OF THE
ºf OF REPRN
of THE . . . .
f
RENTATIV
ri
y
t
* .
‘.
\ . . . .
‘Y
- -
THIRTIETH LEGISLATURE OF TEXAs
APPENDIX D.
MON CARRIERs
| ". . . -- -
-º-º-º-
} - - - f
1907
- ſ - ( : C
...&#. ~
- ºilº 'ºn -
º §: §º,
Cºffſ § *† §§ ºftb
# !!!"; *% t | | | !| [. º G
4.
*
º iš
- º {{ {
§
º
º
|
-. - ºf
©º
… *. | º º -
w
. . . . . . AUSTIN, TEXAs.
VON BOECKMANN-JONES COMPANY, PRINTERS.
**, sº - - ... "..
{..} : . . . . .
| REDUCTION OF PASSENGER
PUBLISHED By AUTHORITY of THE HOUSE OF REPRESENTATIVEs ||
---- -
|w&
l
i
| ARGUMENTS HEARD IN THE COMMITTEE ON COM. ||





























HOUSE JOURNAL

REGULAR SESSION
THIRTIETH LEGISLATURE OF TEXAs
APPENDIX D.
REDUCTION OF PASSENGER
FARES
ARGUMENTS HEARD IN THE COMMITTEE ON
COMMON. CARRIERS
&
The following bills being under consideration in the committee—
House bill No. 64, by Mr. Terrell of Cherokee: A bill to be entitled “An .
Act to amend Article 4542, Chapter 10, Title XCIV, of the Revised Civil Stat-
utes of the State of Texas, 1895, relating to passenger fare upon all railroads
in this State and fixing the maximum charge per mile therefor.”
House bill No. 271, by Mr. Love of Williamson: A bill to be entitled “An Act
to amend Article 4542, Chapter 10, Title XCIV, of the Revised Civil Statutes of
the State of Texas, 1895, relating to the passenger fare upon all railroads in this
State, and fixing a maximum charge per mile therefor.”
House bill No. 272, by Mr. Thomas of Fannin: A bill to be entitled “An
Act to regulate and fix the passenger fare on all railroads in this State, and
provide for the redemption of all tickets sold by such companies.”
PUBLISHED BY AUTHORITY OF THE HOUSE OF REPRESENTATIVEs
- - 1907 • \º º
H E
2 d 3
T4–
A 2,
14 o 7
By transfer
FEB 1 1908
REDUCTION OF PASSENGER FARES.
IN THE COMMITTEE ON COMMON CARRIERS, FEBRUARY 12, 1907.
TUESDAY, FEBRUARY 12, 1907, 10:30 A. M.
The Chairman (Mr. Robertson of Bell) —The clerk will call the roll.
(The roll was called by the clerk of the committee.)
The Chairman—Read the minutes of the last meeting.
(The minutes of the last meeting were read by the clerk.)
The Chairman—If there is no objection, the minutes will stand approved.
Now, I will state to those present, especially the Commissioners, who are here
this morning by invitation, that this matter of reducing the rates was discussed
all last week by those who represented the railroads, and we closed the arguments
in so far as they are concerned. They are here this morning to see what the
Commission have to say, and we are here to hear from them. Mr. Mayfield,
you are chairman of the Commission, and we would like to hear from you on
the subject.
Mr. Mayfield–May I sit at the table?
The Chairman—Yes, sir; sit there at the end of the table.
Mr. Mayfield—I do not want to appear, Mr. Chairman, as a partisan on either
side of this question.
The Chairman—Well, you are here by invitation from the committee.
Mr. Mayfield—Yes, sir. r
The Chairman–In response to their request. -
Mr. Mayfield—I was present one day last week and heard some statements
made with reference to the official action of the Railroad Commission that I
thought it to be my duty to correct, from our point of view, and I asked for
the privilege of presenting some data from the records in the office of the Rail-
road Commission that I think puts a different phase on some statements that
have been made to this committee. -
Among other things, it was suggested to this committee that the Railroad
Commission had reduced rates to the point of confiscation of the railroads of
this State. I give you the record of the railroads’ earnings since the organiza-
tion of the Railroad Commission—not since the organization of the Railroad
Commission, but since the last injunction suits, in 1898. The railroads of Texas,
the principal lines, secured in the fall of 1898 an injunction against the Rail-
road Commission restraining the rates then in force. Before that case was tried
they compromised with the Railroad Commission, the majority of it, asking
for an increase in the aggregate of about 10 per cent. The gross earnings
for the year in which the injunction was secured were in round figures $41,-
000,000. They asked for an increase of 10 per cent of that. There was some
difference of opinion as to the percentage of the increase, but in the aggregate
they did secure an advance of about 10 per cent, because the next year showed
gross earnings of $45,000,000—that is, about 10 per cent of the earnings
of the previous year. Bearing in mind, then, that the gross earnings of the
railroads of Texas were $45,000,000, which was all they asked for in the settle-
ment of the injunction suits, they tell you that the Railroad Commission has
reached the point of confiscation, and that they can not stand any further
reduction in any form of their earnings. For the succeeding year their gross
earnings were $47,000,000; the next year, $58,296,000; the next year,
890,000; the next year, $62,700,000; the next year $65,209,000; in 1905,
145,000; in 1906, $75,510,000—a steady, healthy, wholesome annual increase fº %2
their earnings for each succeeding year. The fiscal year ends June 30th Լ
of each year. We have their report for the current º º
months, ending November 30, 1906. That is also accompanie f
ment of the earnings for the corresponding five months of he precedifig
- * ...
sº A


4 REDUCTION OF PASSENGER FARES.
year. That shows that for the first five months of the present fiscal year
their freight earnings were $28,000,000, as against $23,000,000 last year.
Their gross earnings for 1906, for five months, were $40,000,000, as against
$33,000,000 last year—nearly as much as it was for the twelve months when
the injunction was secured in 1898. Their met earnings for the current five
months are $16,000,000—no, that is wrong—$14,631,000, as against $10,243,000,
or a net increase for the current year in net earnings over the corresponding
period last year of 42.84 per cent. That is the record furnished by the railroads
to the Railroad Commission. We submit it in answer to the charge made that
the Railroad Commission is confiscating the railroad properties in Texas. The
net earnings of the railroads of Texas are not as large as they ought to be,
and I am unable to tell you why that is so. I have some reasons for believing
that the gross earnings are misapplied, and I submit a statement here that
I believe is worthy of consideration—while it is not absolute proof, it is worthy
of consideration.
I have here a statement showing the percentage of the gross earnings per
mile of the Atchison railway system outside of Texas in comparison with the
G., C. & S. F. I use the fiscal year ending June 30, 1904, because those are
the most recent figures which we can get for the Atchison system. We have
to use Poor’s Manual for roads outside of the State. The gross earnings of the
Atchison were $8334 per mile; operating expenses were $5161 per mile; the
percentage of operating expenses to the gross earnings was 61.94—about 62
per cent. The annual report of the G., C. & S. F. that year shows gross earn-
ings per IIIile $6700, as against the Atchison's $8600 gross earnings per mile,
whereas the operating expenses of the G., C. & S. F. were $5300 per mile, as
against $5100 for the line north. In other words, it cost in Texas $200 a mile
more to earn $3000 a mile less. The percentage I used just now, 61.94, was for
the whole Atchison system. I see here that the Atchison north, outside of
Texas, was about 60 per cent, as against 79 per cent in Texas.
Comparison of gross earnings and operating expenses of Morgan’s Louisiana
& Texas Railroad and Louisiana Western Railroad, the two considered to-
gether, with those of the Texas & New Orleans Railroad, for the year ending
June 30, 1905. The two Louisiana railroads earned $13,000 per mile; the
T. & N. O. in Texas $6000 a mile. The operating expenses of the Louisiana
railroads were $8000 a mile, and the Texas railroad $5200. The percentage
of the operating expenses for the Louisiana roads was 58 per cent, whereas
in Texas it took 86 per cent to pay the cost of operating.
The M., K. & T. percentage of operating expenses North, 58 per cent; in
Texas, 89 per cent. It takes about a thousand dollars a mile more expenses
in Texas to earn a thousand dollars less, gross—an absurdity on its face.
The Cotton Belt in Louisiana and Arkansas pays out 58 per cent of its earn-
ings for its gross operating expenses; in Texas, 70 per cent—no, that’s the Texas
& Pacific. The Cotton Belt, outside of Texas the Cotton Belt pays 63 per
cent and 63-100 of its gross earnings for operating expenses; in Texas it pays
80.81 per cent of its gross earnings. It takes the Cotton Belt in Texas about
fifteen hundred dollars a mile—no. I don’t know why the cost of operation
should be more in Texas than it is in Louisiana, Arkansas, Missouri, Kansas
and the Territories. Labor is the same. There is a little difference in the cost
of fuel in the Territory and Arkansas, perhaps, but that is overcome by the
advantages afforded by being mearer the lumber supply, which is a big item of
Cost in railroad maintenance. We have no mountains to cut through; our
valleys are no more numerous; our bridging is no more extensive than generally
prevails in level country. I don’t know and I have never heard advanced, any
good reason why the cost of operation should be so disproportionate in thi
State as compared with other States. -
Now, with respect to the action of the Railroad Commission in reducing rates
for passenger service on the Houston & Texas Central, the Commission has been
criticised somewhat for its failure to extend that order to other railroads.
In our mind, a sufficient answer to that is that the law expressly authorizes
us to make passenger rates on separate lines of railroad. If there is any ques-
tion about it in the mind of any one, why, I can refer you to the statute. It may
be that the Railroad Commission ought to reduce rates on other lines of railroad,
REDUCTION OF PASSENGER FARES. 5
but that is no answer one way or another as to whether the order with respect
to the Houston & Texas Central is proper or not.
As to whether or not the Railroad Commission has approached a confiscation
of the properties of the Houston & Texas Central Railroad Company, I have
here a statement prepared by the auditor of the Railroad Commission that we
think is interesting. It is a brief statement of the earnings of the Houston
& Texas Central Railroad for the year ending June 30, 1900, and for each suc-
ceeding year up to 1906. This statement is made from the reports of the Hous-
ton & Texas Central, and includes, first, gross earnings from all sources.
From that is deducted the cost of operating that road; also is deducted the
entire expenditure for taxes and permanent improvements, and the net balance
is capitalized at 4 per cent per annum, for it is well known that money well
secured, in large volumes, can be secured at that rate of interest. That is
the method of arriving at the value of that road, based on its earning capacity.
Now, that is regardless of guesswork as to the cost of material at different
times and the good will—the value of the good will of the road; that is an
actual mathematical calculation, based upon its earning capacity, capitalizing
its net earnings. First, charge it with the gross receipts from all sources;
then from that subtract every expenditure of every sort—operating expenses,
taxes, permanent improvements—that goes into the value of the property, and
then take that balance, which is their net earnings, and capitalize it at 4 per
cent each year. For the year ending June 30, 1900, it shows that the road
was worth, upon the basis I have named, $36,344 per mile—this is reduced to a
mileage basis; for the year ending June 30, 1901, the road was worth upon the
same basis $87,023.25 per mile; for 1902 it was worth $48,532 per mile; for
1903 it was worth $29,724.75. For that year, the auditor states, the permanent
improvements were unusual; the expense that year for permanent improvements
was $348,000. For the next year, 1904, there was still an unusually large ex-
penditure for permanent improvements, and yet in spite of that the road earned
upon the basis stated, or a value of $28,470 a mile; for 1905, upon a basis of
$40,699 a mile, and for the year ending June 30, 1906, using the figures for the
fiscal year at the time this statement was prepared, and estimating upon the
previous year for the balance of the year, shows a valuation of $44,542 a.
mile, and the whole, in the aggregate for those seven years that I have just
mentioned, shows a valuation—an earning upon a valuation equal to $46,721 a.
mile. At 5 per cent it would equal a valuation of $37,417 a mile, and at
6 per cent $31,180 a mile. This road is bonded for $14,492 a mile, or stocks
and bonds aggregating $37,551 a mile, and yet we have allowed it what is
equivalent to 4 per cent on $46,721 a mile. Its value as fixed by the Railroad
Commission is $19,820 a mile.
I brought these papers along to show you—give you some idea of the amount
of passenger fares that were reduced upon the voluntary action of the railroads
themselves. That represents only a month’s application to the Railroad Com-
mission for reductions, and those are just the principal roads. My judgment
is that possibly less than 50 per cent of the people who ride on railroads pay
less than 2% cents a mile.
The Chairman—You say that is one month's applications?
Mr. Mayfield—Of the railroads, yes, sir; those are authorities that were
asked. - -
The Chairman—Asking for what?
Mr. Mayfield—For reduced rates for various purposes. It is a daily occur-
rence with us. The men who pay 3 cents a mile in Texas, 75 per cent of them
practically in my judgment would pay 5 cents if the law allowed it. Those
men have to travel. Something was said about the drummer the other day—
that we ought not to make these rates because it would affect the drummer.
He only pays 2% cents now. He buys his mileage and these interchangeable
tickets.
The Chairman—Now, those are in the shape of applications for the reduction
Cºf fares for different things—excursions?
(Mr. Mayfield—Here is one for a reduced rate on account of Daughters of the
Confederacy meeting—application from baseball men, and everything—
6 IREDUCTION OF PASSENGER FARES.
The Chairman—Anything they want to make?
Mr. Mayfield—Yes, sir.
Mr. Carswell—Do they have to get permission of the Railroad Commission
to give an excursion ? .
Mr. Mayfield—No, sir, and yes, sir, too. Strictly excursions, they do not,
but there is frequently involved an element of discrimination that they take
chances on, and so they secure our approval. We require notice to us to be
filed with us whenever it is made, in order to have knowledge of the business
of the railroad companies. They have authority under the statute to make
them without our consent or action one way or another.
We have some exhaustive statistics with reference to the Houston & Texas
Central passenger business for the year ending June 30, 1906. The number of
passengers carried one mile was 52,728,000. The average receipts per passenger
per mile were 2 29-100 cents.
Mr. Carswell—Does that include free transportation, too? -
Mr. Mayfield—No, I guess not; no, that is paid transportation; that has
no relation to free transportation. The number of passengers carried one mile
at more than 2% cents a mile was 25,753,000, whereas the number of passengers
carried one mile at less than 2% cents was 26,975,000—more passengers were
carried at less than 2% cents than there were at over 23 cents. Now, the average
receipts from the transportation of passengers per mile who paid more than
2} cents were 2.95-100—not quite 3 cents; whereas the average paid by pas-
sengers who paid less than 2% cents, which was a majority, was 1 66-100
cents per mile. The Houston & Texas Central receives as near to 3 cents as
any of them, because it traverses the most densely populated section of Texas
and it has short-line mileage, it don’t have to meet any short-line rates any-
where, and its reductions result, in the main, from voluntary action, except
the child’s fare; of course that is included, that is one-half. The effect of
the order made by the Railroad Commission upon the actual figures, based
on the business for 1906, shows that if our order had gone into effect their
average receipts would have been 2 7-1000 cents—2 cents and 7 mills per
passenger per mile, whereas they actually got 2 cents and 29 mills—a differ-
ence between 29 mills and 7 mills; that was the reduction if our order had
gone into effect on the Houston & Texas Central.
Mr. Henderson—Judge Mayfield, have you the earnings of the Fort Worth &
Denver City Railroad from Fort Worth to Texline 7
Mr. Mayfield—Yes, sir—I haven’t got it with me now.
Mr. Henderson—Well, now, have you any idea what that earns over that
part of the road 7 I ask that question because it is through a thinly and
sparsely settled country.
Mr. Mayfield—The Fort Worth & Denver City ?
Mr. Henderson—Yes, sir.
Mr. Mayfield—I have only got it for five months here. I can get it from the
records of our office.
Mr. Henderson—I thought maybe you had it.
Mr. Mayfield—Now, for five months ending July 30, 1905, was $1,394,777.
Mr. Henderson—-Give me those figures again.
Mr. Mayfield—#1,394,777.40. Now, for the same five months in 1906 they
earned $1,853,420.38. -
Mr. Henderson—That was gross earnings? - .
Mr. Mayfield—That was gross earnings—an increase of nearly half a million
dollars for five months.
Mr. Henderson—Now, do you know what the net earnings were 7
Mr. Mayfield—Yes, sir; I will show you that for the same period. The net
earnings for 1905 were $472,938.02; for 1906, $677,533.75—an increase of
nearly $204,000.
Mr. Henderson—How many miles of railway, now, is that?
‘Mr. Spoonts—Four hundred and fifty-four and a fraction.
Mr. Mayfield—Mr. Colquitt, have you got their annual report?
Mr. Colquitt—No, sir; I have not.
REDUCTION OF PASSENGER FARES. 7
Mr. Mayfield—The mileage of the Fort Worth & Denver City, judge, you say
is how much 3 -
Mr. Spoonts—Four hundred and fifty-four and a fraction. There is a differ-
ence as to the exact figures.
Mr. Wilmeth—What is the value of that road 7
'Mr. Mayfield—You want it per mile, or in the aggregate?
'Mr. Wilmeth—In the aggregate. §
Mr. Mayfield—They have outstanding stocks and bonds $17,551,000.
Mr. Henderson—What is that per mile?
Mr. Mayfield—Per mile?
Mr. Henderson—Yes, sir.
Mr. Mayfield—Yes, sir,
iMr. Mayfield—$38,000 per mile.
Mr. Wilmeth—Is that the value of the property? -
Mr. Mayfield—That's the stocks and bonds they have got. We do not for a
moment concede that that is the value of the property, or anything like it.
Another thing that in my judgment dissipates the earnings of the railroads in
Texas unnecessarily and unjustly is the peculiar manner the Texas roads, some
of them, have of dividing up their earnings on joint shipments with the outside
connections. Mr. Yoakum the other day referred to a statement, a controversy
between him and myself, otherwise I should not refer to it, because all I had
to say I took from the records of the office of the Railroad Commission, and I
just want you to know it. This is a copy of the statement that he referred to,
and it illustrates the proposition I submit as well as I can state it, and so I
will read it. Referring to the St. Louis & San Francisco Railroad of Texas,
he made the statement that the Railroad Commission was making rates that
were confiscating his property. “For the fiscal year ending June 30, 1902, for
which year Mr. Yoakum says his road exhibits a deficit of $11,767.86, I have
before me a sworn statement of the auditor of the St. Louis, San Francisco &
Texas Railway, sworn to on the 7th day of August, 1902, with respect to only
one commodity handled by that railroad for that fiscal year. In order that
you may fully appreciate the injury practiced upon the St. Louis, San Fran-
cisco & Texas Railway by its foreign connection, towit, the St. Louis & San
Francisco Railroad, I enclose to you here with a copy of the sworn report of
its auditor with respect to the cotton handled and the earnings derived by it
from that source for the fiscal year ending June 30, 1902. An inspection of the
said report discloses the fact that the St. Louis, San Francisco & Texas Rail-
way during that season handled 47,000 bales of cotton, of which amount 7411
bales originated in Grayson county, all of which was concentrated at Sherman,
and the balance, towit, 39,589 bales, originated at points in the Indian Terri-
tory and concentrated at Sherman. The gross earnings from the handling
of all this cotton credited to the St. Louis, San Francisco & Texas Railway
was only $6,816.65, or an average of a little over 124 cents per bale”—that’s
what a dray gets, I think, or 15 cents a bale, just draying cotton in town.
“Probably, if you will examine the detailed statement of the earnings of the
St. Louis, San Francisco & Texas Railway, you will see that their earnings are,
in a great many instances, but little over 1 cent per 100 pounds, or 5 and 6
cents per bale, not a decent switching charge for the service performed. An
examination of the report of the Fort Worth & Rio Grande Railway for the
identical period of time”—now, that is before the Frisco had gotten this Rio
Grande road from Brownwood to Fort Worth—“where rates on cotton are
identical with those on the St. Louis & San Francisco & Texas Railway, shows
that the Fort Worth & Rio Grande Railway, which was not then connected up
with the Frisco North and, therefore, had to deal with independent lines at
Fort Worth, received net on each bale of cotton handled by it 30 cents per
100 pounds, or $1.50 per bale, save and except one small lot that went to
Japan, for which it received 24 cents per 100 pounds. It is an unwritten rule
that prevails in Texas without exception among independent lines, that the
line originating cotton receives the major portion of the rate, but that the
delivering line receives a minimum of 20 cents per 100 pounds. Upon this
basis it will be seen that the St. Louis, San Francisco & Texas Railway, for
8 REDUCTION OF PASSENGER FARES.
that cotton originating in Grayson county, which could have been turned over
to any of four connections at Sherman, would have received in the aggregate
$11,160.50, and on the other cotton handled by it it should have received as a
minimum $39,589, aggregating $50,705.50, whereas according to its report to
us it received only $6816.75, disclosing a net shrinkage of $43,888.75. It,
therefore, follows that if the St. Louis, San Francisco & Texas Railway had
been independent in its management and honest in the exhibition of its accounts
with reference to the one item of cotton, instead of showing a deficit of $11,000
there would have been a handsome surplus to its credit.” With reference to
other commodities, it would show a similar showing, so I had the chief rate
clerk in the office prepare a statement showing the different division sheets on
existing connections with the Fort Worth & Rio Grande and its northern con-
nections at Fort Worth before it became linked up with the Frisco and then
after it became linked up with the Frisco, that statement showing the earn-
ings of the Fort Worth & Rio Grande on shipments with first-class and
class A rates from St. Louis to Dublin, and on wheat, car lots, Kansas City
to Dublin, also on beef cattle, car lots, from Dublin to Kansas City, as follows:
The first-class rate from Dublin to St. Louis is $1.37 per 100 pounds. Out
of that rate of $1.37, the shipment in every instance is turned over to the
connection to be made at Fort Worth, going either north or south, the Texas
road would get 35 per cent, or 48 cents per hundred pounds. In connection with
the Iron Mountain and Texas & Pacific, it would get 48 cents per hundred, and
the same with the Cotton Belt, whereas with the Frisco it gets 19 cents per
100 pounds, and, of course, everything goes by the Frisco. Class A–the other
was first-class in less than carloads usually. The rate from Dublin to St.
Louis is 79 cents per 100 pounds. Now, if the shipment went over the Iron
Mountain and Texas & Pacific, it would get 27 cents per 100 pounds, or $82.95
for the car, the same with the Cotton Belt, while the Frisco system it gets
$32.70 per car—it loses about $50 per car by being linked up with the Frisco.
Wheat, Kansas City to Dublin, rate 31 cents. Going over the Missouri Pacific,
Iron Mountain and Texas & Pacific it earned $43.40 for the car, and the other
$1'ſ per car. Beef cattle, with the Missouri Pacific, Texas & Pacific via Texar-
kana, it would get $30 a car, whereas with its parent line it gets $12 a car.
Now, the Railroad Commission has no power to fix the division on interstate
traffic, that is voluntary on their part, but that is one reason that the earnings
of the Texas roads, in my opinion, do not present a better showing—it goes to
outside connections in that way.
TMr. Thomas—Mr. Mayfield, on the question of expenses, do not nearly all
the railroads in Texas have parent lines beyond the State line to which they
report, and do they pay anything towards the president and directors and so
forth outside of the State 2
Mr. Mayfield—Well, yes; of course, nominally they don’t pay—
Mr. Thomas—Towards their salaries?
Mr. Mayfield—For instance, you take the attorney for the M., K. & T. system,
the solicitor, why, he is also put down on the directory of the M., K. & T. of
Texas and it pays part of his salary.
Mr. Thomas—Does Texas pay part of his salary?
Mr. Mayfield—Yes, sir. *
Mr. Thomas—And pay the board of directors?
Mr. Mayfield—Well, I don’t know about the board of directors; I suppose it
does.
Mr. J. W. Terry—The directors in Texas do not get a salary—they get a
nominal fee for each meeting.
Mr. Thomas—Yes, sir; but they are not on a stated salary?
Mr. J. W. Terry—No, sir; they get no salary. .
Mr. Henderson—Can you tell me from memory what road shows the least
earning capacity in Texas?
Mr. Mayfield—In proportion to what it ought to earn?
Mr. Henderson—No, sir; what road shows the least earning capacity?
Mr. Mayfield—No, sir; I can’t state that from memory?
REDUCTION OF PASSENGER FAREs. 9
Mr. Wilmeth—What road shows the least earning compared with what it
ought to show 7
, Mr. Mayfield—Well, I don’t know; I think, perhaps, the M., K. & T. has the
worst showing of any railroad in Texas to what it ought to have; the Cotton
Belt’s is a very bad showing, too.
The Chairman—What is the best ?
iMr. Mayfield—The Houston & Texas Central, I think, all told, considering
everything, or perhaps the G., H. & H., which runs between Galveston and
Houston; that’s just a local road. -
The Chairman—Well, do they show a greater percentage of revenue than any
other in Texas 7
Mr. Mayfield—The Houston & Texas Central, yes, sir; it occupies the best
territory. w
The Chairman—It goes from Galveston to Denison?
Mr. Mayfield—No, sir; it’s from Houston to Denison, with branches to Llano
and Lampasas, and then another branch to Waco.
The Chairman—Lampasas 7
Mr. Mayfield–Yes, sir; the Houston & Texas Central runs to Lampasas.
Mr. Henderson—Judge, does your office keep figures of freight and passenger
traffic 2 -
Mr. Mayfield—Yes, sir.
Mr. Henderson—Now, some gentlemen stated here the other day, representing
Some road, that the passenger traffic on his road did not pay the expense of
hauling those passengers. - -
Mr. Mayfield—Well, that just depends on how you figure. You can figure
it almost any way you want to. I heard the statement made by one of the best
informed railroad men here the other day that it cost—I think he said it cost
his company about $1.50 a mile to operate its passenger trains, if I ain’t
mistaken. Now, here is an application from the Gulf, Colorado & Santa Fe
to run a special train at $1 a mile. -
Mr. Henderson—A dollar a mile 7
Mr. Mayfield—Yes, sir; and I don’t think it costs that much, although I
am not as good a judge as others.
Mr. Garwood—Mr. Mayfield, what is the special occasion for that Santa Fe
excursion ?
Mr. Mayfield—It’s an excursion of the Houston Trade League over the Santa
Te and its connections. I apprehend that they would not conduct it at an actual
loss, voluntarily. Now, another reference that is made here to the improve-
ments that the railroads needed, and reference is made to the Denison depot.
Well, now, that is built under a separate charter and bonded; they will sell
bonds to build that depot; the law provides for that—they understand that.
All the charge there is on the railroads is to pay the percentage for the use
of it. I don’t know whether the depot at Fort Worth is under a separate
charter or not. The one at Galveston is and the one at El Paso, is. They have
issued bonds for two or three hundred thousand dollars to build it. They get
up equipment contracts in one form or another to buy all the equipment, and
it is bonded—there is no trouble about that.
A Member—I don’t understand exactly what you mean by a railroad's valua-
tion—something about $19,000 per mile, while the value on its earning capacity
last year was $64,000. I don’t understand how you get that.
Mr. Mayfield—The Commission valuation is a valuation of its physical prop-
erties by our engineer, based upon the idea of duplication—the actual cost of
duplication. Sixty-four thousand dollars—they fluctuate every year, you know.
A Member—Sort of intangible values? -
Mr. Mayfield—No, sir; the fluctuating values I gave you were an actual
mathematical demonstration by capitalizing their net earnings, and I believe
that is the method employed by the Interstate Commerce Commission in esti-
mating values of the railroads, is to capitalize the net earnings of a property,
and they fluctuate, of course, every year. That shows that for the last seven
years its average, my recollection is, was about $37,000 a mile. I present that
for your consideration in answer to the charge that the Railroad Commission is
10 REDUCTION OF PASSENGER FARES.
confiscating the railroads. We do not think we are; we do not think the facts
warrant it. -
Mr. Terry—Mr. Mayfield, now give us a comparison of some of the inde-
pendent lines in the State and see whether or not the percentage of net and
gross earnings is the same. For instance, the Midland and Texas Central—
the H. & T. C., Texas Central and the Texas Midland 7
Mr. Mayfield—The Texas Midland is a poor road; it has got no connections,
and its territory is highly competitive.
Mr. Terry—Well, what is the percentage of net and gross earnings?
Mr. Mayfield—I don’t remember that. Do you remember that table; Mr.
Colquitt?—Percentage of operating expenses? I believe I’ve got it. Table No.
5, ain’t it? Percentage of operating expenses to gross earnings. I don’t know
whether I can ever find it.
Mr. Colquitt–I think the corresponding number is on the side.
Mr. Mayfield—Houston & Texas Central, page 28. Houston & Texas Central,
percentage of Operating expenses was 75.49.
Mr. Terry—Well, now, the Texas Central 7
Mr. Mayfield—Texas Central—59.69, about 60 per cent.
Mr. Terry—Now, how is the Midland?
Mr. Mayfield—75 per cent—75.65.
Mr. Wilmeth—What were the earnings of the Texas Central?
Mr. Mayfield—What were the earnings of the Texas Central?
Mr. Wilmeth—Yes, sir.
Mr. Mayfield—I’ll give it to you in a minute. In 1905 it was five million—
Mr. Wilmeth—The Texas Central?
Mr. Mayfield—The Texas Central 7–$827,380.
Mr. Wilmeth—What is its mileage, do you remember 7
Mr. Mayfield—226.78–226.78. -
The Chairman—Well, does any member of the committee desire to question
Mr. Mayfield 2 If not, does any outside gentleman?
|Mr. Wilmeth—What do you do with the amount you allow for bonds?
What do you do with the certificates? Do you allow them to figure on it?
Mr. Mayfield—Well, there is no fixed basis.
Mr. Wilmeth—For instance, the Santa Fe, do you recognize it in figuring the
amount of income they are allowed to make?
Mr. Mayfield—It is added up as part of the operating expenses, interest they
pay On it. -
Mr. Wilmeth—Does that mean the stock and bond law Ż
Mr. Mayfield—Yes, sir.
The Chairman—Does any gentleman present desire to ask any questions?
Mr. Carswell—I want to ask him a question. Has not the Commission now
ample authority to reduce passenger fares on all raidroads in Texas under
the law 7
Mr. Mayfield—I don’t think there is any doubt about it.
Mr. Carswell—What can be the good, then, of the Legislature doing it?
IMr. Mayfield—You are the superior of the Railroad Commission; your
authority is superior to ours under the Constitution and laws.
Mr. Carswell—You can do it, though, if you think it necessary?
