairly early in
appraisal work and the time at the disposal of the appraisers was very
brief; consequently a number of overhead charges that are now recog-
nized as being entirely proper were not considered at that time.
In the case of electric properties within my own knowledge, the
value of the physical elements, allowing for depreciation, has been
found to vary from 77 per cent to 88 per cent of the cost of reproduc-
ing the elements new. Very much run down properties will fall below
and almost new properties will run, above the figures given. Electric
railway property will be found to have a lower percentage than electric
light and power properties, on account of rails, ties and cars, there
being no corresponding elements capable of So much depreciation in
light and power properties. -
I think it is safe to say, in a general way, that electric railway
properties, if they are being maintained in a condition to give satis-
factory and economical service, must stand somewhere around 85 per
cent. There is an economical point beyond which you cannot afford to
maintain them, and below which you cannot afford to let them go.
I do not know just how to determine that point, but it stands to rea-
son that a property should not be maintained at a point which would
involve more expenditure than would correspond to any increase in
earnings nor should a property be permitted to depreciate to a point
resulting in a net decrease in earnings. There is always a point of
maximum efficiency. The hydro-electric and steam-electric properties
of Michigan, practically all of them, which are serving the public, have
been valued during the past eighteen months; most of them are new,
so that the present condition of the properties is rather more than 90
per cent, between 90 and 95 per cent of the cost of reproducing these
120
properties new ; but they will gradually settle. Electric roads must
stand higher in this percentage than steam roads, copper being one
of the elements which does not suffer depreciation anywhere near to
the extent that some of the other materials suffer.
I have not attempted, of course to discuss intangible values; and
by the use of the term “present value of all the physical elements,” is
simply meant the condition of the elements, that is, the fraction or
percentage of the total life at which they are maintained. It may or
may not have any particular relation to the earning capacity of the
property itself. -
The Accountants’ Association and accountants generally can, I
think, do more than almost anyone else towards disseminating the
information which it is necessary for the public to have at this time.
You at least can prepare the information so that it can be made to
do its best work. One of the things that all appraisers want to-day
is facts. The engineer when testifying in courts is obliged to give
an opinion, when he should be able to state a fact; and you ac-
countants can give the information or the data which will enable him
to change an opinion to a statement of fact, and that you should do.
For instance, I give it as my opinion that Io per cent of the cost of a
property was properly spent during the development period. I am
asked to prove it. I cannot do it. You gentlemen should be able to
say precisely how much money was spent in the development period
from your books; likewise with other elements upon which we have
to render an opinion to-day, an opinion which is believed or not be-
lieved, depending upon whether the man who hears it wants to believe
it or not. There is a big difference between an opinion and a fact
in court, and it is you gentlemen, you accountants, who must prepare
these facts. You have got to pave the way—you have the necessary
paving material at least. And I would like to close by urging you to
undertake this work now. The time is ripe. The public must have
this information, soon. There need be no fear what the ultimate re-
sults will be. Everyone will come out on top. Both the public and
the public service corporation are coming out on top, but it will be
the same top. .
*
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