Mr. Mayfield—Oh, yes, sir. -
Mr. Thomas—Have you succeeded in doing that at any time you have at-
tempted to ? -
Mr. Mayfield—No, sir.
A Member—Ain’t your body in better position to look into these matters and
reduce rates than the Legislature, by reason of the fact that you have got
all the figures and everything?
Mr. Mayfield—Of course, we have better facilities than the Legislators, because
we have got the records before us.
Mr. Carswell—Could not the railroads enjoin a rate fixed by the Legislature
as well as by the Railroad Commission ? -
Mr. Mayfield—Yes, sir—I don’t think there is any question in that respect.
A Member—You spoke awhile ago about the difference in the operating ex-
REDUCTION OF PASSENGER FARES. 11
penses of the various railroads in Texas and out of Texas. You said you
could not account for that.
Mr. Mayfield—Absolutely, no, sir. I could only give you suggestions in my
mind that don’t look right.
A Member–Now, do you know anything about the condition of the railroads
in Texas compared with the railroads outside of Texas?
Mr. Mayfield—Well, in a general way. For instance, I have ridden over
the M., K. & T. north and over the Frisco and over the Iron Mountain. I
have not been over the Santa Fe north.
A Member—Well, I mean can they haul freight as far without injury as in
other States? For instance, take the Cotton Belt.
Mr. Mayfield—No, sir. I think they have spent more money in improving north
than they have south; but it is something I can’t understand why it should
cost the Cotton Belt more money in Texas per mile to earn a less sum gross
per mile. The physical conditions you speak of would reduce the percentages,
but would not reduce it in the gross. It ought never to cost more to earn less,
I don’t think. -
A Member—Now, do you know what the freight rates in Arkansas are?
‘Mr. Mayfield—I have seen their tariffs. I could not specify. The Arkansas
Railroad Commission makes the rates, and I think they are generally lower
than ours. I have seen their tariffs, but I have never compared them. I think
Mr. Colquitt has got some comparisons.
A Member—Taxes are also much higher than in Texas?
Mr. Mayfield—Yes, sir.
Mr. Cox—Now, Mr. Mayfield, do you believe that the passenger rate in Texas
ought to be reduced to 24 cents a mile 7
Mr. Mayfield—I think so on the Houston & Texas Central. Now, it may be
that—I hardly think it would be fair for me to express an opinion, because I
may have to pass on that case, and I would not like to prejudge it.
Mr. Cox—I was thinking you had facilities.
Mr. Mayfield—Well, I can’t say that I have got my mind made up on that.
The Commission has got the power, and I think—for instance, a question of
this sort comes up before you, they will come and tell you that the Railroad
Commission is the proper tribunal; then when they come before us they say
that the Legislature considered it and wouldn’t take any action and, therefore,
you should not. You heard that argument the other day.
Mr. Terry—I want to ask a few questions. Mr. Mayfield, if this committee
should decide to report against the passage of this bill, it would be very easy
for them to assign their reason that they would leave it to the Railroad Com-
mission ?
Mr. Mayfield—Yes, sir; and I would prefer that they do it, of course, if
they mean that. Of course, if they decide that the rates should be reduced it
would have great weight with the Railroad Commission, because they are the
Superior authority.
Mr. Terry—I believe the present rules of the House require committees to
state their reasons for advocating the passage of a bill or why it should not
pass. It is very easy for the committee to assign their reason, if they desire?
Mr. Mayfield—There is no question about that.
Mr. Terry—And if they assigned no reason you would not say that the Legis-
lature had approached the question one way or the other?
Mr. Mayfield—That is correct.
Mr. Terry—Now, then, you have referred to the fact that the railroads earned
10 per cent more after the injunction suit in 1898. Isn’t it a fact that the
larger part of that increase was caused by increase in the business carried—
the tonnage?
Mr. Mayfield—Yes, sir. I don’t undertake to say anything about the per-
centages, but I have no doubt that there was an increase in tonnage.
Mr. Terry—You have not figured how much was due to increase in tonnage
and how much to increase in rates ?
Mr. Mayfield—No, sir; I could not differentiate that.
Mr. Terry—Isn’t it a fact that that was also caused by increase in mileage?
12 REDUCTION OF PASSENGER FARES.
Mr. Mayfield—Yes, sir; some of it, but I have these figures here reduced to a
mileage basis also.
Mr. Terry—Now, you have placed before the committee a statement of the in-
crease in the earnings of the railroads for a series of years. Isn’t it a fact that
during that series of years there has been a very large increase in mileage?
Mr. Mayfield—Yes, sir. -
Mr. Terry—Have you the figures showing the increase in mileage?
Mr. Mayfield—Yes, sir. For instance, in 1898, the year of the injunction,
the gross mileage was 9540 miles; in 1906, 12,184 miles. But I have reduced
it to a mileage basis, earnings per mile, take the gross earnings per mile in
1898, and that makes the comparison complete; it was $4300, whereas in 1906
the gross earnings were $6100.
Mr. Terry—Now, has not the larger part of that increase of the earnings
per mile been caused by an increase in traffic business carried?
Mr. Mayfield—Yes, sir; a large part of it, and a large part of it is due to
increase in freight rates, too, a considerable part of it.
Mr. Terry—Well, that was for a year or two—how long did that remain in
effect 7
Mr. Mayfield—Well, mot only that, it has affected your entire earnings.
Eor instance, as we lower rates on merchandise in Texas, you raise them from
points outside of Texas. The rates are higher today from St. Louis on mer-
chandise than they have been in I don’t know when—long before there was a
Railroad Commission. So it is the same with the citizen of Texas, whether
he pays $10 increase on a shipment coming from St. Louis or Galveston.
Mr. Terry—Right in that connection, was not complaint formerly made by
a good many people as well as by the Commission that the rates from St.
Louis and other outside points to Texas were too low as compared with the
rates in intrastate 2
Mr. Mayfield—Well, I think the complaint arose more from not widening the
difference between carloads and less; that was the jobber, and a jobber never
complains of rates excepf relatively.
|Mr. Terry—I am speaking of the general complaint. Were not the railroads
for a long time criticised for charging so much a mile less on interstate busi-
ness than they did on intrastate?
Mr. Mayfield—Well, yes. You haul a shipment from St. Louis to Dallas and
then to Corpus Christi and charge the same rate and reduce it to a mileage
basis, it would make it low. -
Mr. Terry—Well, there was general criticism of the railroads arising out
of the fact that the interstate rates were too low 7 - -
Mr. Mayfield—Yes, sir; but if the Commission reduced the State rates, why
you advanced the interstate rates. -
Mr. Terry—I think that was true to some extent. Well, wasn’t that about
widening the rates? -
Mr. Mayfield—I don’t think there was a complaint of that sort. There was
a vigorous complaint against your advancing those rates.
Mr. Terry—I don’t remember that there was any complaint made to the
Interstate Commerce Commission about the advance, but my recollection is that
the Interstate Commerce Commission instituted an inquiry on their own accord.
Mr. Mayfield—They did. I heard some informal complaint.
Mr. Terry—Now, isn’t it a fact that during the past several years the Com-
mission has reduced freight rates in the State on a great many things?
Mr. Mayfield—Yes, sir; I think it has tried to be conservative, though.
Mr. Terry—Well, I am not questioning that now, but just want to establish
the fact that you have made reductions in freight rates during the past several
years.
Mr. Mayfield—Yes, sir; we have tried to.
Mr. Terry—Freight rates in the State are lower than they were in 1898 as
a whole 7
Mr. Mayfield—Yes, sir, that’s my judgment. - -
Mr. Terry—You have referred to the fact that the operating expenses were
higher on the Santa Fe than on the Atchison railroad. Have you ever ob-
REDUCTION OF PASSENGER FARES. 13
tained a detailed comparison of the items of operating expenses on the two
roads 7
Mr. Mayfield—I have not gone into that.
Mr. Terry—You have not gone into it in detail?
Mr. Mayfield—No, sir; I have not.
Mr. Terry—Well, now, the railroads of Texas report to you on your forms
every detail of the operating expenses? -
Mr. Mayfield–Oh, yes, sir. I think my associate has got some figures. I
have gathered my knowledge, obtained it in various ways. I did not sit down
and figure out the details, Judge, in every particular case.
Mr. Terry—Well, now, does not the Atchison and these other outside lines
make similar reports to the Interstate Commerce Commission ?
Mr. Mayfield–Yes, sir; that’s my understanding.
Mr. Terry—On the same forms you use?
Mr. Mayfield—Yes, sir; that is true.
'Mr. Terry—And both of those reports are made under oath by some officer
of the railroad 2
Mr. Mayfield—Yes, sir.
Mr. Terry—If you desired to institute those comparisons you could get those
statistics of the outside roads from the Interstate Commerce Commission ?
Mr. Mayfield—Yes, sir. I think we get the annual report of the Atchison,
which goes into details.
Mr. Terry—Probably not to the same extent?
Mr. Mayfield—No, sir. -
Mr. Terry—I will ask you if it is not a fact that the San Angelo branch of
the Santa Fe road is in a wet country, where we have excessive rains, some-
times in summer and frequently in winter?
Mr. Mayfield—Oh, I don’t think so; of course, there are wet spells in almost
all countries. -
Mr. Terry—Well, don’t you know that the average rainfall is a good deal
heavier in Texas than in any State where the Atchison railroad goes to ?
Mr. Mayfield—No, sir; I didn’t know that.
Mr. Terry—You don’t know that that is a fact?
Mr. Mayfield—No, sir.
Mr. Terry—Well, if it be a fact, that would account to some extent for the
difference in cost 7 -
Mr. Mayfield—I don’t think the Santa Fe is run in the wet section of Texas—
if there is a wet section. I think there is more rain in the Southern and
Eastern.
Mr. Terry—Isn’t South and Southeast Texas wet sections?
Wr. Mayfield—Yes, sir.
Mr. Terry—Ain’t all this black land country comparatively a wet section ?
Mr. Mayfield—Only the last three years. I have lived in Texas all my life
and I have heard it called a dry section until the last three years. The last
three years we have had excessive rains. ~.
Mr. Terry—Well, before the last three years haven’t there been many year;
in the black land where the roads were so that farmers could not travel?
Mr. Mayfield—Oh, that was just temporary.
A Member—That was on account of condition of the land 7
Mr. Mayfield—Yes, sir.
Mr. Terry—Well, ain’t there many years that the farmers can’t cultivate
the land? Take Lamar county. -
Mr. Mayfield—Well, I have excepted my own county as suffering in that
respect—Grayson county. - -
Mr. Terry—Haven’t the same conditions existed in the years gone by ?
Mr. Mayfield—No, sir; I think it is unprecedented.
Mr. Terry—Well, it is a fact that it costs more in a wet country than in a
dry country?
Mr. Mayfield—Oh, surely.
Mr. Terry—Now, isn’t a large part of the Atchison road in Arizona and
New Mexico, where they have a dry climate and very little rain?
14 REDUCTION OF PASSENGER FARES.
Mr. Mayfield—Yes, sir; they operate over a big territory—they have very
extended mileage in Kansas, Oklahoma Territory and Missouri.
Mr. Terry—Well, take Kansas, don’t you know that the rainfall is less than
in the Eastern section of Texas—say east of the Colorado river and south of
the Denver road 7
Mr. Mayfield—It may be. -
iMr. Terry—Well, haven’t you ever looked at the weather maps?
Mr. Mayfield—I don’t remember; I could not say.
Mr. Terry—Don’t you see these maps issued by the United States government
showing the rainfall ?
Mr. Mayfield—Yes, sir; I have seen them, but I haven’t charged my mind
with the details.
Mr. Terry—You don’t know, then, that the rainfall in Texas in the territory
spoken of, with the exception of Louisiana, is greater than in any other part
of the United States ?
Mr. Mayfield—No, sir; I can’t say as to that.
Mr. Terry—Now, isn’t it a fact that a large part of the Atchison railroad is
located in States where the winters are colder ?
Mr. Mayfield—Yes, sir.
Mr. Terry—Where the track freezes up during the winter season and they
discharge all of the section force except two or three men—have you ever known
of those facts 7 .
Mr. Mayfield—No, sir. -
Mr. Terry—Have you ever inquired into the cost of fuel on the Atchison
and Santa Fe as compared with the Texas railroads?
Mr. Mayfield—Generally speaking.
Mr. Terry—Don’t they get their coal considerably less than the Santa Fe
or any other Texas railroad?
Mr. Mayfield—The G. C. & S. F. 7
Mr. Terry—Yes.
Mr. Mayfield—Well, I don’t know whether they get it for less or not. The
Commission has been discussing that matter SOme.
Mr. Terry—You have not inquired into it?
Mr. Mayfield—I have seen the figures.
Mr. Terry—Don’t you know that statistics show that Texas does not produce
anything near the amount of coal it consumes? +.
Mr. Mayfield—Yes, sir; there is only one road in Texas, and that is the Texas
& Pacific. My recollection is that it was shown here—I don’t know what they
do pay for their coal. It was shown here, is my recollection, at the hearing with
respect to the cost of fuel, that the Texas & Pacific pays in the neighborhood
of about 90 cents or $1 a ton, and others show an expenditure of something
like $2 a ton. Do you remember what it is, Mr. Colquitt?
Mr. Colquitt–It is over $2 a ton.
Mr. Mayfield—I don’t know—they figure up their hauling it, and I think
some of the other roads get fuel in the same way.
Mr. Terry—It is a matter of fact that the Texas & Pacific is practically
the only road in Texas that gets a supply of Texas coal?
Mr. Mayfield—Yes, sir.
Mr. Terry—The others have to bring their coal from other States?
Mr. Mayfield—Yes, sir.
Mr. Terry—Don’t it stand to reason it costs more?
Mr. Mayfield—Well, the railroads have been using oil, some of them.
Mr. Terry—Well, now, didn’t that cheap oil only last two or three years?
•Mr. Mayfield—Yes, sir. -
Mr. Terry–Hasn’t the price gone up now so it costs more to use it than coal?
AMr. Mayfield–It has gone up, but T don’t see any difference in the relative
cost of operation near the supply of oil, and I don’t think these figures I used
here were when they did have oil.
Mr. Terry—That was because they charged up the expenses as an experiment,
buying these oil tanks and so forth, as part of the cost of the oil.
Mr. Mayfield—Whatever the excuse is, it always happens that the extra-
REDUCTION OF PASSENGER FARES. 15
ordinary expense and the small earnings fall to the Texas property; it looks just
like it happens that way. -
Mr. Terry—I am trying to explain with your assistance some of the reasons
for that. Now, isn’t labor the largest item in the cost of operating railroads?
Mr. Mayfield—Yes, sir.
Mr. Terry They pay something like 50 or 60 per cent for labor, do they not?
Mr. Mayfield—It’s the biggest item.
Mr. Terry—Didn’t a gentleman operating compresses in other States appear
before the Railroad Commission some time ago and state that in those other
States where he operated the cost of labor was much cheaper than in Texas?
Mr. Mayfield—Yes, sir; and that applies to the States east of the Mississippi
River that I have in mind. I can’t conceive any reason why labor should be—
Mr. Terry—Well, now, as a matter of fact do you know that the average
cost of labor is higher in Texas than in Arkansas 7
Mr. Mayfield—I do not.
Mr. Terry—Haven’t inquired into that?
Mr. Mayfield—No, sir; the same character of labor, I don’t believe it is.
Mr. Terry—You don’t know what the facts are ?
Mr. Mayfield—No, sir.
Mr. Terry—Don’t you know that all labor is cheaper in Arkansas than in
Texas ?
Mr. Mayfield—No, sir; I don’t. I can’t conceive why a clerk would work in
Texarkana, Arkansas, for less than he would in Texarkana, Texas.
Mr. Terry—Well, right along the border I don’t know as there is any differ-
ence, but I think if you will inquire into the statistics you will find that it is
cheaper in Arkansas than in Texas. Those figures can be obtained ?
Mr. Mayfield—Oh, yes; they could be obtained.
Mr. Terry—The Commission has facilities for obtaining them 2
Mr. Mayfield—Oh, I don’t know—the Commission’s time is pretty well em-
ployed.
Mr. Terry—Well, the average pay of the employes is shown in the reports
of the Arkansas and Texas Commissions? -
Mr. Mayfield—Yes, sir.
Mr. Terry—You can ascertain it from those reports?
Mr. Mayfield—Yes, sir; Mr. Colquitt has collated some data with respect to
that.
Mr. Terry—Now, do you recall that at one time Mr. Colquitt instituted a
comparison in rates in Texas and in Iowa and he sent to Iowa and got their
rates and filed them with the Commission ?
Mr. Mayfield—Yes, sir; but I don’t remember them, judge.
Mr. Terry—Don’t you remember that they showed that labor was cheaper
in Iowa, than in Texas ? -
Mr. Mayfield—I don’t remember.
Mr. Terry—Hasn’t it been shown before the Commission that, so far as
divisions between the Santa Fe and the Atchison were concerned, that we got
better divisions than the H. & T. C. gets from the Rock Island 7
Mr. Mayfield—Why, I don’t remember about that. There has always been a
controversy, especially between me—well, more between me and your Mr.
Goodwin than any other representative of the Santa Fe—about the divisions;
I don’t think the Santa Fe was getting the divisions it ought to have.
Mr. Terry—Well, on what commodity?
Mr. Mayfield—I don’t remember now. I have in mind one commodity, and
that is salt. We had some controversy about the rates on salt, and my con-
tention was that he earned more money out of Texas salt, and he wanted to
haul it from the Kansas mines and I wanted him to haul it from the Texas
ITT 11162S.
Mr. Terry—Don’t you know that an examination would show that the Santa
Fe gets a better division on business interchanged with the Atchison than with
other roads 7
Mr. Mayfield—I know you have contended that, Judge, but I have not agreed
with you. - - . . . ~
16 REDUCTION OF PASSENGER FARES.
Mr. Terry—Well, I would like for you to investigate that and make figures
On it. My recollection is that I have given the Commission figures on more
than one occasion—the last time, I think, was during the cotton hearing. You
have never made any careful analysis of the operating expenses in Texas as
Compared with these other States?
Mr. Mayfield—I have not gone into those details that you mention.
Mr. Terry—That's all.
The Chairman—Well, if that closes, we will hear Mr. Colquitt.
Mr. Garwood—I want to ask Mr. Mayfield a question or two.
The Chairman—Mr. Garwood.
Mr. Garwood—Has there ever been any suggestion that the T. & N. O.
did not receive proper divisions from the Louisiana Western ?
Mr. Mayfield—No, sir; I don’t recall any instance of the sort.
Mr. Garwood—I never have, and I wanted to know if the Commission had
ever had any.
Mr. Mayfield—None.
Mr. Garwood—So far as you know, we get every dollar that we are entitled
to ?
Mr. Mayfield—As far as I know, you do. .
Mr. Garwood—That has been my information always, and I wished to verify
it from you. It was your opinion, was it not, Mr. Mayfield, at the time the
order reducing the H. & T. C. passenger rate from 3 to 2% cents a mile was
made, that the other Texas roads could not stand the reduction ?
Mr. Mayfield—I didn't—I don’t think I ought to be called on to answer that,
Judge. I thought the power of the Commission was—
Mr. Garwood—I am not asking about the power.
Mr. Mayfield—We were just trying that one case.
Mr. Garwood—I am not asking you as to the power now, Mr. Mayfield, I
am asking you as to your Opinion.
Mr. Mayfield—I will state this: That one of my brother Commissioners
proposed to make the order general, and I did not vote for his motion at that
time. I thought that the conditions prevailing on the H. & T. C., all the con-
ditions, justified the order.
Mr. Garwood—It was your opinion, however, in voting against the order
proposed by your brother Commissioner, that the other roads could not stand
the reduction ?
Mr. Mayfield—Well, I did not vote for the motion at that time.
Mr. Garwood—You did not vote for it for the reason that you did not think
they could stand the reduction ?
Mr. Mayfield—I didn’t at that time— (interrupted).
A Member—Had you made any investigation on the other roads at the time?
The Chairman—Well, Judge Garwood is questioning the witness now.
Mr. Mayfield—I did not mean by that that the H. & T. C. was the only
road—I meant that I didn’t think the time had arrived for all the roads, but
that the other roads might come up later; for instance, the G., H. & H. road.
Now, that’s a terminal road—
Mr. Garwood—But your opinion then was, at the time you made the H. &
T. C. order, that the other roads of the State could not stand the reduction?
Mr. Mayfield—Some of them I don’t think ought to stand it.
Mr. Garwood—Some of them :
Mr. Mayfield—Yes.
Mr. Garwood—Now, would you indicate which in your opinion you thought
could not stand it 7
Mr. Mayfield—Well, I don’t like to go into details. It was sufficient, in my
mind, that we were trying that one case. I was not ready to proceed with the
other cases. - --
Mr. Garwood—Well, it was for that reason that you were not ready, that
there were no facts before you which in your mind would justify a reduction on
the other roads?
Mr. Mayfield—I did not vote for the motion, because I was not ready to
proceed with the other cases at that time.
REDUCTION OF PASSENGER FARES. 17
The Chairman—Well, there is no use to go into that now. He has objected to
the question. -
Mr. Mayfield—All the Commission acted on was the H. & T. C. case, and
I present the record here to show that we are not trying to confiscate its
property.
Mr. Garwood—I am not discussing that. Now, you voted against reducing
the rate on the first of July, 1906, on any other road in Texas except, tile H,
& T. C.?
Mr. Mayfield—I voted against setting it down for hearing at that time.
Mr. Garwood—Well, you decline— -
Mr. Mayfield—I made the motion myself with respect to the H. & T. C. One
of my brother Commissioners wanted to make it general, and I said, no, I didn’t
want to do that at that time, so he and I agreed—
Mr. Garwood—What difference existed between the M., K. &. T. and the H.
& T. C. on the first of July, 1906?
Mr. Mayfield—M., K. & T. and H. & T. C.?
Mr. Garwood—Yes, sir. -
Mr. Mayfield—Why, the M., K. & T. shows an annual loss of about a million
dollars. It has accumulated a large deficit now, and it’s getting bigger every
year.
Mr. Garwood—Now, you didn’t apply the rate to the M., K. & T. because of
that deficit 7
Mr. Mayfield—Now, understand—
Mr. Garwood—Is that the reason you didn’t apply it to the M., K. & T. 7
iMr. Mayfield—We had a great many reasons. I was not trying the M., K.
& T. at that time; we were trying the case of the H. & T. C. Now, I don’t
think that is a legitimate charge against the M., K. & T., and I think that some
direct proceeding should be brought to force that road to get rid of that ficti-
tious indebtedness, as I have publicly charged it with being.
Mr. Garwood—I don’t know anything about it.
Mr. Mayfield–But my judgment is that in an indirect proceeding a court
will say to us, “Here is a road showing a deficit all the time.” If we say,
“It is a fictitious deficit,” the court will answer, “Go into court in a direct
proceeding and get rid of it.”
Mr. Garwood—Now, the question I wish to ask, Mrſ Mayfield, is this: Did
the condition of the M., K. & T. influence you in not reducing the rate on the
M., K. & T. when you reduced it on the H. & T. C.?
Mr. Mayfield—Well— -
Mr. Garwood—Is that the reason that actuated you? -
Mr. Mayfield—I have mot tried the M., K. & T. I was trying the case of the
H. & T. C., and I am willing to give my reasons for my action there.
Mr. Garwood—Now, did that consideration have any weight on your mind
at that time? -
Mr. Mayfield—I can’t tell what all the facts were that influenced my mind
at the time, Judge.
Mr. Garwood—You knew the density of traffic, passenger and freight, on the
M., K. & T. at the time as compared with that on the H. & T. C.?
Mr. Mayfield—Oh, I think so, but I can’t state it now. I am familiar
generally with the conditions of the railroads of Texas.
Mr. Garwood—Was there any dissimilarity of traffic conditions, either freight
or passenger, that induced the reduction on the H. & T. C. that would not
have applied to the M., K. & T. at that time? If so, what was it?
Mr. Mayfield—Well, that’s a conclusion, and for the facts I would rather
refer you to the reports of the two roads.
The Chairman—Well, Mr. Mayfield, you have stated that you do not want to
answer this question, and if you don’t want to you don’t have to.
Mr. Garwood—Mr. Chairman, I don’t think Mr. Mayfield has said he don’t
want to answer. -
The Chairman—I think he has said he wanted to reserve it—he may have
to act on it.
Mr. Mayfield—Yes, sir.
18 REDUCTION OF PASSENGER FAREs.
The Chairman—That it might be referred to him, and he might have to pass
On it. *-
Mr. Garwood—I think Mr. Mayfield is trying to answer every question I ask
him.
The Chairman–It looks to me like he was trying to keep from it. (Laugh-
ter.)
Mr. Garwood—Now, that’s a matter between the Chairman and the witness.
Now, Mr. Mayfield, with reference to the Santa Fe, was there any difference
in conditions operating upon your mind that would differentiate—
Mr. Mayfield–Oh, I could not undertake to answer that, Judge.
Mr. Garwood—The H. & T. C. and the Santa Fe at that time 7
Mr. Mayfield—I must ask you to excuse me from trying those cases yet; I
have not acted on those cases.
Mr. Garwood—The question that we are trying to arrive at is whether a
reduction of rates, passenger rates, on those roads was justified at that time or
not, in your judgment?
Mr. Mayfield—Well, I don't—I didn’t take any action with respect to them;
that’s all I can say.
Mr. Garwood—Now, I will ask you that question with reference to the In-
ternational & Great Northern Railway, which was likewise in competition with
the H. & T. C. at the time 2
Mr. Mayfield—I want to make myself understood, that I was not trying any
of those other railroads; that was a separate case; I was trying that case,
whether right or wrong, and not with respect to any other case. The question
is, we made it only with respect to the H. & T. C.; that was the case that I
considered. Whether I should or should not reduce rates on other railroads,
I have not done it yet, and I am subject to criticism for not having done it, or—
that’s the case where I have done it.
Mr. Garwood—Now, Mr. Mayfield, I wish to ask this specific question, so
that I can get your attitude clearly in mind. State whether or not in your
judgment on the first day of July, 1906, traffic conditions, passenger and
freight, justified on the roads I have mentioned a like reduction as that made
upon the H. & T. C. in reducing passenger fares, first-class, from 3 to 24 cents
per mile 7
Mr. Mayfield—I must object, judge, to giving my opinions. I am ready to
give you all the evidence that is in my possession.
The Chairman—Well, Mr. Garwood, I will have to rule that unless you can
ask questions—he has declined three or four times, and there is no use to cate-
chise him; it's just taking up our time.
Mr. Garwood—I merely want to get it that he declines to answer.
The Chairman—I think he showed it, that he declines.
Mr. Garwood—You, see, Mr. Chairman, the stenographer will take down the
answer, and I would like for the witness to frame the answer, rather than the
Chairman.
The Chairman—Well, the Chairman is going to rule on this proposition to
satisfy himself—you can put that down in your book.
Mr. Garwood—Well, I just want to get the record. Now, what is the answer?
Mr. Mayfield—I am ready to give you any fact.
The Chairman—Well, I am going to rule that you don’t have to answer—you
have answered three or four times. If you have any other questions—
Mr. Garwood—I have finished that branch of the case. I have several other
questions.
The Chairman—All right. Leave that one out.
Mr. Garwood—Mr. Mayfield, you are not in favor of cutting out excursion
rates in Texas, are you?
A Member—Mr. Chairman, I would suggest that the Commissioner, the chair-
man, is here merely for the information of the committee, and as to what he
would favor on anything has nothing on earth to do with this proceeding—this
proposition. I don’t think he should be questioned on the policy of the Com-
mission.
Mr. Mayfield—I appreciate that. I want to afford you any fact in my pos-
REDUCTION OF PASSENGER FAREs. 19
session, but it seems to me it is not right to ask me my opinions, because you
are the Ones to form the opinion, and not me.
The Chairman—I will sustain the objection, because we brought you here for
the information of the committee. Anything that borders on the question we
will admit.
Mr. Garwood—Mr. Mayfield is thoroughly familiar with the traffic conditions,
freight and passenger, and he is acquainted with the excursion business and
its extent and the demands of the public for excursion business and whether
or not it is from a traffic standpoint and from the standpoint of the Commis-
Sion proper to encourage or discourage the excursion business, and I think there
can be no doubt that it is a proper inquiry, both for the committee and for the
Commission. - . .
The Chairman—Well, I will state this: Anything that will elicit information
for the committee, of course the committee wants, but Mr. Mayfield occupies
rather a peculiar position in this matter—that is, the Railroad Commission
of the State of Texas may have to pass on this identical proposition—and he
ought not to be called to pass on it now. Now, it may be that this committee
will report this bill unfavorably and give the Commission an opportunity to
pass on it, and it may send it into the House and discuss it there, and I think
he ought to be the best judge as to whether he should ansywer the question
you ask, and if he don’t care to answer, if he objects, we will have to sustain
him in it.
Mr. Garwood—Well, I don’t want to press him.
Mr. Mayfield—I said I would prefer not to venture opinions and conclusions.
If I can give you any fact in our possession, I will be glad to do so.
Mr. Garwood—Well, that’s all; I wished to know what you thought about it,
but if you don’t care to express an opinion I appreciate the considerations
which move you in declining to give any opinion about the matter at all.
Now, Mr. Mayfield, isn’t it a fact that the proportion of personal injuries in
Texas, damage suits, is much larger than in any other State in the Union ?
Mr. Mayfield—Yes, sir.
Mr. Garwood—The Commission has at various times drawn pointed attention
to this fact, has it not?
Mr. Mayfield—I don’t know the number of times it has done so.
Mr. Garwood—It has done so 7
Mr. Mayfield—Yes, sir.
Mr. Garwood—Can you state to the committee in round numbers the amount
that we have paid out in 1904 and 1905 for personal injuries in Texas alone,
excluding the general account of loss and damage?
Mr. Mayfield—I think between a million and a half and two million, some-
where between those figures. Of course, I could get it for you accurately.
iMr. Garwood—That’s my recollection of it.
A Member—Per year?
Mr. Mayfield—Yes, sir; per year. -
Mr. Garwood—Now, you mentioned the fact that there was some difference
between the cost of operation of the Louisiana roads and the T. & N. O., that
connects with it at the Sabine. In 1904, I believe, your records show that the
G., H. & S. A. paid out about $311,000 for personal injuries?
Mr. Mayfield—Yes, sir.
Mr. Garwood—Isn’t it a fact, also, that for the same period the Louisiana
roads paid out about $25,000?
Mr. Mayfield—Well, I don’t remember; I am not surprised at that. I know
that your road paid out that year more than all the other roads in Texas did
in 1891.
|Mr. Garwood—You maan the G. H. & S. A., T. & N. O. and H. & T. C.?
Mrs Mayfield—Yes, sir.
Mr. Garwood—Now, in the figures you have been giving the committee, Mr.
Mayfield, with reference to the receipts of the railways, you included also in
those figures, did you mot, receipts from interstate as well as intrastate busi-
neSS Ž
Mr. Mayfield—Yes, sir.
20 - REDUCTION OF PASSENGER FARES.
Mr. Garwood—The total business, from wheresoever it may have come?
Mr. Mayfield—Yes, sir.
Mr. Garwood—Foreign and State, both in and out, and is not confined to the
intrastate business? * ,
Mr. Mayfield—That’s a fact.
Mr. Garwood—Are you able to state in general terms the per cent, average
per cent of reduction in freight rates since the compromise of 1898 7
Mr. Mayfield—No, sir; I am not prepared to state it.
Mr. Garwood—Could you approximate it, Mr. Mayfield?
Mr. Mayfield—No, sir.
Mr. Garwood—I am asking purely for information.
Mr. Mayfield—I understand. No, sir; I can not.
Mr. Garwood—You can not ?
Mr. Mayfield—There have been reductions, but it would be very difficult to
figure that out.
Mr. Garwood—I expect so.
Mr. Mayfield–Because a small percentage of reduction on cotton, a very
small percentage, and a big percentage of reduction on small shipments would
not spell much—the big percentage would not represent much loss to the rail-
road company, while the small percentage on cotton would represent a big loss.
That illustrates what I mean. -
Mr. Garwood—Now, it is true that the past year has been one of phenomenal
prosperity, hasn’t it, Mr. Mayfield, to the farmers?
Mr. Mayfield—Everybody; it has just been one continual series of prosperous
years since ’96 or ’7. -
Mr. Garwood—And those receipts are due in no small measure to that general
increase in the commodities that were offered for shipment?
Mr. Mayfield—Yes, sir.
‘Mr. Garwood—And that also applies to the passenger business to some extent,
because people had more money to travel with ? -
Mr. Mayfield—Various reasons.
Mr. Garwood—Yes, sir. Now, you mentioned some large receipts in 1901, I
think, Wasn’t that the year of the phenomenal cotton crop 7
Mr. Mayfield—Yes, sir; that is my recollection.
Mr. Garwood—And the increase in that year was due largely to the phenom-
enal crop 7 - .
Mr. Mayfield—Yes, sir.
Mr. Garwood—I understood you to say, Mr. Mayfield, that your figures show
that the average per passenger per mile for the H. & T. C. for the year ending
June 30, 1906, was 2 29-100 cents?
Mr. Mayfield—Yes, sir; plus—there is a small fraction.
Mr. Garwood—Now, I want to get that accurately, because our figures were
very closely calculated. We show 2 35-100—that is approximately 6-100 of a
cent. That’s all, Mr. Mayfield. - -->
Mr. Carswell—Do I understand you to say that the railroads in Texas pay
more for personal injuries than other States?
Mr. Mayfield—In the aggregate, so far as I know. For instance, take Mis-
souri; the aggregate amount that the railroads pay out for personal injuries, in
a year, why, it is considerably more in Texas than in Missouri; I don’t remem-
ber the figures.
Mr. Carswell—Now, is that attributable to the laws?
Mr. Mayfield—Well, I think there are several things in explanation of it.
There are many cases brought in Texas and that the railroads pay in Texas
that originate outside of Texas–Indian Territory, Arkansas and maybe IXansas,
New Mexico—and then another thing, we have got a big territory; we have got
twelve thousand miles in Texas. .
Mr. Carswell—Are there more accidents in Texas? -
Mr. Mayfield—Well, now, I am not prepared to say what the cause of it is.
There are various reasons. But I have heard it advanced. We, of course, have
nothing to do with the several items that are charged up to the earnings of the
railroad companies.
REDUCTION OF PASSENGER FARES. 21
Mr. Carswell—That’s all.
The Chairman—Judge Perkins, did you wish to ask questions?
Mr. Perkins—Yes, sir. With reference to the percentage you speak of as to
the expense of operation and gross earnings on the Cotton Belt, I believe you
said it was about 80 per cent 7
Mr. Mayfield—I believe so.
'Mr. Perkins—And the Texas Midland about 75?
Mr. Mayfield—Yes, sir. g
Mr. Perkins—Now, the Texas Midland is much easier operated than the
Cotton Belt, don’t you think?
Mr. Mayfield—Why, I don’t see why.
Mr. Perkins—Well, it’s one straight line?
Mr. Mayfield—Yes, sir.
Mr. Perkins—Has no branches and runs through a thickly populated country,
and all that—has no expensive terminals to maintain 7
Mr. Mayfield—While that is true, every pound of traffic it handles is highly
competitive, whereas the Cotton Belt controls every bit as good traffic as the
Midland, has every advantage it has in the way of density of population and
character of country and soil and character of tonnage, and it reaches the big
towns; it has numerous advantages over the Texas Midland, and for the mileage
of the road, I believe it has got the best lumber traffic of any railroad in Texas.
Mr. Perkins—It has but very little local territory—I mean that originates
much traffic 2
Mr. Mayfield—Most of it is competitive, yes, sir, outside of the Lufkin
branch.
Mr. Perkins—They have good lumber traffic on the Lufkin branch 7
Mr. Mayfield—Yes, sir.
Mr. Perkins—But it is badly constructed 7
Mr. Mayfield—Yes, sir.
Mr. Perkins—That makes it more expensive to operate?
Mr. Mayfield—Yes, sir; certainly.
Mr. Perkins—Now, in comparing it with the line north of Texarkana, that
line is less than a one per cent grade?
..Mr. Mayfield—Yes, sir; you have been spending lots of money on it in the
last few years to reduce its curves and grades.
Mr. Perkins—Now, comparing that 75 and 80 per cent on the Midland and
Cotton Belt in Texas, ain’t it, considering all things, as good on the Cotton
Pelt as on the Midland 7
Mr. Mayfield—No, sir.
Mr. Perkins—The Midland is owned by Mrs. Hettie Green, or reputed to be,
and operated by her son and economically administered?
Mr. Mayfield—I think it is; yes, sir. The trouble is, it don’t earn anything;
that’s the reason the percentage runs up high. As far as the operation is con-
cerned, I don’t think there is any question about it.
Mr. Perkins—Now, where the grade is less than 1 per cent an engine will
pull practically twice as many cars as where the grade runs above 2 per cent 7
Mr. Mayfield—I don’t know the percentages, but it would pull a good many
more.
Mr. Perkins—That makes the operation of the trains and of tonnage in the
trains much cheaper ?
Mr. Mayfield—Yes, sir. e
Mr. Terkins—Now, if cars are always full that makes a difference?
Mr. Mayfield—Yes, sir.
Mr. Perkins—Those things all have to be considered, Mr. Mayfield 2
Mr. Mayfield—Yes, sir,
IMr. Perkins—In arriving at a comparison between two railroads?
Mr. Mayfield—Yes, sir,
Mr. Perkins—Now, isn’t that what the Commission does or tries to do—find
out all about those things and fix rates for it?
Mr. Mayfield—Yes, sir.
Mr. Perkins—Well, now, on the question of divisions, you spoke about that.
22 REDUCTION OF PASSENGER FAREs.
Do you know the division between the Cotton Belt and Midland outside of Texas
On mileage basis?
Mr. Mayfield—Yes, sir.
Mr. Van Vleck—I want to set Mr. Mayfield straight in one statement he
made awhile ago, and that is on the average earnings. Now, the receipts per
mile per passenger on the H. & T. C. were 2.29. You said if your order had
gone into effect and was in operation that the average receipts per passenger
per mile would be 2 cents and 7 mills. I think you made a mistake on that.
Mr. Mayfield—I just read the figures.
Mr. Van Vleck—Well, the maximum rate is 24 cents.
Mr. Mayfield–Just a summary of the figures of our auditor.
Mr. Van Vleck—That’s a mistake, because the average receipts could not be
2 mills more than the maximum rate.
Mr. Colquitt–I think, Mr. Van Vleck, you misunderstood Mr. Mayfield.
Mr. Van Vleck—Well, that's the way I understood you. -
Mr. Mayfield—Well, of course there would be a reduction; if the reduction
had gone into effect the average rate for all passengers would be 2 cents and
7 mills, whereas now it is 2.29.
Mr. Van Vleck—Well, that’s what I don’t understand. The receipts now per
passenger per mile is 2.29, and the average receipts would have been 2 cents
and 7 mills—2 mills more than the maximum rate.
Mr. Colquitt—Mr. Mayfield, it is 7-100, instead of 7 mills.
Mr. Mayfield—Of course, certainly. I beg your pardon.
Mr. Van Vleck—In figuring the part of the expenses of the Louisiana lines
and the T. & N. O., you probably overlooked the fact on the T. & N. O. there
is a great many 13 and 13 per cent grades. Of course, on lines of that sort they
can only pull a third to a half the tonnage that they pull on level lines.
Another thing, the Louisiana lines are old lines, through thickly settled country,
and the properties are in better physical condition than the T. & N. O. between
Sabine Pass and Dallas, and being new road would make it cost a great deal
morc to operate.
Mr. Mayfield—Yes, sir. The G., H. & S. A. had no branch lines that year—
just had the main line.
Mr. Van Vleck—Well, I am talking about the main line, but the same argu-
ment with reference to the G. H. & S. A. -
Mr. Mayfield—There is no better road, in my opinion, Mr. Van Vleck, in the
Southwest than the G., H. & S. A. w
Mr. Van Vleck—Of course, but you can’t haul the same amount that you
can over the Louisiana lines—you can haul just twice the tonnage on the
Louisiana lines as you can on the G., H. & S. A., and, therefore, it would cost
more to operate it.
The Chairman—Well, now, did you say you wanted to ask some questions,
Judge Spoonts?
Mr. Spoonts—Yes, sir. Texas is the only State in the Union that has a stock
and bond law Ż
Mr. Mayfield—I think so. -
Mr. Spoonts—Now, in other States, when they make any extraordinary ex-
penditure—for instance, building a bridge, putting down new rails—they issue
stocks and bonds?
Mr. Mayfield—Yes.
Mr. Spoonts—In other words, they don’t charge that to operating expenses in
other States, like they do in Texas?
Mr. Mayfield—Well, I don’t know why they should not. I am not talking
about permanent improvements, and I have not compared the method of dis-
tributing—it's just the same on all roads.
Mr. Spoonts—Now, in other States they can issue bonds when they get ready.
Now, isn’t it a fact that the Texas roads are capitalized at about $32,000 a.
mile, while the average throughout the country is about $60,000 a mile, and
in England over $200,000 a mile—you have examined these figures, haven’t you,
Mr. Mayfield?
REDUCTION OF PASSENGER FARES. 23
Mr. Mayfield–Oh, yes; the general average is greater. If you want my
ideas about that, though, I’ll give them to you.
Mr. Spoonts—Well, that has resulted in their having more money, if they
sold those securities, to improve their roadbed with than they have in Texas?
Mr. Mayfield—Every cent that is spent in the handling of a road has a place
assigned to it, whether it goes into operating experises Ur another account, and
it applies just the same in Texas as outside of Texas. If you spend it for per-
manent improvements, we don’t put it in for operating expenses.
Mr. Spoonts—Now, what do you call permanent improvements?
Mr. Mayfield—Get our book that is sent to your auditor that shows the
distribution of expenditures. I can’t remember all the items—there are hun-
dreds of them.
Mr. Spoonts—Now, do you undertake to say that the operating expenses as
reported on other roads outside of Texas include every item that the operating
expenses on the Texas roads do?
Mr. Mayfield–Yes, sir; that’s my judgment; they ought to do it if their
accounts are properly kept and if their reports are properly made under the
system of accounting that prevails all over the country.
Mr. Spoonts—It at last becomes a matter of judgment of the operating man
as to whether it is an improvement or renewal”
Mr. Mayfield–It is set down, every item that you can conceive of, and it
belongs to this or that account.
Mr. Spoonts—Don’t some of the railroads in Texas keep what they call a
capital account and some do not ? .
Mr. Mayfield—That has nothing to do with the distribution of their expendi-
tures for each year.
Mr. Spoonts—Well, that depends very largely on what items they charge in
those various accounts. You can’t tell from the reports made what particular
item they charge in their various accounts?
Mr. Mayfield—They frequently charge up items that—
Mr. Spoonts—Well, maintenance of way—that may include new rails?
Mr. Mayfield—I don’t remember just what items constitute operating ex-
penses, but the items that constitute operating expenses in Texas are just the
same as outside of Texas, and what constitutes capital account or permanent
improvements are the same.
Mr. Spoonts—My information is that they keep those things very differently,
Now, you have no way in Texas to take care of these extra expenses. Suppose
you need a new depot, how are you going to fix it? You can’t issue bonds on it
unless you have a separate arrangement some way or other.
Mr. Mayfield—You ought to make the owners of those bonds that paid nothing
for them, or a small percentage of their value, pay something more.
Mr. Spoonts—Well, I don’t think you find many bonds now that people didn’t
pay their face value for them, and many of them are selling on the market at
more than par.
Mr. Mayfield—Yes, sir; that’s because of the splendid earning capacity. The
H. & T. C., I don’t suppose you could buy one of their bonds for anything in
the neighborhood of par.
Mr. Spoonts—Well, the rate of interest covers that?
Mr. Mayfield—Yes, sir; and the certainty that it is going to be paid—it’s just
as certain as anything could be, both principal and interest.
Mr. Spoonts—What do you propose in the long run for the railroads to do
with what you call the capital account? Just let it keep getting larger and
larger all the time? If you don’t pay for these improvements, how are you
going to pay for them 7 You can’t issue any bonds on them.
Mr. Mayfield—Those are matters that are not relevant to this inquiry.
Mr. Spoonts—That’s all.
The Chairman—Well, we will hear Mr. Colquitt, if you are all done.
Mr. Mayfield—It’s after 12 o'clock.
The Ghºrman—Yes, sir; but we have to hold here until one.
A ſº-Judge Perkins asked you awhile ago about grades. Have you
3.
any tabuláč statements of the grades on those lines?
24 REDUCTION OF PASSENGER FAREs.
Mr. Mayfield—No, sir; but we have profiles in the office that show every
grade and curve.
A Member—How is the grade of the H. & T. C. as compared with the T. & B.
V., just completed?
Mr. Mayfield—Why, my information is that the maximum grade on the T.
& B. V. is about one-half of 1 per cent, and on the H. & T. C. it’s in the neigh-
borhood of 14, possibly 13.
Mr. Garwood—We are trying to cut some of them down—I expect we have
pulled some of them down during the last year.
Thereupon the committee adjourned until Wednesday, February 13, 1907.
WEDNESDAY, FEBRUARY 13, 1907.
The committee met today and postponed consideration of the matter of re-
duction of passenger fares until Thursday morning at 9:30 a. m.
THURSDAY, FEBRUARY 14, 1907.
The committee met pursuant to adjournment, and thereupon the matter of
reduction of passenger fares was postponed until Tuesday, February 19, 1907.
at 10:30 a. m.
IN THE COMMITTEE ON COMMON CARRIERS, FEBRUARY 19, 1907.
The committee met at 10:45 a. m., and the matter of reduction of passenger
fares was considered. -
The Chairman—The clerk will call the roll.
(The roll was called by the clerk, and the clerk announced that a quorum
of the committee was present.)
The Chairman—Judge Storey, we are now considering the matter we had up
the other day—that is, the reduction of railroad rates. We heard Mr. Mayfield,
and now we are ready to hear you and then Mr. Colquitt.
Mr. Storey—Very well. I don’t know that I could add much to what Mr.
Mayfield has said in the matter.
The Chairman—Well, if you desire to say anything, we would be glad to hear
from you. -
Mr. Storey—His testimony, I believe, is pretty full. One trouble that we
have and you may possibly encounter is the want of our fifteenth annual report.
It was sent to the printer last November, and, as is usually the case, it is about
the last report that the printer lets go out of his office for some reason or other.
I have before me, however, a pretty full copy of the text of the report as re-
tained in my room when the original was sent—not the tables, but the text of
the report.
Table 4 gives the gross earnings of all Texas roads for the year ending June
30, 1906, at $75,510,388.38. That is an increase over the previous year of
$7,365,256.28, or an increase of 10.81 per cent. e
Table No. 5 gives expenditures that year amounting to $56,914,670.08—an in-
crease of $4,502,922.35, or 8.59 per cent. The percentage of operating expenses
to gross earnings for the previous year was 76.91 per cent, while for this last
year, ending June 30, 1906, it was 75.37 per cent—a slight decrease.
The income and expenses per mile of road for the year ending June 30, 1906:
Freight earnings per mile were $4291.14; passenger train earnings—that is,
train earnings—were $1580.39; gross earnings were $6182.70; while the oper-
ating expenses were $4660.11. Income from operation was $1521.82, which is
an increase per mile of road of freight earnings, of $246.26, and passenger train
earnings $86.74, and in gross earnings from all sources $343.68. -
Table 7, giving the average distance that freight was hauled, was 150.67
miles. The previous year it was 143.23 miles. The average receipt per ton
z
REDUCTION OF PASSENGER FARES. 25
of freight was $1.48 and 4 mills. The former year it was $1.52 and 8 mills—
a decrease of 4 cents and 4 mills. The average receipt per ton per mile hauled
was 9.87 mills, against 10.67 mills for the previous year. The average receipt
per mile of road was $4291.14. The former year it was $4044.88. The average
of freight earnings for freight train mile was $2.36 and 4 mills, against $2.30
and 5 mills for the previous year. -
Table 8, passenger traffic for the year ending June 30, 1906, all Texas roads:
The average distance the passengers were hauled was 51.84 miles, against 52.12
miles for the previous year, and for the year ending June 30, 1904, the average
was 50.99 miles; so that the average distance each passenger was hauled for the
last three years was 51.65 miles. The average receipt per passenger was $1.16
and 7 mills. The average gross earnings of passenger trains per year per mile
of road were $1580.39. The average passenger train earnings for each mile run
by passenger trains were $1.24 and 8 mills. **
Table No. 10. For the year ending June 30, 1906, as compared with the year
ending June 30, 1905: The increase in gross earnings was $7,365,256.28, while
the increase in operating expenses was $4,503,233.14. The increase in income
from operation was $2,852,896.51.
I have made some memoranda from tables 13 and 14, considered together.
The number of tons of freight carried by Texas railroads for each of the three
years ending June 30, 1904, 1905 and 1906. In 1904 it was 30,492,944; in
1905 it was 30,653,071 tons; for 1906, year ending June 30th, it was 34,998,754
tons. That would show an increase in 1905 over 1904 of 160,126 tons, and of
1906 over 1905 of 4,345,684 tons. That was the tonnage hauled.
Table 15 shows the weight in tons of freight originating on Texas railroads
for the years ending June 30, 1905 and 1906. For 1905 it was 12,575,016
tons. For the year 1906 it was 13,145,496 tons—an increase of 570,480 tons,
or 4.54 per cent. -
Table No. 16 gives the average weight of shipments received from connecting
lines for the years ending June 30, 1905 and 1906. For 1905 it was 18,078,054
tons. For 1906 it was 21,647,380 tons—an increase for the last year of 3,569,326
tons, or 19.74 per cent.
Table No. 17 is a comparative statement of passenger revenues, excluding
express, extra baggage and miscellaneous; passenger train earnings—that is,
actual passenger revenue, as distinguished from passenger train revenue—for
the years ending June 30, 1905 and 1906. For 1905 it is $14,378,639.30. For
1906 it is $16,129,110.17—an increase of $1,750,470.87, or 12.17 per cent.
Table No. 18. The number of officers and employes of all the roads in Texas
June 30, 1906, was 52,082—an increase over the previous year of 2679. Some
duplicates occur in this, where two roads employ the same agent, for instance,
at junction points.
Table No. 19 is the number of killed and wounded for the year ending June
30, 1906. The number killed is 240; injured, 3711. Increase in number killed,
48; increase in number injured, 745. Of employes, the increase of killed was
19 and of injured 663. There were eight passengers killed, the same number
as in the preceding year, and an increase of 68 passengers injured. Of other
persons, there were increases of 29 killed and 14 injured.
Table No. 24, abstract of income account for the year ending June 30, 1906.
Income from operation, $19,970,783.45. Other income during the year was
$513,065,07, making a total of $20,483,848.52. The total expenditures were
$19,361,344.25, making the income for the year ending June 30, 1906, $1,122,-
504.27. This does not include the accumulation of deficit from organization,
amounting to $15,980,460.83, mentioned in the first column of table No. 24,
which, if considered, would still leave a deficit of $14,857,956.56. That’s the
item which Commissioner Mayfield told you the other day that the Railroad
Commission did not recognize. I don’t know what you propose to do with it.
Table 31, table of free transportation. June 30, 1905, there were 100,047,989
miles; for 1906 there were 113,671,834 miles, or 13.68 per cent of the entire
travel. The total paid travel for the year ending June 30, 1906, was 717,134,373
miles, or 86.32 per cent of the entire travel. The per cent of each class of the
total free travel was as follows: By official and employes of other roads—
26 REDUCTION OF PASSENGER FARES.
other roads than the road making the report—was 18.42 per cent; by employes
of the road making the report was 60.65 per cent; by newspaper employes was
6.95 per cent; public officials, clerks, etc.—that is, public officials of the United
States, State and municipal—was 5.93 per cent; other persons, charity, religious,
etc., was 8.05 per cent, making up the 100.
I have here a printed statement that goes a little further into that table.
It belongs to our fifteenth annual report, and a copy of the table was handed to
me awhile ago by our auditor, and I thought I had it with me. It shows that the
per cent of each one of these classes as I read awhile ago to the entire trave!
was this: For the officers and employes of other roads, 2.51 per cent; by em-
ployes and their families of the road making the report was 8.29 per cent;
newspaper employes, 0.94 per cent; public officials and so forth, 0.82 per cent;
other persons, charity, etc., 1.12 per cent, making up that 13.68 per cent which
I told you awhile ago was the proportion of free travel to the entire travel.
The Chairman—Is there any further statement you desire to make now 7
Mr. Storey—Sir 7
The Chairman—Is there any further statement you wish to make, or is
there any question the committee wishes to ask Judge Storey ! If not, shall we
invite the representatives of these railroads present?
Mr. MacInerney—Does any other member of the Commission wish to speak?
Mr. Thomas—Mr. Chairman, I move that we hear from Mr. Colquitt.
Mr. Terry (Representative)—Mr. Chairman, I move that the representatives
of the roads be allowed to ask questions. -*.
The Chairman—Shall we do that now Ż
Mr. Terry—Yes, sir; right now, while he is on the stand.
The Chairman—Well, is it the wish of the members of the committee that
the representatives of the railroads ask any questions? Now would be a very
good time for that purpose.
Mr. Thomas—I suggest, Mr. Chairman, that we have not much time now and
that we hear Mr. Colquitt at this hearing.
Mr. MacInerney—I would like to have a response to that motion.
The Chairman—Well, what is the wish of the committee ? Shall we hear Mr.
Colquitt now Ż
(A majority of the committee were in favor of hearing Mr. Colquitt at this
time.)
Mr. Colquitt—Mr. Chairman, I have here a good many papers. I presume
that the purpose of this committee in sending for the Railroad Commissioners
and asking them to appear before you in connection with the bills pending
with reference to the reduction or the proposed reduction of the passenger
rates was to avail yourselves of such information as the members of the Com-
mission might have gathered or such knowledge as they might have obtained
from the investigation and study of traffic matters, railroad management, the
value of transportation, the value of property and the amount of money in-
wested.
The Chairman—Yes, sir.
Mr. Colquitt–In order to have anything like an understanding of the mat-
ter, therefore, I take it, all these matters will have to be discussed.
The Chairman—Yes, sir.
Mr. Colquitt—So if that is the desire of the committee, I have a lot of data.
here which will lead me into a pretty thorough discussion of all of these sub-
jects. I come to say, first, that I think it eminently proper that the Legisla-
ture, having created the Railroad Commission as its agent, and conferred upon
it power to make these rates and investigate traffic matters and enforce the
laws against railroad corporations, that, I say, I think it eminently proper for
the committee or the Legislature to call upon the members of the Railroad
Commission to furnish such information as they might be able to give, and the
information which I shall offer you is in compliance with your request and in-
vitation. - &
The other day when the members of the Commission were summoned before
you, on arriving in the room, the gentleman who was discussing this bill or
these bills made the statement, or rather intimated, that the Commission knew
REDUCTION OF PASSENGER FARES. g 27
everything, and supposed that we would be able to enlighten you on the ques-
tion which he himself was discussing. Now, there are some things, Mr. Chair-
man, which I do not know, and if members of this committee or the railroad
lawyers or railroad managers present ask me a question that I can’t answer, l
shall tell them that I don’t know. But it has been the custom, I have noticed,
in public meetings and public gatherings, railroad lawyers, railroad traffic
managers and experts have fallen into the habit of criticising the Railroad Com-
mission and the members of the Commission, charging them with a desire to
confiscate railroad property in the State by reduction of freight rates. I want
to say, Mr. Chairman, that in my judgment, and I believe I will be able to
show, that the body of rates, freight rates, in effect in Texas, are, upon an
average, higher per hundred pounds for identical classes of freight and the
commodity of freight than in a majority of the States through which the
systems of railways operate that own and dominate the Texas lines. I am
inclined to believe that these gentlemen have made the statement so often and
persisted in it so long that they have persuaded themselves into believing it.
Table No. 3 of the fifteenth annual report of the Railroad Commission for
the year ending June 30, 1906, is a table which shows the capital stock and
the outstanding bonds or funded debt of each railroad and the aggregate of
the two, stocks and bonds, added together. The aggregate of stocks and bonds
Outstanding at that period on the lines of railway in Texas amounted to
$396,496,127. The value of that property, the same property on which there is
over three hundred and ninety-six millions of bonds and stocks outstanding,
or rather what the Railroad Commission under the stock and bond law estimates
it would cost to reproduce that property, amounts to $188,600,939.63, or nearly
two hundred million dollars less than the aggregate of the stocks and bonds—
a little over two hundred million dollars less.
Now, in answer to the charge that the railroads are being confiscated by the
Railroad Commission and the rates fixed by it, I want to say that the reports
sworn to by the officers of these railroads for the fiscal year ending June 30,
1906, as shown in table No. 11 in the fifteenth annual report of the Railroad
Commission, shows that upon the entire amount of both stocks and bonds, three
hundred and ninety-six million dollars of them, after paying operating expenses,
the earnings from operation, or the earnings from income, amounted to 4.77
per cent of the entire stock and bond value. On the valuation as ascertained by
the Railroad Commission—and I want to say to you that I believe every mile
of railroad in Texas can be reproduced anew—I understand that a seasoned,
old track is worth more money than a new track—it is claimed that it is, at
least—in my judgment this property can all be reproduced at the figures or
approximately the figures which the Railroad Commission estimates it to have
cost, even at the enhanced or increased prices in material. Upon the valuation
fixed, therefore, by the Commission on this property, the earnings of these
railroads for the year ending June 30, 1906, is equivalent to 9.85 per cent on
the Commission’s valuation, and on the tax value the earnings are equivalent
to 14.37 per cent.
Mr. Terrell—Mr. Colquitt, are those bonds at par or below par 7
'Mr. Colquitt–If you will pardon me, I will be glad if you will ask me these
questions after I get through with my main statement.
Mr. Terrell—All right. .
Mr. Colquitt—The gentleman whom I heard addressing the committee also
stated that the increase in the cost of labor amounted to 25 per cent. I do
not now remember whether he mentioned any dates for his comparison. But
his statement shows, Mr. Chairman, that he has brought himself to believe in
the statements, which are current in the newspapers and are often made before
the Railroad Commission itself in hearings which have to be determined very
often upon the statements of the railroads’ representatives present, because of
the fact that no one else appears to combat their statements,
Mr. Yoakum—Mr. Colquitt, will you allow me to state this? I said from
1893 to 1906 the price of labor increased 25 per cent.
Mr. Colquitt—Well. I have a statement here showing the average wages
paid in Texas by the Texas railroads for the years 1891—that was the year the
28 |BEDUCTION OF PASSENGER FARES.
Railroad Commission was organized—up to and including the year ending
June 30, 1906. In some cases an increase in wages is shown; in other instances
decreases are shown. For illustration, the general office clerks of the Texas &
New Orleans, there being twenty-three of them, in 1891 received an average
of $2.86 per day. That same class of laborers for the year ending June 30,
1906, received an average of $2.38, showing a reduction of nearly 50 cents per
day. Station agents on the Texas & New Orleans for the year 1891 received
$2.86 per day, and for the year ending June 30, 1906, received $2.66 per day.
Other station men on the Texas & New Orleans for 1891 received an average
of $2.30 per day, and for 1906 $1.89 per day. Now, enginemen show an increase
from $3.90 in 1891 to $4.45 in 1906. Firemen received $2.25 per day in 1891,
and $2.22 in 1906. Conductors $3.14 in 1901 and $3.67 in 1906. And so on
down the list for the Texas & New Orleans. The average for 1891 for all
employes, which is really not a satisfactory basis to judge increase or decrease
of wages—the average was $2, and the average of 1906 was $2.09 per day.
Mr. Spoonts—Where did you get those figures?
The Chairman—I would suggest to Judge Spoonts that you take notes of
what you want to ask, and ask him when he gets through.
Mr. Colquitt—I take it from the annual reports to the Railroad Commis-
sion for 1891 to 1906. Now, I have that statement here for the Gulf, Colorado
& Santa Fe. I will read a few figures from each of these roads, so as not to
be partial in my statement with reference to this particular matter. The
general office clerks on the Santa Fe in 1891 received an average of $2.27 per
day, and $2.37 in 1906. Station agents, $2.20 in 1891 against $2.47 in 1906.
Other station men received $2.09 per day in 1891, against $1.72 per day in 1906.
Enginemen, $3.50 in 1891, and $5.40 per day in 1906. Firemen, $2.14 in 1891,
against $3.33 in 1906. I will state at this point, that for the intervening years
in many instances the wages vary, in some cases being higher and others being
lower, but I have it here for each class of employes for each year and the aver-
age for each year. Machinists on the Santa Fe in 1891 received $2.58 a day,
against $2.48 in 1906. Carpenters, $2.56, against $2.53. Other shopmen, $1.86,
against $1.97. Section foremen, $1.81, against $1.82. Other trackmen, which
constitutes the largest number of all the employes or any class of employes,
received in 1891, there being 2563 of them, an average wage of $1.41 per day,
against 1448 employed in 1906 at $1.25 per day. Now, these figures run
along for these different roads, and the enginemen and the conductors generally
show an increase. Others frequently are decreased. The Texas & Pacific Rail-
way Company paid their station agents in 1891 $2.95 per day and $3.06 in
1906. They paid other station men $1.99 per day in 1891 and $1.74 in 1906;
their enginemen $3.69 per day in 1891, against $3.53 per day in $1906. That
shows a decrease on the Texas & Pacific for the enginemen. Firemen received
$2.11 in 1891 per day and $2.45 in 1906. Conductors received $3.89 in 1891,
and $3.68 in 1906—the average for the Texas & Pacific, taking all employes,
from 1891 to 1906, being $2.09 in 1891 to $2.12 in 1906. Now, the St. Louis
Southwestern Railway Company of Texas, which is the “Cotton Belt,” paid
its general office clerks in 1891 $3.14 per day, and in 1906 $1.86 per day;
paid its station agents $1.75 in 1891, and $2.21 in 1906; paid its other station
men $1.62 in 1891, and $1.82 in 1906; its enginemen $3.59 in 1891, against
$3.93; firemen, $2.09, against $2.39; its conductors, $3, as against $3.94. The
average of the Cotton Belt daily wage for 1891 was $1.83 per day, and for the
year, 1906 it was $1.83 per day. The Houston & Texas Central paid its general
office clerks $2.88 per day in 1891, and $2.46 in 1906; its station agents $2.79
in 1891, and $2.69 in 1906; other station men, $1.66 in 1891, and $2 in 1906;
its enginemen $3.72 in 1891, and $5.26 in 1906; firemen, $2.32, as against $3.17;
conductors, $3.28 to $5.05. The average for all employes, Houston & Texas
Central Railroad for several years after the Railroad Commission was organ-
ized was in the hands of a receiver, and I have not the averages for the first
two years. The average for 1894, the first year, I believe, that the Railroad
Commission’s rates went into effect, the average wages paid by the Houston
& Texas Central were $2.06 per day for all employes, and for 1906 the average
was $2.10 per day. The Houston & Texas Central Railroad—I mean the Hous-
REDUCTION OF PASSENGER FAREs. 29
ton East & West Texas, paid its general office clerks $3.17 in 1891, and $2.44
in 1906; its station agents it paid $2.59 in 1891, to $2.45, in 1906; other station
men $1.82 in 1891, against $1.76 in 1906. The average for the Houston East
& West Texas for all employes in 1891 was $1.99 per day, and for the year
ending June 30, 1906, the average was $1.90 per day. The Fort Worth &
Denver City paid its general office clerks in 1891 $2.76 per day, and in 1906
$2.48 per day; station agents, $2.52 per day in 1891, as against $2.29 per day
in 1906; other station men, $1.56 in 1891, agains $1.81 in 1906. Enginemen
were paid by the Fort Worth & Denver in 1891 $3.50 per day, and $4.05 per
day in 1906. The Fort Worth & Denver employed in 1891 54 enginemen,
and, notwithstanding their tonnage has increased 300 per cent since that time,
they have increased their enginemen from 54 in 1891 to 65 in 1906. The
average for the Fort Worth & Denver for all employes in 1891 was $2.05 per
day and for 1906 $2.10 per day. The Galveston, Harrisburg & San Antonio,
their general office clerks they paid $3.04 per day in 1891 and $2.41 in 1906;
station agents, $2.65 in 1891, and $2.46 in 1906; their enginemen, $5.48 in
1891, and $5.47 in 1906; their firemen, $3.17 in 1891, and $3.12 in 1906; their
conductors, $3.38 in 1891, and $4.26 in 1906; their trackmen, which constitutes
nearly one-half of all their employes, they paid $1.22 in 1891, and $1.17 in 1906.
The San Antonio & Aransas Pass, general office clerks, $2.08 in 1891, against
$2.47 in 1906; station agents, $2.34 in 1891, against $2.30 in 1906. The average
for the trackmen, San Antonio & Aransas Pass, in 1891, was $1.15 per day,
against $1.10 in 1906. The average was $1.68 in 1891, and $2.04 in 1906.
The International & Great Northern paid its general office clerks in 1891
$2.76 per day, and in 1906 $2.29 per day; station agents, $2.40 in 1891, against
$2.47 in 1906; other station men, $1.62 in 1891, against $1.58 in 1906; engine-
men, $3.55, against $5.19; firemen, $2.03, against $3.20; conductors, $3.02,
against $4.20; and paid its trackmen $1.20 in 1891, against $1.27 in 1906.
These figures, Mr. Chairman, are compared. I have given the comparison the
year before the Railroad Commission made rates with the last year for which
the figures are published under the Commission rates, for the purpose of throw-
ing light upon the statement made by the gentlemen who have argued this
matter before you that wages had increased 25 per cent. -
Now, Mr. Van Vleck, I heard him make a statement before the committee
giving figures which I did not understand, but showing that his road was losing
money. I also heard a statement made by a gentleman representing the Santa
Be practically to the same effect. With reference to those roads and those
statements, the figures—I have them here—will show that the average earnings
per passenger mile for the Santa Fe in Texas is equal if not greater than in group
8, where it has its principal mileage. The G. H. & S. A. handles a large amount
of interstate and international through traffic, upon which, I dare say, we will
be able to show at the proper time it does not receive more than one-half, if
more than one-third, as much for the service rendered as it does on local traffic.
Now, that is a very strong statement, but we will be able to show that, I think,
Mr. Chairman. It has a lower earning—that road has a very low earning
per ton per mile on freight and a very low earning per passenger per mile on
passengers, due largely to the fact that it is operated largely for through
California traffic between California and New Orleans, and other interstate
traffic.
Now, I want to go to the statements and verify the statement which I have
made, that the freight rates in Texas were higher than these gentlemen were
collecting in States through which their systems operate, where they fix rates
themselves. I have frequently made the statement, which has been challenged,
but no figures shown, that beef cattle rates in Texas are higher or at least as
high as they were before we had any Railroad Commission.
I have here a statement showing the rates on beef cattle over the Gulf, Colo-
rado & Santa Fe from different points to Fort Worth & Denver City Points. It
will take up too much time to go over all these figures, and I don’t care to
worry the committee. "I have only a desire to submit enough to show that
the figures sustain my statements to the committee. The freight rate on a
carload of beef cattle in a car of twenty-nine feet to thirty feet six inches in
30 REDUCTION OF PASSENGER FARES..
length, with a minimum weight of 19,000 pounds, as shown by Santa Fe tariff
No. 88—joint through freight tariff No. 88—in effect May 10, 1890, shows
that a carload of beef cattle in such car as I state, from San Angelo to Quanah
was $47.50 per car. Under the rates fixed by the Railroad Commission on a
mileage basis the charge is $51.30 per car. From Belton to Harrold the rate in
1890 was $35.50 per car, and in 1907 under the Railroad Commission rate it is
$45.13 per car. From Belton to Vernon, in Wilbarger county, in 1890, under
the rates fixed by the Santa Fe without any legal interference it was $35.50
per car, and under the rates fixed by the Commission, $45.13 per car.
Mr. Stedman—Mr. Colquitt, I don’t want to interrupt you, but are those beef
Cattle rates ?
Mr. Colquitt–Those are beef cattle rates, yes, sir. From Belton to Quanah,
under the Santa Fe tariff in 1890, the rate was $38.50 per car, and under the
Commission’s rates $47.50 per car. From Brownwood and all San Angelo
branch points there is a similar difference—the rate is materially higher under
the Commission’s rates than the rates fixed by the Santa Fe itself.
Mr. J. W. Terry—Between what points, Mr. Colquittº
Mr. Colquitt–From Brownwood—the figures which I have here show from
Brownwood–-from Gainesville, Krum, Sanger, Justin, Rio Vista, Cleburne,
Alvarado, Meridian, Morgan, Valley Mills, McGregor, Temple, Belton, Caldwell,
Milano, Cameron, Brenham, Nolanville, Lampasas, Ogles, Brownwood, Ricker,
Bangs, Coleman, Ballinger, Norwood and San Angelo to Harrold, Vernon and
Quanah, and from practically the same stations on your line to Decatur, Sunset
and Henrietta.
Mr. Spoonts—Mr. Colquitt, where did you get this tariff you talk about in
force in 1890 : -
Mr. Colquitt—Well, we have it in our possession. I don’t suppose you will
deny it—it was filed by the Santa Fe railroad.
Mr. Spoonts—For 1889?
Mr. Colquitt—For 1890. The rate per car of twenty-nine feet to thirty feet
and six inches, minimum weight 19,000 pounds, under the rates fixed by the
Santa Fe in 1890 on beef cattle was $36.50 per car from Caldwell to Decatur in
Wise county—Caldwell is in Burleson county. Under the Commission’s rate in
effect at this date the rate between the same points is $42.75. From Caldwell
to Sunset under the Santa Fe tariff the rate was $36.50, and under the rate in
effect today $42.75, and to Henrietta under the Santa Fe tariff it was $32.50,
and under the rates in effect today $45.13. From San Angelo to Henrietta
the rate in 1890 was $45 and today it is $47.50.
Mr. Fyfe—Will you object to my looking at that tariff, Mr. Colquitt?
Mr. Colquitt—Certainly not.
Mr. Fyfe—I would like to ask Mr. Colquitt–
The Chairman—Mr. Colquitt would rather be questioned after he gets through
with his statement.
Mr. Fyfe—All right.
The Chairman—So I will ask the gentleman to desist until that time.
Mr. Colquitt–On the G., H. & S. A. Railroad, the Texas & New Orleans and
other Southern Pacific lines in the State named in the tariff, local stock cattle
rates in effect August 20, 1891, as compared with rates established by the Rail-
road Commission of Texas to apply between the same points. I will not
read it all. The rate on stock cattle under that tariff is higher, upon the aver-
age, for short distances than it is under the Commission’s tariff. For the
longer distances the Commission’s tariff is the highest, beginning at 25 cents,
against 27% under the Commission tariff. Now, here is the Santa Fe local
rates on horses from points on its lines to points on its lines, in effect in 1891,
which show that the rates are identically the same between the points named
now as they were then, beginning at 5 cents and running up to 7#–both rates,
in effect now and then, are the same. Here is a road, which complains of the
Commission’s impoverishing it—the San Antonio & Aransas Pass. On mules
and horses, taken as a whole, the rates in effect now are higher than the
rates in effect in 1891 when the rates were made by the railroad undisturbed.
The tariff is a group tariff, and the Railroad Commission’s mileage tariff is
REDUCTION OF PASSENGER FARES. 31
applied to the rates between points on a mileage basis. From Houston to win:
chester, for illustration, between Houston and Winchester the rate Was 17 %
cents in 1891, against 19 now, and the difference runs along most of the stations
on the San Antonio & Aransas Pass line. I have a tariff here on the San
Antonio & Aransas Pass for beef cattle which shows that the Commission's
rates, taken as a whole, are higher than the rates in effect in 1891. Among
others, Mr. Chairman—ſ will not bother to read it, because this sustains the
statement which I have made. Another tariff on the Santa Fe, showing lower
rates then than now.
Mr. J. W. Terry—On what, Mr. Colquitt?
Mr. Colquitt–On beef cattle—local beef cattle rates in effect January 7, 1891,
Bangs, Santa Anna, and all stations on the San Angelo Branch, between those
stations and Fort Worth. Between Bangs and Fort Worth in 1891 the rate Was
174, against 20 cents now, and it runs down to that for Valera, and 17% cents
as far west in 1891 as Miles, against 213, while at Hortense in 1891 it was
20 cents and 224 now. Here is a mileage tariff on the Santa Fe in effect
April 18, 1891, compared with the mileage tariffs of the Railroad Commission,
showing increases in the rates for distances over fifty miles.
Mr. J. W. Terry—On the same thing—beef cattle 7
Mr. Colquitt–Beef cattle and other live stock. Here is one for the Cotton
Belt, dated at Texarkana, April 30, 1891. It has a notation that I don’t
exactly understand, but I will read you the figures that it gives. In some
cases the rate of the Commission—I will read it. For ten miles and less the
Cotton Belt’s rate in 1891 was $10 per car, and under the Commission’s rate
$12; fifteen miles and over ten miles, $11 in 1891, and $13 in 1907; twenty-five
miles and over fifteen, $12 in 1891, as against $15; thirty-five miles and over
twenty-five, $14, against $17; forty-five miles and over thirty-five miles, $16,
against $19, and at one hundred miles the Cotton Belt’s rate under this tariff
was $20 per car, and the rate they are now getting is $25 per car. One hundred
and ten miles, $22, against $27.50, and at 180 miles to 190 miles the Cotton
Belt’s rate was $34, and the Commission’s rate $35. At 190 to 200 miles the
Cotton Belt’s rate was $35 and the Commission’s $35.
Mr. Stedman—Mr. Colquitt, is that beef cattle?
Mr. Colquitt–Cattle, calves, sheep and hogs, carloads, 20,000 pounds mini-
mum. So much for comparative rates on live stock in Texas before the Com-
mission confiscated the railroads and at this time. Here is a tariff that ap-
plies—jobbers’ rates in Kansas—class rates, jobbers’ rates on classes. It
shows on first-class for distances of five miles to fifty-six that the first-class
rate in Texas is lower than the first-class rate in Kansas. For all distances in
Ransas over fifty-six miles the jobbers’ rates are cheaper on first-class than
they are in Texas. Second-class Texas rates are lower from five miles to twenty-
one miles, and for all distances over that, the Kansas rates are lower, running
from 1 cent per hundred pounds at twenty-five miles to 9 cents per hundred
pounds lower at 152 miles, and 6 cents lower at distances of 305 miles, and for
Classes 3, 4, 5 and “A” the rates in Kansas—jobbers’ rates in Kansas—range
from 10 to 40 per cent lower than the same rates on your line in Texas. Now,
here is a comparison of Arkansas on class rates with Texas. Now, the Cotton
Belt operates in Arkansas, and some of the Rock Island lines operate in Arkan-
sas. The Texas Commission mileage rates are lower than the Arkansas mileage
rates on Classes 1 and 2. On Class 1 they are lower for all distances up to
three hundred miles, and on Class 2 the Texas rates are lower for all distances
up to 160 miles, and then the Arkansas rates are the lowest. On Class 4, be-
ginning at seventy-five miles, the Arkansas rate is the lowest, and for the other
classes the Arkansas class rates are much the lowest.
Mr. J. W. Terry—You mean that under seventy-five miles the Texas rates are
the lowest ?
Mr. Colquitt—What did you say?
Mr. J. W. Terry—How about under seventy-five miles?
Mr. Colquitt–I said beginning at seventy-five miles the Arkansas rates were
lower than the Texas rates.
Mr. J. W. Terry—How is it under seventy-five miles?
32 REDUCTION OF PASSENGER FAREs.
Mr. Colquitt–Well, as I stated, the Texas rates are the lowest. I have stated
that. I have here a comparison of differentials and so on, but I will not take
up the time of the committee reading that. Now, Arkansas and Texas coal and
coke rates, I have a comparison of that showing that for the same distances the
Texas and Arkansas rates—well, for thirty miles and less, the Texas rate is
55 cents as against 50 in Arkansas, and forty to fifty miles it is 65 in Texas
and 50 in Arkansas, 50 to 55 miles, 70 in Texas and 55 in Arkansas, and
the rates going down run, pretty much together until you get to 240 miles.
At 280 miles they are the same. For 340 miles the Texas rate is $2.06
per ton, against $1.90 in Arkansas, and for all distances over three hun-
dred miles the Arkansas rate is $1.90; that is the maximum, but Texas
rates go up to $2.27 a ton for four hundred miles. Sand and gravel com-
modity rate, single line, per ton of 2000 pounds, ten miles and less, the Texas
rate is 30 cents, and 40 in Arkansas. Ten to twenty-five miles, 35 in Texas and
40 in Arkansas; twenty--five to fifty miles, 45 in Texas and 40 in Arkansas;
fifty miles to seventy-five miles, 55 in Texas and 50 in Arkansas, and it begins
to increase against the Texas rates at that point, showing a difference of about
5 cents per humdred pounds up to the maximum rate, three hundred miles dis-
tance in Arkansas. Cattle and hog rates, Arkansas and Texas compared. At
fifty miles the Texas rate is 10 cents per hundred pounds, in Arkansas 6; cents;
at one hundred miles the rate in Texas is 124 cents, in Arkansas 94 cents;
at two hundred miles the Texas rate is 173 cents, and 144 cents in Arkansas;
at three hundred miles the Texas rate is 20 cents, as against 173 in Arkansas,
and so on. Horses and mules, reduced to dollars and cents, per carload of
thirty-six feet in length. Ten miles and less, in Texas the rate is $19.80, and
$10 in Arkansas; twenty-five miles in Texas it is $25.30, and $14 in Arkansas;
one hundred miles, the Texas rate is $35.20, and $24 in Arkansas; two hundred
miles, the Texas rate is $44 per car, and so on; at three hundred miles the
Texas rate is $50.60, against $46 in Arkansas. I have here a commodity tariff
on corn meal and hominy, showing a difference of about—from 20 to 33% per
cent higher rates in Texas on that commodity than in Arkansas. Wheat, cow
peas, millet seed and hay, at one hundred miles the Texas rate is 12# cents
per hundred pounds on wheat, cow peas and millet Secd, and in Arkansas 9 cents
per hundred pounds; at two hundred miles, in Texas it is 15 cents, against 11
cents. On hay and straw, the Texas rate at ninety miles is 10 cents per hundred
pounds, against 7 in Arkansas; at two hundred miles, in Texas the rate is 15
cents per hundred pounds, against 8 1-2 in Arkansas. I have just read even dis-
tances here, Mr. Chairman, because the ratio is about that proportion as to the
entire table. Cement in carloads, the Texas rate is the lowest for distances un-
der thirty miles; at thirty to forty miles the Arkansas and Texas rate is the
same ; at seventy-five miles the Texas rate is 9%, as against 8 in Arkansas; at
one hundred miles the Texas rate is 11 cents, as against 9 in Arkansas; at two
hundred miles the Texas rate is 18 cents, and the Arkansas, rate is 10 cents;
at three hundred miles the Texas rate is 23 cents, and the Arkansas rate 13
cents. On corn and oats, the Texas rate begins at five miles and less at 4 cents
—or the Arkansas rate begins at five miles and less at 3 cents, and at that dis-
tance the Texas rate is 4 cents; at fifty miles, in Arkansas the rate on corn and
oats is 5 cents, against 6 cents in Texas; at one hundred miles, the Texas rate
is 8 1-2 cents, against 8 in Arkansas; at one hundred and fifty miles, the Texas
rate is 11 cents, against 9 in Arkansas; at two hundred miles, the Texas rate is
12% cents, against 10 in Arkansas. On lime in carloads, the Texas rate at one
hundred miles is 10 cents, and the Arkansas rate is 6 1-2; at one hundred and
fifty miles, the Texas rate is 12 cents, and the Arkansas rate 7; at two hundred
miles, the Texas rate is 14 cents, and the Arkansas rate is 7%. I have these
tables, Mr. Chairman, all prepared, and I am reading them for the purpose of
showing that the rates are not confiscatory in Texas as compared with the
rates some of the roads that operate in Texas get in other States. I shall not
read them all, but just occasionally. IHere is a tariff on sugar and molasses.
At twenty-four miles to twenty-seven miles the Texas rate is 11 cents per
hundred pounds, and the Arkansas rate is 8 cents; at one hundred miles the
rate in Texas is 25 cents per hundred pounds, and in Arkansas 11 cents per
PEDUCTION OF PASSENGER FARES. 33
hundred pounds; at two hundred miles, the Texas rate is 33 cents, and in
Arkansas 13 cents per hundred pounds. Now, on flour, at forty miles the Texas
rate is 10 cents, against 8 cents in Arkansas; for one hundred miles the Texas
rate is 15 cents, and in Arkansas 11; at one hundred and fifty miles the Texas
rate is 173, to il in Arkansas; at two hundred miles the rate is 17% in Texas,
against 12. But under the tariff the maximum rate is reached under our grain
product rate—reaches its maximum at 173 cents in common point territory.
Now, here is an item that is a common production of Arkansas and Texas,
local production—cotton seed and cotton seed meal. At one hundred miles the
Texas rate is 10 cents per hundred pounds, and 7 cents per hundred in Arkansas;
at one hundred and sixty miles in Texas the rate is 13%, to 8 in Arkansas; at
two hundred and fifty miles the Texas rate is 16 cents, against 8 cents in Arkan-
sas—just one hundred per cent difference. That’s on cotton seed. For One
hundred miles, in Texas on cotton seed meal the rate is 10 cents, against 6 in
Arkansas; two hundred miles, the Texas rate is 15 cents per hundred pounds,
to 8 cents in Arkansas; at two hundred and fifty miles the Texas rate is 16
cents, against 8 cents. Crude petroleum—I won’t read that comparison. The
Texas rates are some cheaper, but none is produced in Arkansas.
Now, I have here a comparison of rates—this is a comparison, Mr. Chairman,
that I have prepared, and have devoted a great deal of time to it in getting
ready to combat the contention the railroads are making against the Railroad
Commission in the Federal Court, and they have been carefully compared and
made up ; and these rates show that the rates applying on all classes in Iowa,
where the Rock Island and the Frisco and the Santa Fe systems own lines, range
from twenty—well, I will say from 10 to 50 per cent lower than the Texas
rate on the same class. For illustration, Class “A,” at fifty miles in Texas
is 27 cents, and in Iowa. 20 cents—that’s Class 1. On Class 2, Texas 25, to
17 in Iowa; and Class 3, 23 in Texas to 13.34 in Iowa. Class 4, 21 to 10.
Class 5, 18 cents to 7 cents. There is a difference of over 100 per cent. Class
“A,” the rates is 19 cents in Texas, against 7.05—that’s nearly 150 per cent.
Class “B,” which is carload rates, the Texas rate is 16, against 7. Class “C”
it is 13, against 6; and Class “D” it is 11, against 5; and Class “E” it is 8,
against 4. That’s for distances of fifty miles. For distances of one hundred
miles, Class 1 in Texas, 44 cents, against 24 in Iowa; and it runs on until for
Class “A,” for one hundred miles, the rate in Texas is 27 cents per one hundred
pounds, against 9 in Iowa–just 300 per cent difference.
Now, I have numerous commodity rates—commodity rates for Iowa–showing
similar comparisons. First, there is slack coal in carloads, Texas and Iowa
Compared. Soft coal commodities—in fact, these statements all show com-
modities that compose the principal tonnage of the Texas roads. I have had
comparisons made up so as to cover tonnage that equals practically 80 per
cent of the total tonnage of the Texas roads in comparison. On beef cattle, for
distances of one hundred miles, the Texas rate is 12.5, and the Iowa rate is
11.32; for one hundred and fifty miles, it is 15 in Texas, against 13.42; for
two hundred miles it is 17.5 in Texas, against 15.53. I will hasten along on
this. - e
Here is Texas and Missouri compared. That’s a State in which these systems
that operate lines in Texas operate. I will not discuss that further than to
say that the comparisons in rates show in Missouri on classes that the Texas
rates, with the exception of short distances on Class 1, and a few of the less
than Carload classes, that the rates in Missouri, where the M., K. & T. and the
Missouri Pacific lines and the Atchison, Topeka & Santa Fe and the Rock Island
and the Frisco lines operate, that the Missouri rates, I feel safe in saying, will
average from 25 to 33% per cent lower than the Texas rates that they are com-
plaining of. I did intend to call the committee’s attention to the lumber rates
in Arkansas as compared with Texas, but I omitted that, because the St. Louis
Southwestern’s mileage is almost altogether in Texas and Arkansas, and lumber
constitutes its heaviest tonnage.
Mr. Spoonts—Ain’t the rates made by the Railroad Commission of Arkansas?
Mr. Colquitt—Yes, sir; they make mileage rates. Here is a tariff I would
like to call the committee’s attention to, because it is a growing industry and
34 REDUCTION OF PASSENGER FAREs.
a matter very much discussed at one time, that is, on melons and vegetables,
comparison with Arkansas rates. For distances of fifty miles, in Texas the
melon and vegetable rate is 13 cents per hundred pounds, and in Arkansas it is
7; for distances of One hundred miles, the Texas rate is 16%, and in Arkansas
it is 11; for distances of two hundred miles, the Texas rate is 20 cents, and
the Arkansas rate is 15. Let's see, I want the lumber rates. Well, I will not
bother about the Arkansas lumber rates now.
The Chairman—Mr. Colquitt, I will suggest to you that we have got about
twenty minutes longer, and do you think you will be able to conclude in that
time 2
Mr. Colquitt–Not so as to discuss the questions so the committee will un-
derstand the relative positions of the Texas railroads; it will be impossible,
because I have got some data here—I understood from the members of the com-
mittee you wanted to go into it fully. I have some data which will answer their
contention.
The Chairman—Just go ahead and do all you can. t
Mr. Colquitt–Now, I have here some rates—here is a comparison of rates
on lumber, shingles, cotton in bales, sugar and molasses, and melons and all
these other commodities that I have made comparisons with, including beef
cattle, sheep and hogs, Texas and North Carolina. For five miles and less, car-
load rate on lumber and shingles—I will read the headlines, so you may under-
stand: “North Carolina rates apply between points on Atlantic Coast Line
Railroad. Texas rates apply between points on Texas & Pacific Railway west
of Mineola.” I have made a comparison between those two roads because the
Texas rates on lumber are different on different railroads. The Commission’s
rates are practically group rates, built on a mileage basis. All of the railroads
in Texas have their own lumber tariffs, and, therefore, comparison is made of
a given railroad in North Carolina with a given railroad in Texas. For five
miles and less, the Texas lumber rate on the Texas & Pacific is $12 per car,
against $5 in North Carolina; at fifty miles the Texas rate is $21.60, against
$12 in North Carolina; at one hundred miles, the Texas rate is $33.60, against
$16 in North Carolina—a difference of over 100 per cent; at one hundred and
fifty miles the Texas rate is $37.20, against $17.05 in North Carolina; at two
hundred and fifty miles, the Texas ſumber rate on the Texas & Pacific is $42
per car, against $17.40 per car in North Carolina. Rates on cotton in Texas
as compared with North Carolina. At distances of fifty miles the Texas rate
is 21 cents per one hundred pounds, to 19 in North Carolina; at one hundred
miles, the rate is 40 in Texas, and 25 in North Carolina; at one hundred and
fifty miles the Texas rate is 47 cents, to North Carolina’s 29.
Alabama and Texas, molasses. The Texas rate at fifty miles—forty-eight
miles to fifty-four miles, is 18 cents, and Alabama is 9 cents; at one hundred
miles, Texas 25 cents, Alabama is 14; at one hundred and fifty miles the Texas
rate is 30 cents, and Alabama is 18; at two hundred miles the Texas rate is
33 cents, and Alabama is 20 cents. Wheat, barley and rye rates, the Alabama
rates are the lowest. -
Texas and Mississippi, horses and mules. At one hundred miles, in Texas
the horse and mule rate is $38.40, and $29 in Mississippi; two hundred miles
the Texas rate is $48, and Mississippi Š37; at three hundred miles the Texas
rate is $55.20, and the Mississippi rate is $52. Lumber and shingles in carloads:
The Texas rate for sixty miles is 10 cents per hundred pounds, and Mississippi
4}; at one hundred miles the Texas rate is 14 cents, and Mississippi 6; one
hundred and fifty miles the Texas rate is 15% cents, and the Mississippi rate
is 7 cents. Comparison is made in Mississippi points on the Alabama & Vicks-
burg Railway with points on the Texas & Pacific in Texas. Here is cotton
in Mississippi, rates applying on the Illinois Central Railway in Mississippi,
against Texas mileage rates. We have had necessarily to figure this down and
reduce the rate in Texas to the amount per bale for the distance given. At one
hundred miles the Texas cotton rate is $2 per bale, in Mississippi on the
Illinois Central it is $1.25 per bale; at one hundred and fifty miles the Texas
rate is $2.35 per bale, and in Mississippi Š1.50; two hundred and fifty miles,
the cotton rate in Texas is $2.75 a bale, and $1.95 in Mississippi. I think
*.*.*
,---
REDUCTION OF PASSENGER FARES. 35
there is a system that operates in Texas that operates a road across Mississippi.
This is the South Carolina rate. There is no road in Texas operating in
South Carolina that I know of, and I will not read it.
Mr. Spoonts—What road did you say was in Mississippi—what system was
that ?
Mr. Colquitt I said there is a system in Texas that also operates across
Mississippi. I think the Frisco has a line that runs from Memphis to Birming-
ham.
Texas and Georgia—I will not compare that. No Texas railroads, as far as
I know, belong to systems that are operating in Georgia.
Now, here is the Illinois rate. The Gulf, Colorado & Santa Fe belongs to
the Atchison, Topeka & Santa Fe, and that has its general offices in Chicago
and runs across the State of Illinois, and I think the Rock Island has lines
in Illinois, and the Frisco and the Missouri Pacific system. On classes of all
kinds—first, second, third and fourth and Classes “A,” “B,” “C.” “D’’ and
“E”—the Illinois rates are very much lower than the Texas rates. At fifty
miles in Texas the charge for one hundred pounds on Class 1 is 27 cents, in
Illinois 24.1 cents; on second-class, 25 in Texas, Illinois 19.6. On Class 4, which
is less than carload rating, and most all of the less than carload shipments in
Texas that are moved in some other States under tariffs fixed by the railroads
themselves, what they call jobbers’ rates, probably—well, I won’t say how
much, but a very large proportion will move under Texas Class 4 rates. The
Class 4 rate in Texas for fifty miles is 21 cents per hundred pounds, and in
Illinois it is 11.7. On Class 5 it is 18, to 9.3 cents. Class “A” it is 19 to 9.2.
Class “B” it is 16, to 8.9. Class “C” it is 13, to 7.1, and Class “D” it is 11 in
Texas, to 5.6 in Illinois. Class “E” it is 8 in Texas, to 5 in Illinois. These
increase as the distance grows. For instance, at one hundred miles, the Texas
first-class rate is 44 per hundred, and in Illinois it is 30.8, and for Class “B”
at one hundred miles the Texas rate is 24 cents, and in Illinois it is 11 cents,
and for one hundred miles on Class “E,” in Texas it is 13 cents, to 6.3 in Illi.
nois, and it is widened as the distance grows, the rate growing less in Illinois
each time.
A Member—Mr. Chairman, now, it is about adjourning time. It is evident
that Mr. Colquitt can not complete his testimony at this hearing, and I move
that we adjourn until this evening. &
The Chairman–It is a matter of impossibility—we can’t meet this evening.
Make it subject to call, and we will try to get together tomorrow morning.
(Thereupon the committee adjourned until Wednesday morning, February
20, 1907, subject to call of the Chairman at the earliest convenient hour.)
IN THE COMMITTEE ON COMMON CARRIERS, FEBRUARY 20, 1907.
The committee met at 9 a. m., the roll was called, a quorum was present and
the statement of Mr. Colquitt was resumed.
The Chairman—Mr. Colquitt can proceed with his argument.
Mr. Colquitt–When you adjourned yesterday, Mr. Chairman, I was quoting
rates in comparison from Illinois with Texas rates—class rates, I believe. I
don’t think I referred to any commodity rates, because the difference between
Texas and Illinois on commodity rates is wider than on class rates. I may
perhaps explain to the committee the difference between class rates and com-
modity rates, so that they may better understand as I discuss the matter what
the difference consists of. A commodity rate is an exception to a class rate.
All commodities and articles take class rates, unless an exception is made of
the particular commodity referred to by either making a lower or higher rate
or a different rate from that which it would take as a class—under class rates.
And I should have explained yesterday in referring to the Texas and Missouri
rates, that the comparison made was on the Missouri Pacific Railway, main line,
St. Louis to Kansas City, and upon all limes in Missouri north of said Missouri
Pacific Railway, main line. There are two columns here. The Railroad Com-
mission of Missouri has classified the railroads of that State into first and
36 REDUCTION OF PASSENGER FARES.
a
second-class roads, and they apply a somewhat higher rate to second-class
roads than they do to first-class roads. With the exceptions noted yesterday as
to the Missouri class rates, while the rates on second-class roads are somewhat
higher, as I stated, than for first-class roads, taken as a whole, both on first
and second-class roads in Missouri, the rates are very materially lower than
On roads in Texas.
In Louisiana–I have not the class rates before me, but they are as a rule
higher than the Texas class rates and some commodity rates. Here is a tariff
Compared on rates applying on the Texas & Pacific on cotton seed meal, ashes
and coke—cake, that should be. The rates in Texas begin at 5 cents per hun-
dred pounds for ten miles and less, and Louisiana 3 cents per hundred pounds;
at fifty miles the Texas rate is 8 cents, and the Louisiana rate 4% ; at one hun-
dred miles the Texas rate is 10 cents and the Louisiana rate is 5%; at one
hundred and fifty miles the Texas rate is 13 cents and the Louisiana rate is
6%; at two hundred miles, the Texas rate is 14 cents per hundred pounds, and
the Louisiana rate is 8. At two hundred and eighty miles, the Texas rate is
173 cents, and the Louisiana rate is 8 cents. On rough rice in carloads we
have had some complaints from the railroads that the rough rice rates by the
Texas Commission are very low, and I have compared them here with the rates
applying in Touisiana. The rates used in comparison for Louisiana, however,
are the rates applying on Morgan’s Louisiana and Texas Railroad, a Southern
Pacific line running from the Sabine River to New Orleans, and on branch lines,
The Texas rate on rough rice for ten miles and less is 3 cents, and in Louisiana
it is 3 cents; for fifty miles in Texas it is 5 cents, and in Louisiana, it is 5}
cents; at one hundred miles, the Texas rate is 7% cents, and in Louisiana it is
8 cents; at one hundred and fifty miles the Texas rate is 10 cents, and the
Louisiana, rate is 10 cents, and there the maximum rates in Louisiana is reached
at 10 cents. Beginning at one hundred and sixty miles the Texas rate increases
half a cent, until at two hundred and forty miles in Texas it is 15 cents, against
10 cents in Louisiana. The rates for the shorter haul in Louisiana are some-
what lower, upon an average, than the Texas rate on rough rice, but when the
movement is considered in Texas and Louisiana probably the rates are about
the same. Cotton-seed oil, in Texas the rate at fifty miles is 8 cents, and in
Louisiana, 7% ; at one hundred miles the Texas rate is 11 cents, and in Louisiana
10; one hundred and fifty miles, the Texas rate is 15 cents, and Louisiana 12% ;
two hundred miles the Texas rate is 17 cents and in Louisiana 15; at two
hundred and forty miles, the Texas rate is 18, and the Douisiana rate is 17.
Rates fifty miles and less are less in Louisiana than they are in Texas. Com-
parison is made with the rates in Texas applying on the Texas & Pacific. Crude
petroleum, the rates in Texas are lower than they are in Louisiana. For fifty
miles and less the Texas rate is 5%, and in Louisiana it is 7; at one hundred
miles it is 7 in Texas and 8 in Douisiana; at one hundred and fifty miles it
is 8 in Texas and 9 in Louisiana; at two hundred miles it is 9 in Texas and 10
in Louisiana; at two hundred and fifty miles it is 10% in Texas and 12 in Louis-
iana. Those are some commodity rates in Louisiana on commodities that are
produced and handled largely in Texas as well as in Louisiana.
I have here now, Mr. Chairman, a statement entitled, “Information relating
to passenger business on Texas railroads and railroads in other States.” The
data seems to have been prepared by H. G. Askew, General Statistician Texas
Railways; R. C. Fyfe, Assistant General Freight and Passenger Agent St. Louis
Southwestern Railway of Texas, and G. F. Hawks, General Superintendent Hous.
ton & Texas Central Railroad and Houston East & West Texas Railway, dated
Austin, Texas, February 6, 1907. They quote tables of comparison from the
statistical abstract of the Interstate Commerce Commission for the year 1904,
that being the last statistical abstract issued by the Interstate Commerce Com-
mission showing statistics for the railways in the United States. They have
selected arbitrarily groups of railways or States for comparison for purposes
of disparagement of the Texas conditions and the Texas rates, evidently, without
explaining the reasons why differences, which appear in the figures which they
quote, exist. For illustration, they quote the Alabama Great Southern Rail-
road, the prices they pay for coal. Alabama is a coal-producing State, and I
REDUCTION OF PASSENGER FAREs. 37
assume that coal is somewhat cheaper because of the less expense of getting it
from the mines to the consumer. They quote the Chicago, Rock Island &
Pacific at $2 per ton, and the lines in Texas owned by the Chicago, Rock Island
& Pacific, or the Rock Island holding company, and they state that the average
price per ton is $3.12. Now, the Chicago, Rock Island & Pacific operates in
Oklahoma and the Tndian Territories and in Kansas and in that contiguous
territory. They have coal mines under either the control of the railway cor-
porations or of the officers of the company allied with the railroad corporations;
that’s my understanding. They produce that coal, and fix the price upon it;
they control it, and I suppose—I don’t know, because this statement does not
explain, but there are those connected with this statement. who could explain
why this difference in the cost exists. If it exists, and it is due to freight
rates, it should have stated the cost at the mines or the cost of the Chicago,
Rock Island & Gulf at the mines, plus freight to the point of consumption.
If that is what makes the difference in the cost it should have said so, and
yet it is a well known fact to railroad men that it costs as much to haul
Company coal—about as much, at least—as it does coal for commercial con-
sumption, and I assume that the coal used by the Chicago, Rock Island & Pacific
had to be transported, just as coal used by the Chicago, Rock Island & Gulf;
but those differences and the items entering into that difference are not ex-
plained. The Missouri, Kansas & Texas; that’s the corporation which owns
the Missouri, Kansas & Texas of Texas. The price of coal for the year 1904
for the M., K. & T. is given at $1.88.6 per ton; for the M., K. & T. of Texas
the rate is given at $2.42.5 per ton; and yet the M., K. & T. of Kansas, the
parent company, owns coal mines at Coalgate, or, if they don’t own them,
their subsidiary company does—that’s practically the same; and I am advised
they also own coal mines in Missouri and in Kansas. They omit to state in
comparison the cost of bridge timbers in those States and on those lines with
which they have made the comparisons. They omit to state in their-make
any comparison that is not unfair to the Texas conditions. The Texas &
Pacific's entire line is compared with Texas at $2.48 per ton. The Texas &
Pacific has coal mines on its lines in Palo Pinto county. I understand the price
of coal fluctuates, like the price of anything else. My recollection is that in a
statement here before I became a member of the Commission, on the fuel oil
question, the operator of the Texas & Pacific coal mines at Thurber said that
the price of coal—the price which he was getting for coal at that time from
the Texas & Pacific was 90 cents per ton, and he was here combating cheap
rates on fuel oil, because, he said, it would put him out of business as a com-
petitor with that class of fuel. I would not be positive as to the figures stated,
but that is my recollection; it has been several years ago. So with reference to
this statement, the figures compiled are compiled evidently for the purpose of
discrediting the results of the rates which the railroads of Texas are getting
under the operation of the Railroad Commission law. The question of loco-
motives is discussed by this pamphlet. In 1893 they state the cost of a loco-
motive at $9800; in 1906 they give the cost at $20,000, and show the increase
at 104 per cent. My associates on the Commission will remember that when we
were hearing the Commission’s notice to the railroads to show cause why the
rates on cotton should not be reduced and a change in the compress regulations,
the compress men and railroad men brought an expert or a gentleman of long
experience in both railroading and compressing for Atlanta, Georgia, to testify,
and they proved by him that labor in Georgia for compresses—compress labor—
was much lower than it was in Texas. I don’t remember that he testified that
railroad labor was lower, but at that hearing the superintendent of the Gulf, Col-
orado & Santa Fe, in ansfer to a question by Commissioner Mayfield, as I remem-
ber now, concerning his motive power, testified that he had bought several engines
second-hand from the Atchison, Topeka & Santa Fe Company, and according to
my recollection, Mr. Chairman, he said that they paid about $6000 for them.
Does that harmonize with your memory 7
Mr. Mayfield—I don’t remember.
Mr. Colquitt–But, anyway, a great deal of the motive power on the Texas
railroads is second-hand, and they buy it from the systems, frequently, to which
the road in Texas belongs.
38 REDUCTION OF PASSENGER FARES.
Mr. Mayfield—I will call your attention, in that connection, to the list of
motive power purchased by the Frisco lines and the T. & B. V., we have just
passed on.
Mr. Colquitt—Yes. -
Mr. Mayfield—They range all the way, my recollection now is, from nine to
twelve and fourteen thousand dollars.
Mr. Colquitt–Well, the Chairman of the Commission’s statement is of
record—matter of record in the application of the Trinity & Brazos Valley for
issuance of bonds on rolling stock, and it is unnecessary for me to repeat his
statement, because it thoroughly rebuts the comparison made by this state-
ment, which, as I have already stated, was evidently gotten up for the purpose
of disparaging the Texas rates and Texas conditions.
Mr. Mayfield—I will call your attention now, just in that connection, to
the fact that in 1893 there was no such improvement in dimensions and capacity,
and it was a different sort of material altogether.
Mr. Colquitt–Yes, I was coming to that. In discussing this engine proposi-
tion, these large, powerful locomotives that are being purchased new now by
Texas railroads and by many other railroads not located in Texas have double
the capacity of locomotives formerly used, and the economy of railroad men,
their view of it is that if they can make one locomotive that costs—say that
it costs twice the money—do twice the work of another locomotive, an inferior
one, that the railroad management and the railroad company saves 100 per cent
in labor in the operation of their locomotives, or about that, because one engi-
neer and one fireman or helper generally supply a locomotive, whether it is a
big one or a small one; and we frequently have complaints that the locomotives
are so heavy that they get off the track and bog down in the mud and delay pas-
senger trains. The price of coaches, mail cars and baggage cars is compared
here, and if I had had the time we could have made up some figures and com-
parisons from data on file in our office which I think would not show as big
a difference as this pamphlet indicates. It discusses the question of wages and
employes. I have gone over it all. I will say, however, in that connection,
that the Atchison, Topeka & Santa Fe Railway system or railway company
controls the Gulf, Colorado & Santa Fe, the Pecos Valley lines, they have lines
in and around Beaumont, the Cane Belt, and usually their contracts with labor
organizations stipulate about the same wages, whether they operate in Texas
or Missouri. I think the Order of Railway Conductors is a benevolent corpora-
tion, a corporation under the laws of the State of Iowa. They generally stand
or fall together. I know soon after I came on the Commission the question
was whether the M., K. & T. would continue to operate without a strike or
with a strike, and the trainmen put it up to the management to raise wages, and
that adjustment was fixed in St. Louis, and not in Texas, and the rates apply
all along the line, as I understand, and that comparison is unsound.
Mr. Spoonts—Mr. Colquitt, is there any comparison there between the wages
paid in Texas and out of Texas?
Mr. J. W. Terry—Mr. Colquitt, if you had been here when I made my opening
statement—
Mr. Colquitt–I will be glad to answer that when I get through. This
pamphlet is unfair because it don’t give the figures which they should have
given to you. When men use figures, if they have not the figures and can’t get
them, then they may be justified if they qualify it, but where they have the
figures at their disposal they ought to give the figures. The pamphlet also dis-
cusses free transportation. I will discuss that later, when I reach the passenger
part of this statement. It discusses freight rates, general results of operation
in Texas, and on that line I have some data here which gives you figures in-
stead of statements. According to the statistical abstract of the Interstate
Commerce Commission for the fiscal year ending June 30, 1904, the average
earnings per passenger per mile for Group 9, composed of Louisiana, Texas and
the eastern portion of New Mexico, was 2.319 cents per mile. For the same
year the average for Texas was 2.239 cents per mile. That includes a large
portion of New Mexico, where the travel is perhaps not as great as it is in
Eastern Texas, but does not include a portion of the Panhandle of Texas.
REDUCTION OF PASSENGER FARES. 39
For Group 9 on freight, June 30, 1904, the average per ton per mile was 1 cent.
For the same year in Texas the average was 1.067 cents per ton per mile. In
Group 6, comprising—this is the statistical abstract, Mr. Chairman; if any
person desires to see it and verify the figures, it is here before you. In Group
6, comprising Illinois, Iowa, Wisconsin, Minnesota and a part of North and
South TYakota, and the western part of Michigan, the average revenue per pas-
senger per mile was 2.086 cents. For the same group on freight per ton per
mile it was .779 of a cent, showing .156 of a cent less per mile per passenger
in Group 6 than for the State of Texas, and on freight the revenue per ton
per mile was .288 less in Group 6 than in the State of Texas. Now, some of
these railroads—some of these systems that dominate the Texas lines operate
in that group, notably the Atchison, Topeka & Santa Fe, the Wabash, which
belongs to the Missouri Pacific system, and, perhaps, a small portion of the
Rock Island, from Chicago to the Mississippi river. Group 8 is composed of
the States of Arkansas, Missouri, Indian and Oklahoma Territories, Kansas,
two-thirds of the south portion of Colorado, and a portion of the north of New
Mexico. In 1904 the average passenger earnings in Group 8 were 2.283 cents
per passenger per mile and in Texas it was 2.239, a difference of .044 in favor of
Group 8; and the revenue per ton per mile on freight for Group 8 was .998
of 1 cent per ton per mile, whereas in Texas for the same year the average
per ton per mile on freight was 1.067 cents, showing a difference in favor of
Texas on freight, as against Group 8, of .069 of 1 cent per ton per mile.
Groups 6 and 8 is the territory in which the systems owning lines in Texas
operate. The Chicago, Rock Island & Pacific Railway east of the Missouri river,
in Group 6, revenue per passenger per mile in 1904 was 2.113; revenue per ton
per mile on freight was .884 cents. See page 386 of the statistical abstract
of the Interstate Commerce Commission. Group 8, line west of the Missouri
River, revenue per passenger mile was 2.347 cents; revenue per ton per mile
on freight was 1.045 cents. See page 394 of the statistical abstract. And
for the Chicago, Rock Island & Pacific system the revenue per passenger per
mile was 2.203 cents; the revenue per ton per mile on freight was .994 of
a cent. For the same year in Texas the Chicago, Rock Island & Gulf Railway
earned an average per passenger per mile of 2.228 cents, and 1.222 cents per
ton per mile on freight. See page 406. The St. Louis & San Francisco Rail-
way in Group 6, revenue per passenger per mile was 1.754 cents; revenue per
ton per mile on freight was .468 of a cent. See page 390 of the statistical
abstract. In group 8 the revenue per passenger per mile was 2.343; the revenue
per ton per mile on freight was .959 of a cent. See page 396. The Frisco lines
in Texas for the same year: The Fort Worth & Rio Grande Railway, the
revenue per passenger per mile was 2.623 cents; the revenue per ton per mile
of freight was 2.445 cents. The Red River, Texas & Southern Railway, the
revenue per passenger per mile was 2.396; the revenue per ton per mile of
freight was .980 of a cent. This shows that the lines belonging to that system
in Texas on that basis earned much more money than they did in the groups
as reported by the Interstate Commerce Commission. The Missouri, Kansas
& Texas, in Group 8, the line north of Denison, the revenue per passenger per
mile was 2.144 cents; the revenue per ton per mile on freight was 1.024 cents.
See page 394 of the Interstate Commerce Commission statistical report. The
same year in Texas the revenue per passenger per mile was 2.447; the revenue
per ton per mile on freight was 1.213 cents, showing a decided increase of
earnings per mile on passengers and per ton on freight in Texas as against the
north end of the line, and yet the north end of the line is said to be making
money and the Texas end has got about a ten million dollar deficit, of which
I will speak later. The Missouri Pacific system, in Group 6, the Wabash Rail-
road, west of Danville, Illinois, the revenue per passenger per mile was 1,908
cents; revenue per ton per mile on freight was .616 of l cent. The Missouri
Pacific, in Group 8, revenue per passenger per mile is 2.173 cents; revenue per
ton per mile on freight is .884 of 1 cent. The St. Louis, Iron Mountain &
Southern, the revenue per passenger per mile is 2.461 cents; the revenue per
ton per mile on freight is .786 of 1 cent. See page 394, statistical abstract. For
the same year, towit, 1904, the Missouri Pacific or Gould roads in Texas
40 - REDUCTION OF PASSENGER FARES.
showed the following earnings on the same basis: Texas & Pacific in Texas,
average receipts per passenger per mile were 2.252 cents; on freight, 1.045
cents per ton per mile. The International & Great Northern, the receipts per
passenger per mile were 2.167 cents; on freight, 1.086 cents per ton per mile.
St. Louis Southwestern Railway of Texas, the receipts per passenger per mile
were 2.351 cents; on freight, 1.411 cents per ton per mile. The Atchison,
Topeka & Santa Fe Railway, Group 8, page 394, the line west of Kansas City,
Missouri, revenue per passenger per mile, 2.200 cents; revenue per ton per
mile on freight, 1.016 cents. The Atchison, Topeka & Santa Fe Railway, line
east of Kansas City, Missouri, page 386, Group 6, revenue per passenger per
mile, 1.951 cents; revenue per ton per mile on freight, .811 of a cent. The
Atchison, Topeka & Santa Fe Railway, page 402 of the statistical abstract, in
Group 10, which embraces California, Mr. Chairman, and the Pacific States,
Slope States, the revenue per passenger per mile was 1.984; revenue per ton
per mile on freight was 1.021 cents. For the Texas lines for the same year
belonging to the Atchison, Topeka & Santa Fe Railway, the earnings were as
follows: Gulf, Colorado & Santa Fe Railway, receipts per passenger per mile,
2.150 cents; on freight, 1.030 cents per ton per mile. Pecos & Northern Texas
Railway, receipts per passenger per mile, 1.893 cents; on freight, 2.039 cents
per ton per mile. Pecos River Railroad, receipts per passenger per mile, 2.059
cents; on freight, 2.303 cents per tom per mile. Southern Kansas of Texas, re-
ceipts per passenger per mile, 2.284 cents; on freight, 1.371 cents per ton per
mile. Southern Pacific lines, Group 9, statistical abstract, page 400: Morgan’s
Louisiana & Texas Railroad, revenue per passenger per mile, 2.333; revenue
per ton per mile on freight, 1.365. Southern Pacific Company, Group 10,
California and Pacific Slope, including Arizona and New Mexico, part of New
Mexico, page 404, revenue per passenger per mile was 1.889 cents; revenue
per ton per mile on freight, 898 of 1 cent. Lines belonging to the Southern
Pacific in Texas in comparison with the foregoing shows the following: Gal-
veston, Harrisburg & San Antonio, revenue per passenger per mile, 1.809
cents; on freight, .638 of 1 cent per ton per mile. Galveston, Houston & North-
ern, revenue per passenger per mile, 1.446 cents; on freight, 1.575 cents per
ton per mile. Houston & Texas Central, revenue per passenger per mile, 2.307
cents; on freight, .968 of one cent per ton per mile. Gulf, Western Texas &
Pacific, revenue per passenger per mile, 1.875 cents; on freight, 3.526 cents
per ton per mile. Texas & New Orleans, revenue per passenger per mile,
2.330 cents; on freight per ton per mile, .962 of 1 per cent. Houston East &
West Texas, passenger per mile, 2.688; freight per ton per mile, 1.440 cents.
San Antonio & Aransas Pass, receipts per passenger per mile, 2.418 cents; on
freight, 1.498 cents per ton per mile. The Colorado & Southern, in Group 8,
page 394, revenue per passenger per mile, 2.637 cmts; revenue per ton per mile
on freight, 1,182 cents. The Fort Worth & Denver City, in Texas, for the
same year, receipts per passenger per mile, 2.385 cents; on freight, .931 of 1 cent
per ton per mile. Group 8 comprises a part of the Panhandle of Texas.
One reason why, in my opinion, the Texas railroads do not make a better
showing than they do is on account of their absolute domination, control and
management by officers and systems of railways and holding companies, who
do not have their domicile in the State of Texas. You heard the Chairman
of the Commission the other day say that in his opinion—he could not say
except from his opinion—why deficits on certain roads exist. It is my opinion
that the Texas lines that belongs to those systems in the final accounting do
not get credit for what they earn. The system of railroad management and
railroad financiering is one of the most gigantic financial conceptions, I think,
ever conceived by the mind, of man. In this country transportation under the
conditions that now exist is absolutely—transportation facilities are absolutely
necessary for the existence of the people. The people demand and require, un-
der the conditions that exist, fresh supplies for their daily subsistence. Mer-
chants carry small stocks, depending upon quick service. They can do business
in that way upon less capital. Years ago when the railroad building was active
and the country did not have so many miles, people in different States and in
different communities put their funds together and organized and began build-
REDUCTION OF PASSENGER FARES. 41
ing. There existed in New York a condition which made it possible for a half
dozen men to bankrupt those railway companies and stockholders who put their
money in those properties. They gradually acquired—they found after years of
experience and manipulation and issuance of watered bonds and stocks and
the control of the prices of those stocks, they found that to carry on and con-
trol and dominate rates and control tonnage, that through limes and systems of
railways were necessary to be organized in order to accomplish their desires.
They began organizing companies for that purpose. Today, I dare say, two
hundred thousand miles of railway in the United States are dominated and
controlled by not more than a dozen heads or a dozen companies, and they have
their domiciles in New York, where they can hold their conferences and make
their agreements without the laws of the States ever touching them. They buy
up a Texas railroad as you buy your beefsteak for breakfast in the morning.
And what I say about that will apply to other States. The holding company
or the dominating—the company that dominates a system of railways will
issue its stocks and its bonds to cover the purchase price of the road they buy.
If the laws of the State where the road is situated requires its operation inde-
pendent from the system, they will take such stocks and such bonds as they
may require which will control that property and they place these stocks and
those bonds in the treasury of the holding company and issue the holding
company’s securities and bonds, preferred and common, to represent the securi-
ties which they have deposited. Now, I made this statement the other day to
a railroad gentleman who, I thought, understood fully the minutia of the man-
agement and handling of these vast railroad properties; I stated to him that a
certain railroad in Texas shows an absolutely bankrupt condition, when its
parent system is paying its stockholders 4 to 5 per cent dividends upon the
value of that property annually, and he didn’t believe it, he thought it was
impossible. But I want to say to you, Mr. Chairman, that while this Commis-
sion,--and myself particularly,–have been frequently misunderstood, perhaps,
and have been misrepresented about what we were trying to do, if these rail-
roads, in my judgment, earned twice the money they earn now they would
never pay a dividend—they would never pay a dollar of dividend on the stock.
That's the favorite way of cutting out the minority stockholder in these inde-
pendent corporations. A corporation operating these vast systems, with their
offices in Chicago, St. Louis or New York, will come down here and buy up a
hundred-mile railroad and pay a million dollars for it; they will issue a mil-
lion dollars to represent that million dollars; if it has a million dollars of stock
outstanding, that stock is put in their treasury, the holding company’s treasury,
as collateral security pledged for the stock of that system which they issued to
represent it, and they put that system stock upon the market and sell it to you
and to me, and the balance of the country and pay 4 to 5 per cent dividends on
it. Now, a railroad which these dominating systems can not control in their
issuance of stock, they purchase a majority or controlling interest of the stock.
That road may make 40 per cent upon its value per annum. The controlling
offices are in ihe hands of the dominating system. They declare no dividends;
they pay no dividends; they say they are making none, and the minority
stockholders will receive no money, no returns upon the investment, and they
get together and discuss it and disgorge it to the holding companies. That is
the system of railroad financiering in this country today, and there is no dis-
pute of it. Now, further than that, they organize these systems, they make
these rates, they haul transcontinental freight cheap; and today no railroad
in Texas can show what proportion of their earnings come from interstate
rates that are hauled at less than the cost of transportation, nor can they
show the proportion of expense of handling interstate and international traffic
as compared with the State traffic. Their figures are available; they can show
it, or could show it. The Southern Pacific Company, which was one of the
first holding companies organized, owning several thousand miles of railway,
through the ownership of the stock and ownership in part of the bonds, for
years and years never paid a dividend. The Southern Pacific Company, a
majority of the stock of that corporation, is controlled and owned by the
Union Pacific Company, and the president of the Union Pacific Company is
*
42 REDUCTION OF PASSENGER FARES.
the president of the Southern Pacific Company, and they continued to use the
assets of the Southern Pacific Company as they pleased or held it in the treasury
of the Union Pacific Company until some of the stockholders brought suit to
force the holding company to declare a dividend upon the stock of the Southern
Pacific corporation. At that time the stock of the Southern Pacific Company
was selling on the open market at from 40 to 46 cents on the dollar. That
corporation, by the terms of its charter, has legislative powers just as com-
plete as this Legislature has, in so far as its own self-control is concerned in
the issuance of stocks and securities—no limitation upon its power. And yet
the Southern Pacific was controlled by another corporation and the minority
stockholders brought suit to force the Southern Pacific to pay its accumulations
out in dividends, but it was not until those who sued were broke and forced to
stop the litigation that the Union Pacific officers and directors who controlled
it allowed a dividend to be declared on the stock of the Southern Pacific Com-
pany, and the stock jumped up as a result, which showed its value, its intrinsic
value or its commercial value, from 45 cents until today it is selling nearly at
par. The Rock Island system is controlled identically the same way. It is
here complaining of the rates fixed by the Railroad Commission of Texas. And
that includes the Frisco lines. It may be said that of the Atchison, Topeka &
Santa Fe, that it controls its subsidiary lines the same way. The Gulf, Colo-
rado & Santa Fe shows upon its face that it owes thirteen million dollars more
than all its property in Texas is worth, or about that; and yet the Atchison,
Topeka & Santa Fe for the year 1904 paid 4 per cent on the common stock and
5 per cent upon the preferred stock of stock representing sixty-three million
dollars of value south of Red river. The Interstate Commerce Commission
report shows that.
Mr. Mayfield—What lines has the Atchison got south of the Red river ?
Mr. Colquitt—The Atchison, Topeka & Santa Fe owns all of the bonds and
all of the stock of the Gulf, Colorado & Santa Fe; Cane Belt; Gulf, Beau-
mont & Great Northern; Gulf, Beaumont & Kansas City; Pecos & North-
orn Texas; Poços Rivor, and the Southern Kansas of Toxas; and has re-
cently acquired the Texas & Gulf and the Gulf & Interstate, and the Gulf,
Colorado & Santa Fe, Mr. Chairman, has no more of its own—not as much
as a child three days old, except that it gets and draws its breath from
the Atchison company. In a battle between your Railroad Commission under
a law enacted by your Legislature, the dictum does not come from the Gulf,
Colorado & Santa Fe, a creature of the laws of the State of Texas, but
it comes from Chicago, where the general offices of the Atchison, Topeka
& Santa Fe are situated, a corporation given existence by the State of Kan-
sas, with power to own the stock and hold the bonds and stocks of other
railway corporations—a thing which they can not do under the laws of this
State. Now, what I say about that applies to practically every system that is
operating in Texas. The Gould system is dominated, not exactly on that prin-
ciple, but I think so far as the Missouri Pacific is concerned it is. The Rock
Island and the Frisco and the Katy are all managed and financed upon identi-
cally the same basis. Now, I suppose that this was known to those who were
connected with those properties in Texas, and was surprised the other day to
learn from a very intelligent gentleman, who stands very close to one of the
principal holding companies that owns a large mileage in Texas, that he did
not understand it that way. Consequently, I dare say, if we knew the exact
facts, they would be as we ascertained them to be with reference to the Pacific
and American and Wells-Fargo Express Companies with reference to making
annual reports to us—the report is made up in New York for the American,
in St. Louis for the Pacific, and in San Francisco for the Wells-Fargo. They
have so-called general officers down here, whose function it is to sign these
reports and send them to us, and they don’t know whether they are correct or
not. We showed that in the litigation with the express companies, and I have
no doubt that applies to some extent with the railroads of this State—that the
reports are made up and signed without the officer making the report verifying
the figures and the facts which it is supposed to contain. I do not make this
statement for any reflections, but these are great corporations, and I saw in the
REDUCTION OF PASSENGER FAREs. 43
paper the other day where a gentleman said he had sworn falsely—he did it
to save his job. They control employment for something like two million of
men in the United States, something like fifty thousand men in Texas, and the
power of these corporations over their own employes is very great.
Now, with reference to the divisions. I understand all these roads have what
appears upon its face to be a fair agreement between them and the dominating
lines as to divisions of rates and divisions of expenses. It may be fair upon
its face, but contracts with these Texas lines are not made by the Texas lines,
or carried out by the Texas lines. For the M., K. & T. of Texas, by the terms
of the agreement the M., K. & T. of Kansas buys all its supplies, makes all
of its divisions, supplies all of its appliances, and everything of that kind.
I am not able to say this positively, but I think the same thing will apply
to the Atchison, Topeka & Santa Fe and the Rock Island and the Frisco. I
can not say, as I say, definitely about those, because I have not gone far enough
into that question with them to be able to make the positive statement, and 1
try to confine myself in statements of this kind to matters which I can prove.
Now, here are some statements, Mr. Chairman, which will tend to show and
support the statement made by Chairman Mayfield before you the other day,
and which I have in part repeated this morning. I shall not call the road's
name, because I have no disposition to be unkind or unfair, and what I say
to you I say in absolute good faith and with nothing but a sincere and good
purpose as a public official called before you to do what I am trying to do,
To show you even under the supposed fair agreements or divisions on interstate
freight how easy it is for the company which makes the division to get the
advantage, I used to hear a little story which ran about this way: Two boys
went fishing; one was a white boy, and the other was a negro; and the story
ended up that the fish were for the white boy and none for the negro.
“Naught’s a 'naught and figger’s a figger,
All for the white boy and none for the nigger.”
The Texas roads get the niggardly share in the way I am telling you about.
Here is a Carload of wheat, and in the minutia of freight-rate making, which
so few people understand, which I confess I may not understand myself, you
have milling in transit regulations, you have stopping in transit regulations,
you have diverting regulations, you have combinations of the locals, you have
the through rates, you have differentials and everything of that kind, and when
the parent line figures those all out, the result generally is about like the story
that I have just repeated to you, so far as the Texas lines are concerned. Now,
this is a shipment of wheat under the interstate milling in transit rules
established by the railroads themselves. This shows the movement of a carload
of wheat from Kansas City into Dallas. I have the waybill and everything here,
but I won’t read that. The rate from Kansas City to Dallas on wheat is 26 cents
per 100 pounds. This carload of wheat weighed 29,038 pounds, which at 26
cents amounts to $75.50. The Texas road got 22 per cent of that, which was
$16.61. The flour made out of that wheat was forwarded from Dallas over the
Texas & Pacific to Wills Point, and the additional amount collected on the
flour to what had been paid on the wheat to get the flour to Wills Point was
$14.52, making a total of $31.13. The Texas & Pacific’s portion of the flour
rate from Kansas City to Wills Point was $30.70, and which the Texas inter-
state line that brought the wheat into Dallas had to pay out of what it received
on its portion of the rate into Dallas on the wheat and the rate out of Dallas
on the flour, showing that the road that brought the wheat into Dallas paid
88 cents to the originating, dominating line—88 per cent, and its net earning
on that carload of wheat, hauling it from the State line to Dallas, was 43 cents.
The Texas road paid the Texas & Pacific $30 and never got any of it back from
the outside line. I have here a number of such illustrations as that. Here is a
shipment of wheat originating at Kansas City and milled at Dallas. The rate
on the carload of wheat at Dallas was $100.88, 22 per cent of which was $22.19.
The flour was shipped from Dallas to Llano on the Houston & Texas Central.
The amount collected on the flour was $28.80 and on the bran $5, making a
total of $33.80, or $55.99 which the road that brought the wheat into Dallas
collected for its service and on the service for moving the flour out, and the
... •
44 REDUCTION OF PASSENGER FAREs.
Houston & Texas Central portion of that shipment on the flour rate from
Ransas City under their agreement for divisions was $63.97, and the Texas
road belonging to the system which originated it made a net loss on that move-
ment of $7.98. I have a number of these here which illustrate that point, Mr.
Chairman. It is useless to take up the time of the committee in going over
them all.
Mr. J. W. Terry—Will you please give the numbers and dates of those way-
bills 7
Mr. Colquitt—No, sir; I will not do that.
Mr. J. W. Terry—Well, we would like to have an opportunity of verifying it.
Mr. Colquitt—Your road can verify these. These are some data which I
have prepared, Mr. Chairman, in getting ready to try suits in the Federal
court, and I don’t care to furnish that information. They have it in their
offices.
Mr. J. W. Terry—You decline, then, to give us the dates and numbers?
Mr. Colquitt—Yes, sir; I do.
Mr. J. W. Terry—The committee will understand we can’t verify Mr. Col-
quitt's figures without knowing—
Mr. Colquitt—I am willing to go under oath, Mr. Chairman, and swear that
these are made up from the books. I don’t want to enlighten them at this
point—I may do so later.
Mr. J. W. Terry—I was not questioning Mr. Colquitt's statements at all.
I know that all human beings make mistakes, and I just wanted the opportunity
of ascertaining whether he had made a mistake.
Mr. Colquitt—A great many of the statements which I am making to you,
Mr. Chairman, I expect to go under oath on after this hearing is over, later on,
and this is a very prominent railroad in the State that I am referring to.
I do not want to be personal in any statement I make before the committee,
because I have no such desire, and I do not care before this committee to name
the road that I have reference to, and which I think my friend will concede
WOIIld not, he fair fo him nr fin his road. -
Mr. J. W. Terry—No, sir; if it’s my road I prefer to have it named. -
Mr. Colquitt—That, I think, sir, serves to answer some of the misunderstand-
ings which the railroad attorneys most evidently have of the actual results of
the operations of the roads which they represent when they make their speeches
before public assemblies and before the Railroad Commission and before this
committee charging us with confiscating their property. I think it is an ample
answer to it. For myself, if there are two principles that are cardinal with
me in my beliefs and in my conduct, it is the preservation and the protection
of the citizen first in his personal liberty and in his natural rights, and, secondly,
the protection of his property, and I would not disturb either right. I am
ready to battle with others to protect both. And I have no such prejudice
against corporate property as some have alleged that I have.
Mr. Thomas—Mr. Colquitt, do you think the railroads of the State—
The Chairman—Mr. Thomas, Mr. Colquitt don’t want to be questioned yet.
Mr. Colquitt–I am getting to it now, Mr. Chairman. I have discussed the
matter generally relating to the general questions of railroads and the effect
that the Railroad Commission’s action had upon them, and closing, I want to
Say I believe that I will be sustained by some railroad men in the statement
that the best part of the M., K. & T. system is the Texas end of it. In my
opinion, the best part, segregated, taken separate and apart, of the Atchison
System west of the Mississippi river is the Texas portion. I believe beyond all
question that the best part, as an earning proposition, of the Cotton Belt, is the
Texas end of it. I think that the Southern Pacific lines—the Southern Pacific
Company owns roads in Texas that are better than any they own in California,
or as good. If the value or the price of the bonds quoted upon the market,
such of them as can be bought, is any index, the Texas railroads sell their bonds
at a better price, as a rule, upon the markets of the world than the portions—
other portions of the systems that control them. Now, our annual report for
1904 will show a comparison of the prices of bonds of the Texas roads with
the portion of the dominating line that controls those roads outside of the State.
REDUCTION OF PASSENGER FARES. 45
Now, as to the passenger feature of the railroads’ earnings, which is the im-
mediate cause of your summoning the Railroad Commissioners before you, I
have a letter here which I have written to one of the members of this committee
at his request, furnishing some data which I will read from, because it con-
denses it better if I were to go over it verbally. It relates to the free trans-
portation issued on the Texas railroads. Transportation used by railroad
officials and officials of other roads for the year ending June 30, 1906, amounted
to 20,935,671 miles, which at 3 cents per mile amounted to $628,070.13. At
23 cents it would amount to $523,391.77. Transportation charged to employes
and their families amounted to 68,948,437 miles, which at 3 cents per mile
amounted to $2,068,453.11. At 23 cents per mile it was worth $1,723,710.93.
Transportation given to newspapers and persons connected with publishing
houses, in payment for advertising, amounted to 7,889,828 miles. At 3 cents
per mile it was worth $236,694.84. At 23 cents per mile it would be worth
$197,245.70. Transportation given to public officials and their clerks amounted
to 6,741,120 miles. At 3 cents per mile it was worth $202,233.60. At 23 cents
per mile it was worth $168,528. Transportation given to other persons not
connected with railroad companies amounted to 9,156,778 miles. At 3 cents
per mile it was worth $274,703.34. At 23 cents per mile it would be worth
$228,919.45. The total free transportation, as reported by the railroad com-
panies to the Railroad Commission, as will be shown by the Commission’s
fifteenth annual report, amounted to 113,671,834 miles. At 3 cents per mile it
was worth $3,410,155.02. At 23 cents per mile it was worth $2,841,795.81. The
total transportation, or miles traveled, by passengers paying their fare amounted
to 717,134,373 miles, and the average income from said paid mileage was 2.251
cents per mile. The total passenger revenue from paid passenger fares for the
year ending June 30, 1906, amounting to $16,144,818.96. The total number of
miles traveled on free passes, as reported by the railroads to the Railroad Com
mission, amounted to 113,671,834 miles. This makes a grand total of paid and
free miles traveled of 830,806,207 miles. The question is asked me directly in
the communication to which this is a reply—“You ask me if the Legislature
reduces the maximum passenger fare from 3 to 23 cents, what will the probable
reduction amount to in dollars? Replying to this question, I beg to advise that
any figures in answer to this question furnished by me would be an approximation
or estimate or opinion. It is my opinion that the railroad companies of Texas do
not get 3 cents per mile on, more than 50 per cent, if that much, of their total
gross earnings from passenger charges. Taking 50 per cent as the basis for esti-
mate, a reduction of 3 cent per mile on one-half of the earnings would affect
Only $8,072,409.48, and 3 cent per mile would effect a reduction of one-sixth,
or a sum equal to $1,390,401.58. From your inquiry I understand that you
propose to deduct the value of the free transportation given persons other than
those connected with the management of railroads, eliminating that given to
newspapers and paid for advertising, and including that given to public officials
and clerks and to other persons not connected with the railroad management,
for the year ending June 30, 1906, which amounts to $476,936.94. Deducting
this from $1,390,401.58, would effect a net reduction on this basis of $913,464.64.”
Now, I will not read all the balance of that letter, Mr. Chairman, but I have
given you there my opinion based on the figures which I have read to you.
From the time which I have had to go into the matter and the limited investi-
gation made, I am of opinion that more than—I am of the opinion that decidedly
more than one-half of the mileage, total passenger mileage, paid mileage, is
travel at less than 2% cents. You take the Galveston, Harrisburg & San Antonio
Railway, which does a heavy freight and passenger business, its mileage, in
my opinion, for interstate travel and travel by fares sold at less than 24 cents
is far in excess of the mileage which the collect 3 cents for. My judgment is that
it will apply, perhaps not to such great extent, to the other roads in the State.
I have here a statement showing the name of the railroad and the amount
Of passenger tax paid at 1 per cent under the old law on fares collected from
tickets sold between points in the State for the year 1904, taken from the Comp-
troller’s report, and I have compared with those figures the number of pas-
46 REDUCTION OF PASSENGER FARES.
sengers carried and their total revenue from passenger fares strictly for each
of the same railroads for the same year. The table bears out What I have
said was indicated, that the mileage traveled at full fare was much less than
half of the total passenger paid mileage. For illustration, the Galveston, Har-
risburg & San Antonio for the year 1904, that being the last year that the l per
cent tax on passenger earnings in the State was collected, paid $5586.18. That
multiplied by one hundred, which would get the total amount in dollars paid
on, amounted to $558,618, and the total mileage for that year traveled on that
road was 62,975,920 miles, and the total earnings from passenger fares were
$1,176,932.01. If I had had the time I could have reduced that and shown
exactly the number of miles, or approximately the number of miles at 3 cents
which the tax represented. Of course, it would not be accurate, because a very
large proportion of the earnings on passenger fares between points in the State
are on excursion tickets and tickets sold less than 3 cents—perhaps the major
portion mileage of it. I have made out here tables showing for that road the
amount of passenger traffic interchanged. Texas local traffic, for the Galveston,
Harrisburg & San Antonio for the year 1906 was 53.4 per cent of the total;
Texas traffic interchanged was 6.3 per cent; interstate and international was
40.3 per cent. My judgment is that the mileage traveled from which the 40.3
per cent was collected was probably larger than that from which the 53.4 per
ent was collected, showing that a proportionately larger portion of the travel
was on interstate tickets. and through tickets and is much less than the average
collected on the Texas business. In substantiation of that—
The Chairman—What was that statement 7
Mr. Colquitt—Showing that, in my judgment, from these figures, a larger
portion of the passenger paid mileage is from interstate travel, at less—at much
lower, the average rate per mile, than that collected from the State travel.
The Chairman—Thank you. t
Mr. Colquitt—I have a statement in preparation—it is not ready yet—which
would show that absolutely, if I could have had it here, with reference to One
particular road, anyway. Now, I don’t care to refer to any hearing on this
subject before the commission, except for the purpose of giving you facts which
are furnished by the railroads themselves. The Houston & Texas Central last
year when the hearing before the Railroad Commission on the passenger rate
question was had, in answer to an order issued by us, filed a statement showing
the total mileage traveled on that line from each and every station on it and
the number of miles traveled on each ticket and applying the 24 cent rate to
it, for the purpose of ascertaining the probable reduction of its revenues on the
proposed rate of 23 cents. That furnishes some very interesting data bearing
upon these questions, and in conformity with the statement which I have just
made to you. That statement shows, Mr. Chairman, that there were 25,753,668
passenger miles traveled, for which the Houston & Texas Central Railroad
Company received more than 2% cents per mile. It shows that on such traffic—
towit, the traffic at over 24 cents a mile—the average earnings per passenger
per mile were 2.953 cents, not quite—lacking 47-1000 of being 3 cents
per mile, and the net revenue derived from that mileage for which it received
over 24 cents was $760,560.45. The total passenger mileage on that road for
the period of one year—I mean the total passenger fares collected for a period
of one year on that road were $1,208,957.89, and the average for all of its pas.
senger travel per mile was 2.293 cents. Now, the total mileage traveled for
that year on the Houston & Texas Central Railroad was 52,783,402 miles, show-
ing that there were 26,975,269 miles traveled at less than 24 cents. In other
words, the Houston & Texas Central, out of the total passenger earning of
$1,208,957.89, collected from less than one-half of its mileage $760,560.45, and
for about 55 per cent of its mileage they collected $448,397.44. Now, that
shows to you who is paying the fares on that road, and those are their figures.
The average on twenty-six—the average earning on that road on nearly twenty-
seven million miles of passenger paid fares was 1,662 cents. On 25,753,668 it
was 2.953 cents. When you apply the rule which must be in any fair analysis
of this statement, of deducting one-half of a cent from this twenty-five million
REDUCTION OF PASSENGER FARES. 47
miles paid mileage which the drummers traveled and others who purchase
thousand-mile tickets and receive a rebate, you undoubtedly will find that the
remaining mileage possibly paid an average of over 3 cents per mile. What
proportion of that twenty-five million miles was traveled on 3-cent tickets for
which there was a refund of half a cent per mile is not shown in this statement,
though I apprehend it could be shown. Now, before the Railroad Commission
I asked a very intelligent railroad man what the average cost per mile was
for running passenger trains—train expense. I understood him to say that
the general average was estimated at 40 cents per mile of located expense—
that was such expense as could be directly attributable to operating the train,
including the engine and the trainmen and the fuel and other things entering
into it. He said that 40 cents per mile of located expense and 60 cents per mile
for unlocated expense would represent every conceivable expenditure connected
with the management and handling of a railroad train. I asked another—
Mr. Stedman–Did you say 60 per cent of the expense? -
'Mr. Colquitt–I am coming to it. I am not going to be unfair in my state-
ment to anybody.
Mr. Stedman—I think maybe you misunderstood him.
Mr. Colquitt–No, sir; I didn’t misunderstand him, because I put his words
down at the time he used them. I asked a gentleman who was on the stand—
I asked another gentleman, who is, I think, conceded to be a good railroad
man, if he concurred in the statement made, and he said he did—that it was
about right, as an average proposition. This statement was made by the general
superintendent of the Cotton Belt. He added after making that statement
that the average on his road was $1.12 per passenger train mile. He stated
to me yesterday that upon examination found it exactly $1.13 for the Cotton
Belt system. I understood him to state that the operation—in answer to my
question—that the operation of a freight train, the located expense would be
50 cents per mile and the unlocated expense 70 cents a mile. Now, I under-
stood him to say yesterday, in discussing the matter with him, that he said,
in reference to both passenger and freight trains, that the located expense of a
passenger train would be 40 per cent and the unlocated expense 60 per cent,
and that the located expense of a freight train was 50 per cent and the unlocated
expense would be 70 per cent. But I don’t understand how that can be, because
after you locate 50 per cent there isn’t but 50 per cent that is unlocated. But
anyway, he stated also that the cost of operating the freight trains on his line
was $1.50, and I understood him to say yesterday to me that after investigating
the books it was $1.55. Now, using that basis, the cost of operating freight
trains as per the testimony of Mr. W. E. Green, General Superintendent, for
the fiscal year ending June 30, 1906, the located expense, for I have taken those
figures and multiplied the train mileage, the located expense for operating the
Cotton Belt’s passenger trains in Texas would be $340,565.20. The located
expense of operating their freight trains would be $546,554.50. The total
located expense for the operation of 1,944,522 train miles is $887,119.79. The
unlocated expense for its trains, passenger and freight, for the total mileage
would be $1,276,024.10, or a total of $2,163,143.80, which would include upon
that basis every conceivable expense attendant upon the operation of a rail-
road, including its taxes, interest upon its bonds, its permanent improvements
and fixtures and everything of that kind. The gross earnings of the Cotton
Belt for the year were $3,302.141.0l. and upon this basis the Cotton Belt
Railroad of Texas ought to have had a net earning of $1,138,997.21; whereas I
believe it reports to us $15,000. On the calculation of the Cotton Belt state-
ment as I understood it and as I think he stated at the time, of $1.12 per pas-
senger train mile and $1.50 per freight train mile, the total cost of operating
the Cotton Belt in Texas would be $2,593,246.06. This deducted from its gross
earnings would leave it a surplus of cash of $352,182.85. I have applied: these
figures to the Gulf, Colorado & Santa Fe on its earnings and train mileage, and
the Houston & Texas Central and the Galveston, Harrisburg & San Antonio, and
in each case, taking the average statement, the result shows that they are not
losing money. Now, I want to say in that connection that the drummers’ rate
48 * REDUCTION OF PASSENGER FAREs.
matter has been referred to. As I understand, the railroads and the drummers
make those counter-charges against each other, which I do not care to partici-
pate in. At any rate, today the drummer is traveling at 23 cents, as a rule,
and he buys his credentials and his thousand-mile ticket and gets a refund of
# cent per mile. Now, I don’t think the drummer is to be censured for that,
because anybody else can buy the same kind of credential and same kind of book
and get the same result. To show that passenger rates may in some cases be
reduced without confiscation or injury to the carrier, when the interurban road
Was Completed between Dallas and Fort Worth the Texas & Pacific came to
the Commission and got its approval of an order permitting the Texas &
Pacific to carry passengers between Fort Worth and Dallas, I believe, as low as
1 cent a mile, and they provide now that if you buy a five hundred mile book
just as many persons can ride on it as want to until the five hundred miles
mileage is exhausted, and all go on one train if they want to. The child's rate
under the statute passed in 1883 is a maximum of 2 cents. Since I came on
the Commission the rate has been reduced by the Commission from 2 to 14 cents.
For years and years—in fact, from 1883 to the time the Commission took that
matter up—the railroads. of Texas persistently and continually charged the
child’s rate of 2 cents for travel between two stations in Texas, and if the child
Went out of the State it didn’t ask him for above a cent and a half. And I
want to say further, in this connection, Mr. Chairman, according to my recol-
lection at the time—I was a boy just about old enough to vote when the Legis.
lature in 1883 reduced the rate from 5 cents to 3, or established, rather, 3
cents as the legal maximum passenger fare in Texas, but that was not dome
until after the road was built from St. Louis through Arkansas or through
Arkansas down into Texas, when the St. Louis, Texas & Arkansas, or the St.
Louis, Arkansas & Texas—it’s now the Cotton Belt, anyway, Jay Gould was
fighting that road, would not give it any freight—and that is a favorite way
of starving an independent road to death because it don’t belong to the sys-
tems—wouldn’t give it any freight, would not let any freight be routed over
it, and it voluntarily, through its president, Mr. Parramore, issued an order
to reduce the passenger rate to 3 cents, and I think the other lines met it;
that’s my understanding.
Mr. Green—That was before my time.
Mr. Colquitt–It was not before mine, and I have a good memory about some
things. I don’t know or don’t remember as to whether there was any strenuous
opposition on the part of the railroads to the Legislature's fixing 3 cents as the
maximum or not, but quite a number of the roads in Texas had reduced it to
3 cents. My information is that they do not get 3 cents out of the mileage
that they interchange with their dominating, parent lines—dominating lines of
their parent systems—they don’t get 2%.
Now, further on the question, Mr. Chairman, of whether or not the rail-
roads in Texas have been confiscated by the Railroad Commission and whether
they have made anything or not, I have prepared some statements which throw
some light on that question. They are prepared showing the assets and lia-
bilities of these roads, just as the Federal Government requires you as a director
or an officer of a national bank to prepare sworn Statements of your liabilities
and assets and to report to the Comptroller of the Currency every item entering
into the value or that constitutes the value of a railroad is included except
what is usually called its franchise or good will. Every species of actual,
taxable property is included. Also the stock of the road is included as a lia-
bility of the company. The Houston & Texas Central Railroad is considered
by some the best railroad property in the State. In 1893, two years after the
Railroad Commission was organized, it was in the hands of a receiver. A
portion of the stock of that road had been purchased by the Southern Pacific
Company. The State of Texas had granted that road a very large amount of
land, and the time had arrived when under the Constitution and laws of the
State those lands had to be alienated. The Morgan, Louisiana & Texas Railroad
Company, I have heard stated, loaned the Houston & Texas Central some
money, about seven or eight hundred thousand dollars, and they defaulted in
|REDUCTION OF PASSENGER FARES. 49
the interest and threw it in the hands of a receiver; they ran it in the hands
of a receiver, and reorganized and arranged in some way to alienate the lands
in the hands of Mr. Olcott and the railroad, but in fact they still belong to
the H. & T. C., and provide that the bonds—that the revenues from the sale
of those lands should go towards the payment of the bonds of the H. & T. C.
Railroad Company, and if no bonds should be found for sale they were to be
drawn by lot and paid for at the rate of not over 110, and they have been
paying for them that way. It came out of the hands of the receiver in 1893,
and the stock of the road was worth 95 cents—the book value of the stock was
95 cents on the dollar. At that time it had twenty-eight—I mean this road—
in round figures had twenty-eight million dollars of assets. The year ending
June 30, 1906, those assets by accumulation had increased to thirty-eight mil-
lion dollars. The book value of the stock of that company—the mileage of that
company has increased about two hundred miles, and the book value of that
company’s property in Texas has grown from $95.85 on the hundred dollars
until in 1906, on the 30th day of June, the book value was $212.91. I cite
this for the purpose of showing that a road may not declare dividends and get
rich and make money and not get confiscated.
Mr. Spoonts—Where do you get the book value, Mr. Colquitt?
Mr. Colquitt–Prom the sworn reports of the railroads. Everything here,
Mr. Chairman, is based on their sworn reports.
Mr. Spoonts—Sworn reports to whom ? -
Mr. Colquitt–To the Railroad Commission of Texas. Now, that’s the road
that alleges in the Federal court that we are about to confiscate it—one of them.
I have here a statement made up in like form for the Santa Fe. The Gulf,
Colorado & Santa Fe showed in 1891, according to this statement, that its
stock was worth $14.08 on the hundred less than nothing—that is, its liabilities
were equal to $14.08 on the hundred dollars of its capital stock more than all
its property was worth. It has not changed from that time until this. The
aggregate amount—notwithstanding the aggregate amount of its assets, was
$26,884,835.79 in 1891, and had grown to $37,195,461.81 in 1906, the aggregate
of its liabilities had increased from $30,802,638.67 in 1891 to $49,251,818.84,
and that is part of the property upon which the Atchison, Topeka & Santa Fe
is paying dividends of 4 to 5 per cent south of the Red river as shown by
their report—as shown by the report in the statistical abstract of the Interstate
Commerce Commission for 1904.
Mr. Stedman—Mr. Colquitt, will you pardon me—
Mr. Colquitt—Just make a note, please.
Mr. Stedman—I want to get the figures on the Santa Fe—the assets. I
didn’t get the figures.
Mr. Colquitt—The assets for what year—1891?
JMr. Stedman—No, sir; from one period to another. -
Mr. Colquitt—The aggregated amount of assets in 1891 was $26,884,835.79.
Mr. Stedman—Now, what was the other ? -
Mr. Colquitt—1906, $37,195,461.81. The aggregate liabilities 1891, $30,802,-
638.67—have you got that?
Mr. Stedman—Yes, sir. -
Mr. Colquitt–Now, in the assets of the Santa Fe for 1891—I would be glad
if the members of the committee would note the figures I am reading now
carefully. The cost of the Santa Fe's equipment or its value in 1891 was
$2,120,689.44. The value of the equipment of the Santa Fe in 1906 was $2,542,-
309.13. The clerk does not seem to have included the sheet which shows the
cost of maintaining the equipment, which I wanted to call your attention to.
On the two million and a half dollars of equipment, the report of the Santa Fe
shows that for the year 1905, as I now remember, that they expended about a
million eight hundred thousand dollars, or nearly 66% per cent of its value.
Now, you ask me why this is, and I will say to you that I can’t tell you... I
assume that the contracts for division of expense and freight earnings, like
all other contracts I have seen on the Santa Fe, are made by the Atchison,
Topeka & Santa Fe, and it may be that the Atchison, Topeka & Santa Fe
50 REDUCTION OF PASSENGER FAREs.
owes the Gulf, Colorado & Santa Fe for some portion of the expense of repair-
ing that it has not settled. I don’t know about that. But I have a statement
here which shows that in comparison with other roads. Now, Texas & New
Orleans Railway Company stock has more than doubled in that period of time.
I have here—I want to make a little comparison for the information of the com-
mittee with the Texas Central Railroad, an independent road running from
Waco to Stamford. The Santa Fe shows its roadway cost about twenty-three
thousand dollars of stocks and bonds—that the bonds were sold at a discount
when the road was first built. The Texas Central has a stock and bond obliga-
tion of about—a little over twenty thousand dollars a mile. The Santa Fe
earnings last year were about seven thousand—in 1905, I will say—were about
seven thousand dollars per mile. The Texas Central’s was three thousand five
hundred per mile. The Santa Fe defaulted on the interest of its bonds and it
is in the hands of its owner, the Atchison Company, and it is carried forward
here each year for fifteen years, and it amounts to more than the road costs, or
nearly as much, and they have charged in here an item of advances made by
the Atchison company of several million dollars; and yet the Atchison Company
has been paying the stockholders of that corporation on the value of its prop-
erties south of Red River 4 and 5 per cent interest on the bonds, aggregating a
value on that basis as I have it figured up of sixty-three millions of dollars,
whereas the total of stocks and bonds of all the corporations in Texas owned
by the Atchison Company is about forty-two or forty-three million dollars.
Now, those are some things which might be explained, but have not been, and
are some of the things that come to my mind sometimes and are in my mind
when some people charge me with being unfair-minded. I want to say, further,
because the question was asked me about the Chicago, Rock Island & Gulf
1 ccently at a hearing before the Interstate Commerce Commission, why the
Railroad Commission had in the case of that road refused to revalue it for the
purpose of issuing bonds on the improvements which the road had put on it.
A majority of the Commission refused to allow them to issue bonds on those
improvements. Speaking for myself, and I think Commissioner Mayfield will
concur with me, one of the reasons why the refusal was made was the
fact that the reports of the Chicago, Rock Island & Texas show that those im-
provements and betterments were made out of the earnings of the road—out of
the earnings on the freight and passenger rates—and the Commission did not
care to establish the policy of allowing roads to collect money from trans-
portation and commerce to rebuild their properties and then let them issue
bonds and pay compound interest on it. As I understand, that is the motive
that actuated the majority of the Commission. Going upon the theory that if
the Railroad Commission law meant anything and the stock and bond law
meant anything it was intended to hold in check the continued issuance of in-
terest-bearing securities on railroad properties above their cost to the owners.
I suppose upon the supposition that common carriers have the attributes of
government, the power of eminent domain and the power of taxation in the
hands of a common carrier is just as absolute and just as complete as it is in
the hands of this Legislature to tax property. The Legislature taxes the .prop-
erty of the citizen for the maintenance of the government, and the common car-
rier taxes the citizen’s commerce for its own maintenance and for its own
profit, and I suppose that the Railroad Commission law and the stock and bond
law, in theory, at least, was intended to hold that down to a reasonable amount.
Now, Mr. Chairman, I am about through with my statement, and if there is
any committeeman—
The Chairman—Now, Judge Terry, you wanted to ask a question just now,
and you can interrogate Mr. Colquitt now. --
Mr. J. W. Terry—There are quite a number of them that I would like to ask.
The Chairman—Well, proceed.
REDUCTION OF PASSENGER FARES. 51
EXAMINATION BY JUDGE J. W. TERRY.
Question—Mr. Colquitt, what is the reasonable consideration in determining
what rates a railroad can charge and make something—determine what is a
reasonable rate in a particular State on a particular road 7
Answer—Well, now, that’s a very intricate question. It might depend on the
conditions altogether, and it does depend upon the manner of preparing the
article for shipment. As a railroad proposition, as I understand, the element
of value enters into and is a matter to be considered in fixing the rate, and
the value of the service performed as it may relate and as I think it should
relate to the value of the product transported in the hands of the producer.
Eor illustration, a carload of watermelons that might be profitably transported
in a car that you would be otherwise hauling empty might go at a very low
rate, and by going at a low rate it would increase your tonnage and increase
your profits, because you would carry the car anyhow, and you would other-
wise get no revenue from it; whereas if the rate was so high as to confiscate
the value of the melons in the hands of the producer, they would rot in the
patch. Those are considerations that I think should enter into making rates,
some of them. -, -
Q. You refer to the rates on particular commodities?
A. Any article. The same considerations might induce a party—might in-
duce a governmental agency in fixing the rate. I don’t think the railroads have
any rule they have not made exceptions to by favor or preference to this in-
terest or that interest; it may be friendly to that or unfriendly to what it
wants to help build up or tear down. -
Q. Well, you say they have no rule. What is the rule of the Commission in
making rates,
A. I don’t think the Railroad Commission has any, because I think it has
followed the railroads in the matter. •
Q. The Commission has never adopted any rule in making rates?
A. I don’t think it has, because a good many of the rates are made upon
their basis.
Q. It is a fact that the Commission has made a great many tariffs 7
A. Yes, sir.
Q. You have never had any basis to make those charges on ?
A. I don’t think that there has been any hard and fast rule established
by the Commission. I don’t think any can be established. -
Q. Well, now, with reference to the rates in general, earnings of the rail-
road. What are the considerations that ought to determine what the earnings
should be 2 -
A. How is that ? - * -
Q. What are the considerations that ought to determine what the earnings of
a particular road should be—what you should allow a particular road to earn?
A. I don’t think you can establish any rule that will insure or guarantee—I
don’t think upon the theory of governmental regulation that any Railroad
Commissioner or any tribunal could proceed to make rates upon the theory
that you were entitled to a my guarantee at all. Why should the holder of "rail-
road stocks be guaranteed a dividend upon his stocks by the government, any
more than the stockholder of any other private corporation should have a guar-
antee of earnings upon his stock 2 -
Q. Well, I didn’t ask about a guarantee, but I asked what were the consid-
erations that ought to enter into the problem of how much a given road should
be allowed to earn ?
A. I think the best basis for making rates is to fix rates which will stimu,
late the movement of commerce and develop tonnage for the railroads to haul.
I think that is the best basis—what would keep you busy at work and keep
other men busy producing freight for you to carry. I don’t think a rate ought
to be fixed for the purpose of punishing a railroad or making it haul or do busi-
ness at less than is reasonable. On the other hand, I do not think a rate should
be fixed which would put it into the hands of the common carrier to make it
unprofitable for a man to produce a certain kind of freight.
#2 REDUCTION OF PASSENGER FARES.
Q. We entirely agree about that, I think, but if you carry that reduction
of rates to stimulate the production of business down to nothing—there is
bound to be a limit somewhere?
A. Why, I suppose that all the members of this Committee understand if
you haul freight for nothing and pay your expenses you would make nothing
out of the business.
Q. Well, then, there is a limit beyond which you can carry it to nothing?
A. I do not understand that to be the purpose of the Legislature or the
purpose of the Railroad Commission.
Q. Well, do you think the cost of doing business should be considered in
making rates? - w
A. Yes, due allowance should be had for the rights of the carrier, but
those rights should not be given the sole consideration. The rights of the
shipper must be considered as well, and you must take the rights of both parties
into consideration in considering those things. Conditions may surround one
commodity that may not surround another, and when you ask me what is the
general basis, I say there is none, and you will find no freight men that will
say there is any.
Q. Well, if you yourself were managing a railroad and fixing rates, wouldn’t
you consider the cost, just like a farmer considers the cost of raising cotton 7
A. Yes, only the difference between you and the farmer is great; if the
farmer fails to make a crop or his crop fails altogether, he gets nothing in
return for his labor and nothing in return for his investment.
Q. Don’t we lose the freight on the crop 7
A. Yes, sir, you do; but it is possible to tax him in addition to his loss
to keep you up. *
Q. Well, suppose a railroad could carry freight at a cost of $3, a ton, and
another railroad could carry it at a cost of a dollar a ton, would you con-
sider that difference in making rates?
A. Well, you come down to a question now of classifying railroads for dif-
ferent rates. I understand some of the railroads in Texas are contesting the
right of the Commission to make that distinction now. Now, if you fix a
general rate that might make money for the Houston & Texas Central Railroad
and show earnings of seven or eight thousand dollars per mile, the same rates
might only show earnings of half that amount or one-third of that amount
for some other road which would cost just as much per train mile to operate
its trains and keep up its track as the H. & T. C.
Q. Well, I will put the question this way, if you will pardon me: As-
sume that it can be done, rates that will move traffic and reasonable to the
shipper, should not the railroad be protected and earn enough to pay its operat-
ing expenses and have some profit also 7
A. The railroad company ought to have its operating expenses, certainly.
You understand, Mr. Terry, also, that while the Railroad Commission has
jurisdiction over rates, and to that extent has jurisdiction over your earning
capacity, it has no jurisdiction over your disbursement of those moneys. Now—
Q. I am assuming that the disbursements are honestly made. I am not
asking about any particular road.
A. Well, how are we to know that the rate is going to meet those expenses
unless we know what expenses will be piled up on the property?
Q. I understand that, too.
A. You take a railroad that cost $18,000 a mile and bond and stock it for
$60,000 a mile, do you think it fair to assess commerce produced along its
line enough to pay interest and dividends on three or four times its value?
Q. Do you mean on fictitious stock?
A. Yes, sir. - <>
Q. I am not on the witness stand, but I would say that I don’t think they
are entitled to do that.
A. Well, the rates you were enjoining last year produced over 4 per cent.
You pay 4 per cent on your system stock—system bonds. Your Atchison sys-
tem can borrow all the money it wants at that.
REDUCTION OF PASSENGER FARES. 53.
Q. I understand that the bonds bear 4 per cent, and sold a large volume of
them at a considerable discount—they didn’t bring par.
A. But all the railroads in Texas for 1906 on the rates which you are Com-
plaining about in the Federal court earned over 4 per cent on the entire stock
and bond issue, water and all.
Q. Well, Mr. Colquitt, if you will mot answer my questions—
A. Mr. Chairman, I have tried to answer the questions by telling him that
there was no established basis for making rates. There are no two freight men.
who have the same basis I ever heard of.
Q. Well, I will ask you, assuming that the cost of operating railroads in
New York per ton of freight is one-half of what it is in Texas, do you think
it ought to be lower in New York than in Texas?
Well, I don’t care to go into a discussion of the New York rates.
Well, say Illinois.
Well, I don’t care to go into a discussion of the Illinois rates.
Well, you produced rates from Illinois?
Yes, sir.
Well, did you make any inquiry as to the cost in Illinois of conducting
railroads as compared with Texas? -
A. No, sir; I did not make any comparisons of those figures.
Q. You are not prepared to furnish the committee with any information as
to the comparative cost of operating roads in these other States and Texas?
A. I don’t think in the States where your roads operate that there is any
vast difference in the cost of operation. I think the Interstate Commerce Com-
mission’s figures will show that. There is information here which I have
furnished the committee that shows that.
Q. Well, can you furnish the committee with that information ?
A. Yes, sir; here it is.
Q. What does it show is the difference in cost of operation in Illinois and
Texas?
A. It don’t show for Illinois; it shows by groups of States. In Group 6–
that is the State of Illinois—the cost of operation is reported east of Kansas.
City as 1.241—a little over 13 cents per mile.
Q. One and a quarter cents on what?
A. Operating expenses per mile—per ton mile. In Group 10, California,
New Mexico, Arizona, it is 1.547.
Q. I will ask you to examine and see whether or not that is correct or not
(handing paper to Mr. Colquitt) 7
A. I suppose the average in Texas would be about the average in the other
States. I could not tell you anything about that statement.
Q. Will you kindly have your auditor to check that statement and see
whether it is correct or not ?
A. Yes, sir; I can have it done. What is that ?
Q. What is that from ?
Mr. Green—It is compiled from the various reports of the Railroad Commis-
sions of those States.
A. Well, I will state, Mr. Chairman, that this statement is absolutely
worthless; it is not worth the paper it is written on as throwing any light
on the conditions in Texas, because it shows Missouri, Minnesota, South Dakota
and Massachusetts—it is not worth the paper it is written on.
Mr. Green—Haven’t you taken some from the Interstate Commerce Com-
mission as shown in there?
A. I have taken systems or groups and cited figures and the page.
Q. Mr. Colquitt, what are the principal items that enter into the cost of
operating 7 -
A. Principal items of operation ? The principal items of operation are labor,
wages, fuel and materials for repairs.
Q. Well, now, can you furnish the committee with any comparison of the
rates and wages actually paid in Texas as compared with these other States
that you have referred to in your testimony?
A. T don’t think I can furnish that, Mr. Chairman, for the reason that the
i
54 REDUCTION OF PASSENGER FAREs.
other State Commissions do not all compile that data. We have to rely upon
the Interstate Commerce Commission for it, and the Interstate Commerce Com-
mission compiles all of it by systems of railways or by groups, just as I have
stated to you, and I am not willing to undertake that labor, because if they
have anybody to state that, I think they should submit it. I am not contesting
any fact that the authorities have stated.
Q. Well, can you furnish the committee with any information as to the
prices in Illinois and Iowa and Kansas and these other States as compared with
Texas?
A. No, sir; I never was in the State of Illinois and don’t know anything
about local conditions.
Q. Don’t know anything about the conditions that prevail there?
A. No, sir; I have never been in the State of Illinois.
Q. As matter of fact, don’t you know, or a matter of information, that the
people of Texas—take Dallas, for instance—pay more for the coal they use than
in Kansas or Missouri ?
A. No, Sir. I know I made a speech in Oklahoma, a few weeks ago, and the
delegate from McAlester wanted to know why the freight rate from there to
Fort Worth and Dallas was about 90 cents or $1 a ton, and from McAlester
to Oklahoma City and Guthrie was about $2.25 a ton, and those are matters
which are not safe comparisons, because in some States the railroads fix the
rate just as high as they can collect, and in Oklahoma the railroads own the
coal product–own the coal mines. They can shut down and shut off the pro-
duction any time, and they are doing it, and put the price of it up. Your coal
proposition is a matter that is in your own hands, because you control it.
Q. Does the H. & T. C. own any coal mines?
A. No, sir; I don’t think it does.
Q. Do you know what price they pay for coal 2
A. No, sir; I have not examined that, but I can furnish that information to
the committee.
Q. Well, you don’t know the conditions, actual conditions, as to operating
expenses, cost of labor and fuel in Kansas and Iowa, and Illinois?
A. No, sir. Mr. Chairman, I have followed the reports in my statement of
the Interstate Commerce Commission, which are furnished by the railroads to
the Commission, and I followed the reports of the Texas Railroad Commission,
figures which they have filed here under oath to us, and I don’t care to testify
as an expert, because I am not an expert, and I don’t know anything about those
matters and local conditions.
Q. Well, Mr. Colquitt, eyou are familiar with the case of Smith against
Ames, called the Nebraska freight rate case, decided in the Supreme Court of
the United States ?
A. Yes, sir; I am reasonably familiar with the case, but I have not had
time to read it for some time.
Q. Was not an attempt made to show that the Nebraska rates were unrea-
sonable by proof that the rates in Iowa were much lower than in Nebraska ž
A. I think that case holds in substance this on that point: That that is
a matter that unless conditions in the States are shown to be similar—I think
there is an expression of the Supreme Court to that effect, isn’t there?
Q. Didn’t they hold that unless it was shown that the conditions in Iowa
were the same as in Nebraska the comparison of rates was worthless?
A. Yes, sir—the cost of labor, cost of material, and other items of expense
entering into the operation of railroads. *
Q. Volume of traffic 2
A. I think those are the conditions that the Supreme Court referred to.
Q. And they also referred to the density of traffic—didn’t that figure in the
Ca,Se 3
A. That probably might cut a figure in a comparison of that sort. I don’t
know what the Supreme Court would say if you isolate that particular ques-
tion and present it to them.
Q. I don’t isolate it, but ask wasn’t that one of the considerations?
A. I don’t remember that the court said that was one of the considerations.
REDUCTION OF PASSENGER FARES. ~ 55
Q. Isn’t it generally recognized that a railroad that is doing an immense
traffic can carry it at less rates and make more money than some other road
that has a limited traffic 2
A. Yes, sir; I think that is recognized by all business men. With a large
volume of business it would be better, even though the earning of the dealer
is less—I think that is manifest upon its face.
Q. Well, the Supreme Court in that case practically held that unless the
State of Nebraska—the Railroad Commission of Nebraska—could show that
conditions were the same in Nebraska as in Iowa, the proof of the Iowa rates
being higher than in Nebraska would not amount to anything.
A. I don’t think the Supreme Court held that at all. I think they intimated
that if it was shown that conditions in other States were similar—not the
S2,]]]62.
Q. Well, substantially the same.
The Chairman—Gentlemen, I want to break in here just a minute. We have
been carrying this on for the third week, I believe, and we are wanting to close
it up today. We have some time yet, but I just want to remind you. I don’t
know how much longer you gentlemen want to question on this, but it
would be a good idea to confine yourselves to the propositions you want to
discuss, because the committee have about decided they are going to act on this
matter. We have about thirty minutes left that we can give to you.
Mr. Henderson—Are you going to take a vote on this today?
The Chairman—Yes, sir. *
Mr. J. W. Terrell—Well, we necessarily have to yield obedience to the wishes
of the committee, but Mr. Colquitt has been on the stand here for several hours
making his statement to the committee, and I think he has made some state-
ments that can be qualified by producing other facts that I wish to ask him
about.
The Chairman—Well, we would like for you to direct yourself strictly to those
points without taking up any more time than you can help.
Mr. Colquitt—I just want to make this observation at this point, Mr. Chair-
man, that I stated to you in the beginning: That I would state to you some
facts and give you the sources of my information and I would also make state-
ments to you relating to those facts, with deductions of my own, my opinion,
and I have no purpose on earth and would feel myself unworthy of your
consideration if I were to come here and make a statement of fact which ſ
did not make in good faith. I have expressed my opinions in good faith, and
they were based on the facts. Now, answering his question about the Ames case,
I want to say this: That that is the stumbling block to Railroad Commissions;
that is the stumbling block at this time to governmental regulation of railroad
companies. The Railroad Commission of Texas rarely ever has an important
hearing that it is not thrown in its face. But I want to say this, that in a
former case which put this Commission, the Texas Commission, in jeopardy,
the Supreme Court of the United States expressly holds that they will not
consider any one tariff or freight rate, but that they will consider the entire
body of tariffs and see whether or not the rates prescribed by a Commission or
by a Legislature affords a reasonable return upon the investment. Based upon
that, the Supreme Court of the United States would not say, in my judgment,
that 4.77 per cent on four hundred millions of dollars of stocks and bonds,
that actually represented property of one hundred and ninety millions, was un-
reasonable. Now, you have it in a nutshell; I have stated it in a nutshell, at
the very outset, that the rates of the Railroad Commission gave you last year
a return of nearly 5 per cent on the on tire stock and bond obligations of all
the roads in Texas, and some of them are bonded and stocked at sixty-five
thousand dollars a mile that can be reproduced now for eighteen thousand. I
have heard it stated here that they want you to refer this question back to
the Railroad Commission. I would not be frank to myself if I did not say to
you that I hope you will not do it, because we are confronted with this ques-
tion, but if the Legislature sees proper—I want to refer at this time to the
fact that when I walked in here the other day the remark was made about
some member of the Commission and the proposed reduction to 2% cents. I
56 *
REDUCTION OF PASSENGER FAREs.
favored it, and the people of Texas passed on my proposition and rejected it
and elected another man that favored 2 cents. Now, if these questions are to
enter into this matter, why, the railroads are already litigating with the Rail-
road Commission. They charge that we are seeking to confiscate their property
by the rates we have fixed. I have shown you here that they never pay any
dividends, and never will.
A Member— Mr. Colquitt, if the Legislature cuts it down to 24 cents, won’t
the litigation be the same?
Mr. Colquitt–It may be the same, but the result will not be the same.
They will have to litigate over an act of the Legislature. They can go into the
Federal court and amend and set up that the Legislature has reduced their
passenger rates, which makes it all the more necessary for them to enjoin the
freight rates, but I don’t think they can merge a suit against an act of the
Legislature with one against an act of the Railroad Commission.
Mr. Henderson——Mr. Colquitt, in your opinion, which would result in the
greatest benefit to the people at large—a reduction in freight rates or in pas-
senge; rates? 2 -
Mr. Colquitt–I am glad he asked me that question, Mr. Chairman. When
we had up the question or reducing the cotton rates the contention of the ablest
railroad lawyers in the State was that the reduction made on cotton by the
Commission or that might be made on cotton, would go into the pockets of the
European manufacturer and it would not help the farmers of Texas. I did
not believe in that; I don’t believe in it today. When we had up the question
of lumber rates their argument was that it would inure to the benefit of
the lumber men and the people would not get the benefit of it. Now, I
said to one of my associates on the Commission, “If we reduce the pas-
senger rate, why, they can’t make that argument—the fellow that pays his
way will get the benefit.” Now, the question suggests an argument which I
have heard and which has been used to try to defeat this bill. Now, I am not
here simply expressing my opinions as a Railroad Commissioner, but those
opinions of mine generally are made up after investigating, and I am willing to
express them anywhere. My judgment is that the argument suggested by the
question is the best reason why you should relieve the Railroad Commission of
this duty. If the passenger rate of 3 cents is too high—that is, the maximum
rate, and the statute which creates the Railroad Commission says that the
Railroad Commission may fix freight and passenger rates, provided it shall
never fix a rate higher than the maximum passenger fare prescribed by the
statute—and if you want a 2% cents fare established as the maximum rate,
the power to fix a lower rate rests with the Commission, and no power you
have vested in the Railroad Commission has ever been taken out of the hands
of the Legislature.
Mr. MacInerney—Mr. Colquitt, do the reports of the amounts charged to
repair and renewal account show the repair work done on the lines’ own cars
and the amount done on system cars and the amount done on foreign cars?
Mr. Colquitt–No, sir; they don’t show that; they just show the total gross
paid.
Mr. Henderson—Now, Mr. Colquitt, on the same line of the question asked
awhile ago, is it your opinion that the foreign cotton man gets the benefit of
the reduction in freight rates on cotton 7
Mr. Colquitt—No, sir; I dispute that, and always have. I take this position,
and I believe it is accurate and correct: That any surplus product, I don’t care
whether it is cottom or molasses, must be sold at the place that needs it for
consumption, and the price which prevails at the place which buys it is the
price which the man gets for his stuff, less the cost of getting it from the pro-
ducer to the purchaser. -
Mr. Henderson—Then a reduction on freight rates on cotton would be in
favor of the producer ?
Mr. Colquitt—Yes, sir; that is my opinion about it, and I think so on lumber
or any other article that is not controlled by a combination—a combination
can control any article and fix prices regardless.
Mr. Terry—Mr. Colquitt, as a matter of fairness to our position on the cot-
REDUCTION OF PASSENGER FAREs. 57
ton question, I will ask you if the argument was not this: That when the
supply of any article exceeded the demand, the rate was cut, then the consumer
would get the benefit of the cut, but if the demand was greater than the supply,
then the producer would get the benefit of the cut. Wasn’t that Judge Perkins’
argument?
Mr. Colquitt–I think his theory is that the consumer pays all freight and
the producer gets no benefit.
Mr. Terry—Well, our recollection differs as to that.
Mr. Colquitt—Well, that’s my recollection, that he said that the consumer
pays the freight regardless and that the producer is not concerned.
Mr. Terry—Now, Mr. Colquitt, have you made any examination as to the
density of traffic in Texas as compared with other States?
Mr. Colquitt—No. sir; I have not had the time to make that. Take the
Atchison, Topeka & Santa Fe, you have a large mileage, and I think it will com-
pare favorably, on an average. Those are just some figures that I have in my
head—I could not say that the conclusion is an accurate one.
Mr. Terry—Well, I have a statement here prepared by Mr. Askew which shows
that the density of the group in which Texas is situated, both passenger and
freight, is less than in any other part of the United States.
Mr. Colquitt—What do you mean by that expression ?
Mr. Terry—Well, the number of tons of freight carried one mile.
M. Colquitt—Yes.
Mr. Terry–And the number of passengers carried one mile?
Mr. Colquitt–Any table, Mr. Chairman, of figures prepared separate and
apart, either by myself or Mr. Askew, can be used to prove anything, just like
you may prove anything by the Scripture if you take it separate and apart.
Now, I have here a statement, and I am glad you asked me about that, because
it shows some comparisons and bears directly on it. Here is a statement which
shows that the Houston East & West Texas Railroad hauled for the year 1896
191,218 tons of freight, and that the tons hauled per train mile was 137, and the
tons per loaded car was 12, and the revenue per ton per mile was 10.60 mills,
and the earnings per train mile were $1.45. For the year 1906 it hauled 382,166
tons, still carried eleven loaded cars per train, and its tons per train load was
203, and its revenue per train—revenue per ton per mile was 13.63, and its
revenue per car mile was 26.07. And then here is the H. & T. C.—
Mr. Terry—Mr. Colquitt, will you pardon me, please? The committee says
I have only a few minutes. Every time I ask you a question, you branch off
on something else.
Mr. Colquitt No, sir; I want to answer you fully.
Mr. Terry—Well, my time may be consumed on matters I am not asking
you about.
Mr. Colquitt—Well, now, the same kind of a statement, Mr. Chairman, would
answer his question for the H. & T. C., but the revenue per ton per mile on the
Houston East & West Texas has increased over 3 mills.
Mr. Terry—I have not asked you about that, but about the density of traffic.
I asked you to compare Texas in general with some of the railroads in other
sections of the country, not one particular road—it would take a month to do
that, to take every road in the State and compare it. .
Mr. Colquitt—Well, I misunderstood you, because I thought you said to
compare the revenue per mile.
Mr. Terry—No, sir; I said the number of tons carried per mile of road and
number of passengers. I asked you if it was not less in Texas than in any
other group. -
Mr. Colquitt—Well, I shall answer that by saying that the number of tons
carried one mile shows those results.
Mr. Terry—Well, that is one particular road, but I am asking you for the
State as a whole.
Mr. Colquitt—Yes, that might be true. ,
Mr. Terry—You are not prepared to give the committee information on it?
Mr. Colquitt–No, sir. I was going to answer your question fully to illus-
58 REDUCTION OF PASSENGER FARES.
trate the fallacy of your contention, because here is a piece of road that be-
longs to a system—
Mr. Terry–Now, I am not asking you to argue the matter, Mr. Colquitt.
Mr. Colquitt–Well, I beg your pardon. Just strike the argument out.
Mr. Terry—If you don’t know, that ends it.
A Member—Now, Mr. Chairman, I move that at 12:45 the committe go into
executive session and vote on the bill.
The Chairman—Well, if we can I would like to give these gentlemen all the
time we have to spare. Let’s proceed a little bit further—maybe they will get
through.
EXAMINATION BY MR. FYFE.
Question—Have you got the papers you read here yesterday?
Answer—Yes, sir.
Q. What did you say the cattle rates were from Temple to Harrold, the
present rates ?
I didn’t quote any rates from Temple to Harrold; it was from Belton.
Well, from Belton to Harrold 2
The rate in 1890 by the Santa Fe tariff was 35.50.
What is the present rate? *
$45.13.
. Now, will you look and see if that Lariff applies on beef cattle? You
testified before the committee yesterday that that tariff applied on beef cattle.
i
A. Well, I see that the tariff—
Q. Look inside the tariff and see the description of cattle that it applies on.
A. Well, the tariff does seem to apply on live stock.
Q. Well, look inside the tariff and, see the description that it actually applies
OIT. -
A. Let me read it all together, Mr. Chairman.
. Now, I say that is stock cattle, and, further, that the rate from Belton
to Harrold is $29.80. I think the employes in the Commission room overlooked
the fact that that was range cattle and have led him to make an erroneous
Statement. I don’t know how many more he has got of that kind. I knew
when he called those rates that those were wrong.
A. Well, Mr. Chairman, the tariff reads this way: “Fort Worth & Denver
City and Gulf, Colorado & Santa Fe joint through tariff No. 88”—takes effect
May 10, 1890, on live stock in carloads from stations on the Santa Fe.
Q. Well, look inside, Mr. Colquitt.
A. On the inside, “Range cattle in Carloads.”
Q. That is not beef cattle, is it?
A. No, sir; but it may include beef cattle.
Mr. Stedman—Mr. Colquitt, I would like to ask you a question. Did you
intend yesterday to make the impression on the minds of the committee that the
rates in Texas as a whole are higher now than they were in 1891?
Mr. Colquitt—Yes, sir; and I repeat it today.
Mr. Stedman—Repeat it today?
Mr. Colquitt—Yes, sir.
Mr. Stedman—Now, Mr. Colquitt, I will call your attention to the published
report of the Railroad Commission for 1903, pages 31 to 34, inclusive, showing
reductions in class rates. Is that a correct report?
Mr. Colquitt—What year is that?
Mr. Stedman—For 1903, the first year you were on the Commission, showing
reduction of class rates.
Mr. Colquitt—Yes, sir; that shows reductions made by the Commission in
class rates at the time that report shows it.
Mr. Stedman—Yes, sir. Well, you have not increased them since.
Mr. Colquitt–In 1891 the Railroad Commission was enjoined. The case
against Reagan and the Farmers’ Loan & Trust Company was decided, I think,
in 1894. The constitutionality of the Railroad Commission act was upheld, but
that held that the rates prescribed by the Commission were too low. The Com-
mission then put in rates practically that the railroads recommended, and in
REDUCTION OF PASSENGER FARES. 59
1902, I think—Commissioner Mayfield was entitled to the credit for that; he
made a motion to reduce the class rates.
Mr. Stedman—In 1902?
Mr. Colquitt—Yes, sir. In, I think, 1898, they attempted a reduction of the
rates, the Commission being composed of Reagan, Storey and Mayfield, and the
railroads enjoined it. Circular 766 provides that there should be by the terms
of the tariff practically an increase of 10 per cent over the rates prevailing
theretofore. Is that correct 7
Mr. Stedman—Yes, I think so; but that don’t answer my question. Don't
that show that they were much lower in 1902 than they were in 1891?
Mr. Colquitt–In some of the tariffs, yes, sir.
Mr. Stedman—Don’t it show it as a whole 7
Mr. Colquitt–In my judgment, I repeat it, that the body of the rates in
effect now are higher than they were before the Railroad Commission was
created.
Mr. Stedman—Mr. Colquitt, isn’t it a fact that a large majority of the com-
merce of the State moves under those class rates?
Mr. Colquitt—Why, cotton does not. Merchandise does.
Mr. Stedman—Well, the majority of the commerce moves under it?
Mr. Colquitt–No, sir; I think not.
Mr. Stedman—Well, a very large proportion of it?
Mr. Colquitt—I think not.
Mr. Stedman—Don’t class rates apply in nearly every case on the commodity
tariffs 7
'Mr. Colquitt–Less than carload shipments mostly.
Mr. Stedman—Well, now, take cotton. What were the cotton rates in 1891?
Mr. Colquitt—Well, I don’t think anybody in Texas knows. It was a dollar
and a half a bale from Dallas to Galveston, and I know that nearly every town.
got rebates. º
Mr. Stedman—Now, if you don’t know what they were then, how can you
say they are higher now Ż
Mr. Colquitt–Did I say they are higher? I said in my opinion they were
higher.
, Mr. Stedman—Now, how can you say that without you know?
Mr. Colquitt—Well, based on my experience of four years as a Railroad Com-
missioner. I think you can go into your office and find hundreds of rebate
vouchers.
Mr. Stedman—What was the maximum cotton rate 7
Mr. Colquitt—To make an accurate and correct answer to these questions,
we would have to take them and average them.
Mr. Stedman—Well, wasn’t 70 cents the rate?
Mr. Colquitt–Well, I think it was 65 to 70 from my town.
Mr. Stedman—Now, what is it today?
Mr. Colquitt–Fifty-five today.
Mr. Stedman—That is a difference of 15 cents per hundred pounds?
Mr. Colquitt—Yes, sir.
Mr. Stedman—On an ordinary crop that would be quite a difference?
Mr. Colquitt—Yes, sir; if you collected it, but I know that Judge Reagan
and Judge Storey and I think yourself cited some cotton buyers from my town
to explain why they were getting rebates on cotton about that time.
Mr. Stedman—Now, Mr. Colquitt, in that same report don’t you see that
your reductions—on page 34—that the reductions on commodity tariffs have
been greater than on class tariffs?
Mr. Colquitt—I think so. I would not dispute that. I suppose it was based
on estimate. -
Mr. Stedman—Now, you have not raised any rate since 1903?
Mr. Colquitt–I am not sure about that. A good many rates might be af-
fected by a rule without raising the rate itself. We authorize you to penalize
shippers 10 per cent on certain conditions on the rates in existence.
Mr. Stedman—Well, that’s a very small matter.
Mr. Colquitt—I don’t know, sir.
Mr. Fyfe—Wasn’t that to keep them from committing fraud?
Mr. Colquitt–Well, I am not ready to charge, Mr. Fyfe, that they were com-
mitting fraud.
60 REDUCTION OF PASSENGER FAREs.
Mr. Fyfe——Well, we have shown they were committing fraud. -
Mr. Colquitt–Well, those are details, Mr. Chairman. We have fifty thousand
railroad men to deal with, and all the people. -
Mr. Stedman—Now, are you not in error about the rates being higher now Ż
Mr. Colquitt—No, sir; I will not admit it.
Mr. Stedman—I mean if that statement in your report—
Mr. Colquitt–Well, that report speaks for itself. I say in my judgment that
the body of rates from which you collect your revenue today are higher than
they were before the Railroad Commission was created. I can’t get at it unless
ou present to me tariffs at that time. I have seen cotton, tariffs where it is
55 cents today and where it was 35 then, and I take into consideration all the
facts coming to my attention. I think we will show to you before the year is
out that my statement is practically correct; if it is not, I will confess it. I
think it is honorable to acknowledge an error.
Mr. Stedman—Certainly. Now, Mr. Colquitt, another thing. You stated that
the assets of the H. & T. C. had increased from twenty-eight million to about
thirty-eight million in 1906? -
Mr. Colquitt—Yes, sir. -
Mr. Stedman—Now, then, in showing to the committee here the valuations
of the railroads, have you allowed the H. & T. C. that ten million dollars in-
crease in its assets 7
Mr. Colquitt–In the valuation of railroads? No, sir.
Mr. Stedman—IIave not allowed that ?
Mr. Colquitt–No, sir. Allowed it—how do you mean?
Mr. Stedman—In estimating the present value of their property 7
Mr. Colquitt–We don’t place any estimate on the present value of the prop-
erty at all for purposes of a bond issue, except on new roads, if you are referring
to our valuation for bond issues. We value the property at what it is supposed to
be worth to reproduce it. -
Mr. Stedman—Now, you were stating yesterday about what we earn on
one hundred and eighty-eight million dollars?
Mr. Colquitt–No, sir; you have heard me make a different statement too
often to misunderstand me on that. I said that was the figure which the
Railroad Commission estimated it would cost to reproduce all of these properties.
I say to you that your earning, taken as a whole, constitutes 6 per cent,
in my opinion, upon your commercial value. The cost of reproduction is about
two hundred million dollars less than your stock and bond value, but I think
that your commercial value is about one hundred million dollars less. I think
the railroads of Texas commercially are worth three hundred million dollars
and the stock and bomd issue is four hundred million dollars, and the estimate
to reproduce it anew is one hundred and eighty-eight.
Mr. Spoonts—Mr. Colquitt, you say the railroads can be reproduced as valued
by the Railroad Commission ? t -
Mr. Colquitt—Yes, sir.
Mr. Spoonts—You put the Texas & Pacific at about sixteen thousand dollars
a mile 7
Mr. Colquitt—Yes, sir.
Mr. Spoonts—And you valued the Brazos Valley recently at about twenty-two
thousand dollars a mile 7
Mr. Colquitt—No, sir; I didn’t do the valuing.
iMr. Spoonts—Well, the Commission did?
Mr. Colquitt–I think you will find my dissenting opinion—you will find I
did not agree to that. I said to you and I will give you the same answer I
did Judge Freeman at Fort Worth before Commissioner Prouty, that at the
time the Texas & Pacific was built there were circumstances then that did
not exist now and that there are conditions now that did not exist then. I
said then, and repeat it today, that, in my judgment, the Texas & Pacific can be
reproduced today from El Paso to Texarkana at the Railroad Commission’s
figures, and I believe your road can be reproduced at much less.
Mr. Spoonts—Now, take the Trinity & Brazos Valley, which has been valued
at an average of about twenty-two thousand a mile?
Mr. Colquitt—Yes, sir; I think the Commission allowed from 25 to 30 per
cent more than the cost—that is done to meet the accusation that the Commis-
Sion is unfair.
REDUCTION OF PASSENGER FARES. 61
Mr. Spoonts—You are not an engineer 7
Mr. Colquitt–No, sir.
Mr. Spoonts—You don’t know anything about how to figure the value of the
railroads? *.
Mr. Colquitt–No, sir; but I see lists of the prices of materials.
Mr. Green—Have you had experience in the construction of railroads?
Mr. Colquitt–No, sir; I tried to, but the railroads would not employ me.
Mr. Spoonts—Now, what do you take into consideration in valuing it?
Mr. Colquitt—Well, I think the items entering into the construction of a
railroad, as far as I am able to judge—I am a pretty good judge, because I can
go in the market and buy materials at different prices and see the quotations
in the papers, I can see whether you are paying more than the market price.
That’s the basis upon which our engineer values it, at the daily quotations.
Mr. Spoonts—In valuing the Texas & Pacific at sixteen thousand dollars a
mile, do you estimate the value of their equipment in that? .
Mr. Colquitt—I don’t remember that. That was before I went on the Com-
mission, and in my statement about that I intended to convey the idea that the
railroad as it now stands, not including the equipment, could be constructed
at that price.
Mr. Spoonts—You stated that you thought you could reproduce the railroads
of Texas at the Commission’s valuation ?
Mr. Colquitt—Yes, sir.
Mr. Spoonts—That’s your opinion. Is that opinion as valuable as the opinion
of experienced men in the operation of railroads?
Mr. Colquitt—Well, I would not dispute that with you.
Mr.Green—Now, there is one item that you spoke of that is somewhat mis-
leading to the committee, and that is in regard to coal. Most of the roads in
the State have no coal mines on their roads—they have to go outside to pro-
duce coal %
Mr. Colquitt–I said the systems or roads that owned the Texas roads.
Mr. Green—Well, you said the systems of roads outside of Texas hauled it
free of charge to the Texas roads.
Mr. Colquitt—Well, I understand they have a contract by which they pay
ene another—I said that in my statement.
Mr. Green—-It is shown that the roads in Texas are paying reasonable amounts
at the mines, and that the railroads are using proper economy.
Mr. Colquitt—That might be, Mr. Green, and I concede that to you, but if the
Texas end of your road pays 20 cents more at the mine than the Arkansas end
of your road, then I think it is something queer.
Mr. Green—Well, what about hauling coal 560 miles to your Texas line at
the difference in rate of 25 cents a ton ?
Mr. Colquitt—Your question shows they don’t understand my statement, be-
cause I was referring to those roads that control coal mines, where the com-
parison in this printed statement was to the disparagement of the Texas lines
showing much higher rates.
Mr. Green—I will tell you that we buy our coal in Illinois for $1.08 a ton
less than in Texas, and the coal produced in Illinois will carry an engine 20
per cent further than the coal produced in the Indian Territory; so, in addi-
tion to the difference in price of $1.08 a ton, we have got 20 per cent difference
in the efficiency of the coal.
Mr. Colquitt—Well, that may be so.
Mr. Fyfe—Are you acquainted with the difference in the rates on the com-
promise basis of 18997
Mr. Colquitt—No, sir; I am not.
Mr. Fyfe—Don’t you know that with the exception of cotton seed products,
coal, and one or two minor commodities, that the freight rate in that circular.
has been reduced since March, 18997
Mr. Colquitt—No, sir; I don’t know that, but many reductions have been
made on the application of the railroads.
Mr. Fyfe—Now, you read yesterday a comparison of rates in Kansas with
Texas. Kansas has a Railroad Commission, and show their earnings separate
from the system earnings. Do you know what the gross earnings per mile are
on the Kansas railroads?
Mr. Colquitt—No, sir.
62 REDUCTION OF PASSENGER FARES.
Mr. Fyfe—Do you know their operating expenses?
Mr. Colquitt—No, sir,
A Member–Now, I move that we go into executive session.
|Mr. Green—I just wanted to set one matter right. There was a difference
of understanding between Mr. Colquitt and myself in arriving at the basis of
train mile rates. I just want the committee to understand the difference in the
understanding.
Mr. Colquitt–I explained that difference fully.
Mr. Green—It wouldn’t take me but a minute.
The Chairman—Have you finished 2
Mr. Green—No, sir. I just wanted to make that one explanation.
The Chairman—Well, we will indulge you a minute. e
Mr. Green—Mr. Colquitt stated that I said that the expense of operating a
passenger train, that was directly chargeable to that train, was 40 cents a mile,
and that was about 40 per cent of the total charges that were directed to that
train, and I said that the cost of operating a freight train, I believe, was 50
cents a mile, and that that was 70 per cent of the charges. Now, what I did
say was this: We were discussing the question of operating passenger trains
on time. No one conceived the idea or thought that the Commission would go
into the question of cost of conducting those trains. We were not prepared for
that. I stated to Mr. Colquitt on the question that it cost about 55 cents to
operate a passenger train, and that represented about 40 per cent of the total
charges of operating passenger trains. I said that about 70 cents a train
mile was the charges that could be charged to a freight train, and that repre-
sented about 40 per cent of the total expenses that were chargeable to the oper-
ation of freight trains. Now, that was what I said, and that is what our
records will substantiate.
Mr. Colquitt—Now, let me say, Mr. Chairman, just this, because I think
the record will bear me out. I explained that fully in my statement with
reference to that. I asked the question of Mr. Green, and he said the cost of
operating a passenger train was 40 cents per mile of located expense and that
the cost of O erating a passenger train unlocated expense was 60 cents a mile;
and I asked Mr. Van Vleck, who was present, if he agreed with that, and he said
ho did.
Mr. Green—That was per cent—60 and 40 per cent.
Mr. Colquitt–As to freight trains, Mr. Green said that the cost was 50
cents per mile of located expense and 70 cents a mile of unlocated expense, and
then Mr. Green said that his trains cost $1.12 a passenger train per mile,
located and unlocated, and his freight trains $1.50, including located and un-
located expense; but on yesterday he stated to me that I misunderstood him,
and said that he said that 40 per cent represented the expense of a passenger
train that was located and 60 per cent was unlocated expense, and that 50
per cent was the located expense of a freight train and 70 per cent unlocated
expense of a freight train, and that his freight trains cost $1.50. On examina-
tion of his books, he found that the cost for passenger trains was $1.13, and
of freights $1.50.
Mr. Green—Fifty-five.
Mr. Colquitt–Fifty-five. I could not understand, with 50 per cent of located
expense of operating a freight train, how there could be left 70 per cent of un-
located expense, because there was only 50 per cent left to be located.
The Chairman—Mr. Bartlett wants to offer a motion.
'Mr. MacInerney—Under what condition does the stenographer make this
report?
The Chairman—Wait a minute and we will see.
‘Mr. Bartlett—I move that we employ the stenographer to furnish a type.
written copy of same to the committee for the purpose of publishing in the
Journal. *
(The motion was put and carried.)
Mr. Storey—When Mr. Mayfield was on the stand I did not hear any question
asked him about the relative earnings between Texas and the other States. No
such question was asked me. A question was asked me that I supposed was
leading up to it, after I got through with what I had to state, and it was
stated that questions would be asked me after they got through with the exami-
REDUCTION OF PASSENGER FAREs. 63
nation of Mr. Colquitt. I came back this morning, supposing that those ques-
tions were to be asked me, and but for that I would not have been here this
morning. I wish only to state this: That I do not agree with Mr. Colquitt.
as to his statement about the relative earnings of Texas roads and other roads,
West of the Mississippi River. I do not agree with him at all as to the state-
ment that the Railroad Commission has not reduced rates. On the contrary, I
am able-to say that every Commissioner, except Mr. McLean, because I never
talked to him about it, and Mr. Colquitt, said time and again that the Com-
mission had been reducing rates, and I have it in a statement from Mr. May-
field and Judge Reagan in the Journal of 1901, April 18th, pages 432 to 446.
Mr. J. W. Terry—Mr. Colquitt has made a good many statements that I think
are incorrect, and as the committee has denied us any time to answer Mr. Col-
quitt, if we furnish this report to the committee, I think we should be allowed
to attach our answer. With that understanding, I am satisfied that whoever
has employed this gentleman will agree to furnish the stenographer’s report.
The Chairman—The committee is anxious to extend every courtesy to the
railroads, but this is the third week now, and you gentlemen had two weeks
without anybody’s interruption, and we have had nobody on the stand except
Colquitt and Mayfield, and now he has been subject to questions here.
Mr. Spoonts—He has not answered any, Mr. Chairman.
The Chairman—I can’t answer for that. You have been entitled to question
lim, and if you have not been able to get answers, the committee is not re-
sponsible for that. Now, the motion is that we go into executive session.
A Member—I want to understand, is this to be published in the Journal 2 It
will be a pretty large volume.
(Mr. Colquitt had left the committee room a short time previously, and re-
turned at this stage.)
Mr. Colquitt—I came back at the suggestion that some statement was made
contradictory of some of my statements, and if such was made I would like to
know what it was, so I can answer.
Mr. Storey—I will repeat what it was I said.
The Chairman—Well, that’s about the only way for him to answer it.
Mr. Colquitt—I want to say this—
The Chairman—Let Judge Storey proceed.
Mr. Colquitt—Well, let me make this statement—pardon me a minute, judge.
In the questions asked me by Judge Stedman, and in the statement which I
made about the rates at present applying in Texas as compared with the rates
applying before the Railroad Commission was created, if I did not state it I
intended to state it, that from a revenue-producing basis the rates are higher
now, or as high now, as they were then. Of course, I had in mind when I made
that statement the fact that at the time a great deal of the rates published
were paid back to shippers in rebates, and I spoke of it from a revenue-pro-
ducing standpoint. As for the statement made by my friend here, if any ques-
tion was asked me that I did not answer, it was simply because I didn’t know
how to do it.
The Chairman—Well, Judge Storey, you can now make your statement.
Mr. Storey—I said this, that as a Railroad Commissioner, believing that the
Commission has done its duty, I thought it my duty to state that when Mr.
Mayfield was on the stand the other day no question was asked him as 1 re-
member about a comparison of rates in Texas and in other States and earn-
ings in Texas and other States. If there was any question of that sort asked,
I don’t remember it. No question of that sort was asked me. I confined myself,
as you may remember, to memoranda from the fifteenth annual report, which
is still in the hands of the printer. No question of that sort was asked me.
As I was about to leave the stand, some one asked me a question which I
supposed was going to lead up to that, and it was stated that the question
could be deferred until after the examination of Mr. Colquitt, and I stated that
1 would not have been back here this morning but for that statement. I think
it my duty to say that I do not agree with Mr. Colquitt in the idea that the
Railroad Commission had not been a reducing-rate body, and that I was pre-
pared to show that the reduction had been continual from the time the Railroad
Commission was permitted by the decision of the Supreme Court of the United
States to reduce rates, and I also thought I was prepared to show the difference
64 REDUCTION OF PASSENGER FARES.
between the rates in Texas and the rates in a number of States west of the
Mississippi River as well as the aggregate earnings of the roads in Illinois, Mis-
Souri and Georgia and some other States, which I think the committee ought
to know if you consider that kind of testimony at all.
Mr. Colquitt–Now, Mr. Chairman, bearing directly on that—
Mr. Storey—I will state, furthermore—I stated furthermore, that in fact
I knew the views of every Commissioner we had on the subject, except Judge
McLean; I had never talked to him about it, and I knew that all the other Com-
missioners regarded it as a reduction of our former rates.
The Chairman—Well, you said further that you didn’t agree with him on
any—
Mr. Storey—No, sir; I did not put it that far.
The Chairman—I just want him to hear it.
Mr. Storey—I wish to state, furthermore, that in the Journal of the House
of 1901, on pages 432 to 446, is a letter, one from Mr. Mayfield embodied in
a letter from Judge Reagan to the Legislature.
The Chairman—Well, now, Mr. Colquitt, we will hear you.
Mr. Colquitt—I think I said yesterday, referring to the live stock rates,
that the beef cattle rate was higher now under the Commission’s rates than they
were in 1891, before the Commission was organized. This morning Mr. Sted-
man asked me if I made the statement apply to all rates, and I stated to him,
and I want to make that qualification of my statement, because I intended to do
it when I made it, that the rates in effect in Texas now, from a revenue-producing
point of view, are higher than they were before the Commission was organized,
and that opinion is based upon my knowledge of the fact that the rates in effect
then were not collected by the railroads, and, if collected, a portion of it was re-
funded in rebates. The net result, therefore, I wish to repeat, of the rates today
is to give the railroads a higher percentage of earnings than they got then; and
I thoroughly concur with Judge Storey in the statement that the Commission
has reduced rates. It has reduced rates; the Commission has done many hun-
dreds of things of value to the public—hundreds of things. I was simply
answering the argument and my statement is that the railroads are doing better
under the Railroad Commission than without the Commission.
Thereupon the committee adjourned.
PROPOSED PASSENGER. RATE REDUCTION.
Answer of the Railway Companies to Mr. Colquitt's Statement Before the
|House Committee.
As the railroad representatives had no opportunity to answer the elaborate
statements of Mr. Colquitt made before the House Committee, and as we, at
the request of the committee, have furnished the committee with a stenographic
report thereof, we respectfully request that the subjoined answer to Mr. Col-
quitt's statement be printed in the Journal of the House in connection with
Mr. Colquitt's statement; -
About the first allegation he makes after a page and a half of preliminaries
is (on page 53 of the original manuscript) “that in my judgment, and I believe
I will be able to show, that the body of rates, freight rates, in effect in Texas
are, upon an average, higher per 100 pounds for identical classes of freight
and the commodity of freight than in a majority of the States through which
the systems of railways operate that own and dominate the Texas lines.”
Comment: Granting this to be true, is it not rather an argument that freight
rates should be reduced, than passenger rates? Does the allegation which he
makes show, in any way, that passenger rates are too high 7 And, leaving
aside passenger rates, for the moment, as he does, why should not freight rates
be higher in Texas “than in a majority of the States through which,” etc. The
particular States are not mentioned by him, at least at that time, but we will
assume that he includes Alabama, Mississippi and Tennessee, which are in
Group V of the Interstate Commerce Commission, Illinois, Iowa and Northern
Missouri, which are in Group VI: possibly Nebraska and other territory in
REDUCTION OF PASSENGER FARES. 65
* >
Group VII; Southern Missouri, Arkansas, Kansas, etc., which are in Group
VIII; Louisiana, which is partly in Group V and partly in Group IX; and
possibly some of the States, etc., which are westward of Texas in Group X.
We think that the statistics of the Interstate Commerce Commission clearly
indicate to any reasonable person or tribunal, that both freight and passenger
rates should be higher in Texas than in all of the States mentioned (except
possibly Louisiana), and also than in all of the other States and Territories
contained in the groups mentioned, on account of the greater density of traffic
in Groups V, VI, VII, VIII and X than in Group IX.
The statistical report of the Interstate Commerce Commission for the year
ending June 30, 1905, gives (on page 70) the following information as to
density of traffic in said groups:
Number of pas- Number of tons
sengers carried of freight car-
Group— one mile per ried one mile per
mile of line. mile of line.
V. Alabama, Mississippi, etc. . . . . . . . . . . . . . 65,810 565,008
VI. Illinois, Iowa, etc. . . . . . . . . . . . . . . . . . . . . 89,618 702,510
VII. Nebraska, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 71,396 639,489
VIII. Southern Missouri, Kansas, Arkansas, etc. 66,491 435,282
IX. Practically Louisiana and Texas. . . . . . . . 51,904 367,799
X. California, Utah, etc. . . . . . . . . . . . . . . . . . 111,016 507,053
For the Texas railroads, by themselves, the figures in the Texas Railroad
Commission report for the same year indicate the passenger density to be
52,941, something above the average for Group IX, and a freight density of
361,962, something below the average for Group IX, and therefore indicating
that freight rates should be a little higher in Texas than in Louisiana even,
and considerably higher than in any of the other states named, on any equitable
adjustment. -
Considering further that a very large part of the tommage of Louisiana is
handled over a level country, where there are practically no grades, while the
greatest bulk of the Texas tonnage passes over hilly sections of the State, with
corresponding grades, that the railroads in Louisiana enjoy cheaper fuel, it
follows that the Texas rates should be in equity materially higher than those
in Louisiana.
Further, the Louisiana rates are much more largely affected by water com-
petition than in Texas.
We do not think the comparison made by Mr. Colquitt between rates pre-
vailing in Texas and in other States was on the whole fair, and Judge Storey
of the Railroad Commission so stated to the committee. To make a fair com-
parison of the entire body of rates in Texas with those in the other States
referred to by Mr. Colquitt would prolong this document so that the members
of the House would probably have no time to read it. We understand that in
many of the States referred to by Mr. Colquitt, rates over two or more lines
are made by adding the locals and deducting 10 per cent or some other per-
centage, while on a great many things the Texas Commission rates are joint
line rates and far less than is the sums of the locals less 10 per cent. How-
ever, for the sake of the argument it can be admitted that rates in Texas are
in the main higher than in the other States mentioned by Mr. Colquitt, and
it is only necessary to direct attention to the logical statement of the Supreme
Court of the United States in Smyth vs. Ames, etc., that a comparison of rates
in one State with those in anotlier proves nothing unless it be shown that the
conditions prevailing in the two States are similar. We insert an extract from
the opinion of the court in that case. “It is said by the appellants that the
local rates established by the Nebraska statute are much higher than in the
State of Iowa, and that fact shows that the Nebraska rates are reasonable.
This contention was thus met by the circuit court: ‘It is, however, urged by
the defendants that, in the general tariffs of these companies, there is an in-
equality; that the rates in Nebraska are higher than those in adjoining States;
and that the reduction by House Roll 33 simply establishes an equality between
Nebraska and the other States through which the roads run. The question is
asked, Are not the people of Nebraska entitled to as cheap rates as the people
66 REDUCTION OF PASSENGER FARES.
of Iowa? Of course, relatively they are. That is, the roads may not discrimi-
nate against the people of any one State (but they are not necessarily bound
to give absolutely the same rates to the people of all the States), for the kind
and amount of business, and the cost thereof, are factors which determine
largely the question of rates, and these vary in the several States. The volume
of business in one State may be greater per mile, while the cost of construction
and maintenance is less. Hence, to enforce the same rates in both States might
result in one great injustice, while in the other it would only be reasonable
and fair. Comparisons, therefore, betwen the rates of two States, are of little
value, unless all of the elements that enter into the problem are presented.
It may be true, as testified by some of the witnesses, that the existing local
rates in Nebraska are 40 per cent higher than similar rates in the State of
Iowa. But it is also true that the mileage earnings in Iowa are greater than
in Nebraska. In Towa, there are 230 people to each mile of railroad, while in
Nebraska there are but 190; and, as a general rule, the more people there are,
the more business there is. Hence, a mere difference between the rates in two
States is of comparatively little significance.’ 64 Fed. Rep., p. 165. In these
views we concur, and it is unnecessary to add anything to what was said by
the circuit court on this point.” Mr. Colquitt admitted that he was not pre-
pared to give the committee any information as to the cost of operating and
other conditions in the other States mentioned by him as compared with Texas.
As illustrative of how unfair it is to compare rates in Texas with those in
other States, without at the same time presenting to the committee the differ-
ence in conditions prevailing, the following examples in Mr. Colquitt's testi-
mony are cited: He compared rates of the Atlantic Coast Line in North Caro-
lina with those of the Texas & Pacific west of Mineola. The Atlantic Coast
Line is situated in Group IV, which for the year 1905 had a density of freight
traffic of 778,670 tons of freight carried one mile per mile road, while for
the same period in Texas the figure was 361,962, showing in the territory
traversed by the Atlantic Coast Line a density of more than double that of
Texas. The Atlantic Coast Line in North Carolina is situated in a practically
level country with no grades to steam over, while the Texas & Pacific west of
Mineola has heavy grades, correspondingly decreasing the number of cars an
engine can draw. The cost of many classes of labor, as well as fuel, of the
Texas & Pacific is much higher than on the Atlantic Coast Line. Mr. Colquitt
compared rates in Texas with the rates on the Illinois Contral in Mississippi.
The principal part of the Illinois Central south of Cairo is in Mississippi. Mr.
Colquitt did not direct attention to the fact that the Illinois Central south
of Cairo is practically a water grade line, that it enjoys cheaper coal and
largely cheaper labor than any road in Texas. The Illinois Central south of
Cairo had a freight density in 1906 of 1,692,307 tons carried one mile per mile
of road against an average density in Texas for the same year of 413,414. In
short, the density of traffic on the Illinois Central south of Cairo is more than
four times as great as the average in Texas. Much of the expense of a railroad,
like any other business, does not increase in proportion to the increase of
traffic. For example, it is probable that the cost of maintenance of track where
only one train a day is run over the track is 75 per cent as much as if ten
trains a day were run over the same track. The same general statement is
true of many of the other expenses. With so much excess of tonnage, with
lower cost of fuel and labor and low grades, it is not surprising that the
Illinois Central can profitably do business on lower rates than those in Texas.
We could take up the comparisons made by Mr. Colquitt and give numerous
similar examples, but it would unnecessarily consume time. We refer briefly
to two companies of which the same gentleman is president, the figures being
for the fiscal year ending June 30, 1906. The average daily pay of all employes
of the Missouri, Kansas & Texas north of Texas is 8 cents less than of the
Missouri, Kansas & Texas of Texas. If the Missouri, Ransas & Texas of Texas
had the benefit of this 8 cents it would have saved $132,702.40. The average
cost of coal to the Missouri, Kansas & Texas north of Texas at the points of
distribution was $1.48 per ton, and on the Missouri, Kansas & Texas of Texas
$2,425 per ton. Had the Texas company as cheap coal as the compány north, it
would have saved $358,517.88. Personal injury payments per mile of road on
the Missouri, Kansas & Texas, north, $46.65; Missouri, Kansas & Texas of
REDUCTION OF PASSENGER FARES. 67
Texas, $167.90. Had the figures been the same, the Missouri, Kansas & Texas
of Texas would have saved in this item $159,928.75. Had the Missouri, Kansas
& Texas of Texas enjoyed the same figures on these three items as the Missouri,
Ransas & Texas, north, it would have saved on these three items alone
$651,149.03 in one year. In connection with the foregoing if you will consider
that the tons carried one mile per mile of road on the Missouri, Kansas &
Texas of Texas was 367,095, and on the Missouri, Kansas & Texas, north,
531,655, it will be readily seen that the Missouri, Kansas & Texas, north, can
afford to do business on cheaper rates and still make more money than the
Missouri, Kanas & Texas of Texas. The same man being president of both
companies, it is not presumed that he would pay higher wages in Texas than
elsewhere unless necessary. Mr. Colquitt intimated that the Missouri, Kansas
& Texas, north, owns the coal mines and sells coal to the Missouri, Kansas &
Texas of Texas, but he does not undertake to show that the excess cost of
coal to the Missouri, Kansas & Texas of Texas represents more than the reason-
able cost of hauling the coal from the mines in the Indian Territory or other
places of supply to the points of distribution on the Missouri, Kansas & Texas
of Texas. Mr. Colquitt admitted that the Houston & Texas Central owns no
coal mines and it does not appear that any corporation with which it is in
any way connected sells coal. The cost of coal on the Houston & Texas Central
for the same year was $2.92 per ton, or 49% cents a ton more than the cost
of coal to the Missouri, Kansas & Texas of Texas. As the Missouri, Kansas
& Texas, north, furnishes its Texas line with coal at 49% cents a ton cheaper
than the Houston & Texas Central can procure the same, it would seem that the
line north was favoring the line south, rather than robbing it in the price of
coal. We do not believe that the Legislature or the committee would even
convict a Mexican of fraud or deception on mere suspicion. The Railroad Com-
mission has had many years in which to investigate and study the railroad
problem, and when they undertake to enlighten the Legislature they should
present all of the facts legitimately bearing on the proposition, or refrain from
saying anything.
Mr. Colquitt says average earnings were:
Per passenger Per ton per
per mile. mile.
In Group 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.318 cents 1.000 cents
In Group 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.086 cents .779 cents
In Group 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.283 cents .998 cents
On C., R. T. & P. Ry., in Group 6 . . . . . . . . . . 2.113 cents .884 cents
On C., R. T. & P. Ry., in Group 8. . . . . . . . . . 2.347 cents 1.045 cents
On C., R. I. & P. Ry. system. . . . . . . . . . . . . . . . 2.203 cents .994 cents
On St. L. & S. F. Ry., in Group 6 . . . . . . . . . 1.754 cents .468 Cents
On St. L. & S. F. Ry., in Group 8. . . . . . . . . 2.343 cents .959 cents
On M., K. & T. (north), in Group 8. . . . . . . . . 2.144 cents 1.024 cents
On Mo. Pac. system, in Group 6 . . . . . . . . . . . 1.908 Gents .616 cents
On Mo. Pac. system, in Group 8. . . . . . . . . . . 2.173 cents .884 cents
On St. T., T. M. & S., in Group 8. . . . . . . . . 2.461 cents .786 cents
On A., T. & S. F. Ry., in Group 8. . . . . . . . . 2.200 Gents 1.016 Gents
On A., T. & S. F. Ry., in Group 6 . . . . . . . . . 1.951 Cents .81.1 cents
On A., T. & S. F. Ry., in Group 10. . . . . . . . 1.984 Cents 1.021 cents
On So. Pac. Co., in Group 10. . . . . . . . . . . . . . . . 1.889 cents .898 Gents
On Morgan’s La. & Tex. R. R., in Group 9. . . 2.333 cents 1.365 cents
On Colorado & Southern, in Group 8. . . . . . . . 2.637 cents 1.182 cents
With the foregoing he compares the following:
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.239 Gents 1.067 cents
Chicago, Rock Island & Gulf. . . . . . . . . . . . . . . . 2.228 Gents 1.222 cents
Fort Worth & Rio Grande . . . . . . . . . . . . . . . . . . . 2.623 Gents 2.445 cents
Red River. Texas & Southern . . . . . . . . . .-. . . . . . 2.396 Cents .980 cents
Missouri, Kansas & Texas of Texas . . . . . . . . . . 2.447 cents 1.213 Gents
Texas & Pacific, in Texas. . . . . . . . . . . . . . . . . . . 2.252 Gents 1.045 cents
International & Great Northern . . . . . . . . . . . . . . 2.167 cents 1.086 cents
St. Louis Southwestern Railway Co. of Texas. , 2.351 cents 1.411 cents
68 REDUCTION OF PASSENGER FARES.
Per passenger Per ton per
per mile. mile.
Gulf, Colorado & Santa Fe. . . . . . . . . . . . . . . . . . 2.150 cents 1.030 cents
Pecos & North Texas . . . . . . . . . . . . . . . . . . . . . . . . 1.893 Cents 2.039 cents
Pecos River . . . . . . . . . . . . * * * * - - - - - - - - - - - - - - - - - 2.059 cents 2.303 cents
Southern Kansas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.284 cents 1.371 cents
Galveston, Harrisburg & San Antonio. . . . . . . . . 1.809 cents .638 cents
Galveston, Houston & Henderson . . . . . . . . . . . . . 1.446 cents 1.575 cents
Houston & Texas Central . . . . . . . . . . . . . . . . . . . . 2.307 cents .968 cents
Gulf, West Texas & Pacific. . . . . . . . . . . . . . . . . . 1.875 cents 3.526 cents
, Texas & New Orleans. . . . . . . . . . . . . . . . . . . . . . . . 2.330 cents .962 cents
Houston, East & West Texas. . . . . . . . . . . . . . . . 2.688 Gents 1.440 cents
San Antonio & Aransas Pass. . . . . . . . . . . . . . . . . 2.418 cents 1.498 cents
Fort Worth & Denver City. . . . . . . . . . . . . . . . . . 2.385 cents .931 cents
The more than four pages of Mr. Colquitt's statement placed in tabular form
as above do not show, by any means, that the revenue per passenger per mile
or the revenue per ton per mile is invariably higher on the Texas roads than
on the great roads outside of Texas which he selects for comparison with them,
or than in Groups 6, 8, 9 and 10. Among other instances it will be seen that
the Colorado Southern received 2.637 cents per passenger per mile and the
Fort Worth & Denver City only 2.385 cents; on freights the Colorado Southern
received 11.82 mills per mile and the Fort Worth & Denver City only 9.31 mills.
Recurring to Mr. Colquitt's comparison of freight rates in Louisiana and Texas,
it is interesting to note that Morgan’s Louisiana & Texas Railroad received
a revenue of 13.65 mills per ton and the Texas & New Orleans Railroad a
revenue of only 9.62 mills per ton. If this difference is caused by a difference
in the character of the freight hauled by the two companies, why should not
Mr. Colquitt have explained that? Are not the records of all of the other
State Commissions, as well as those of the Interstate Commerce Commission,
accessible to him 7 And would not differences in the character of the freight
affect the revenue per ton per mile in any group or on any railroad, either
in Texas or beyond its borders, which he has mentioned 7 But it may be said
that these differences are brought about by unfair divisions. Then why is
it that the Missouri, Kansas & Texas of Texas has a revenue of 12.13 mills
per ton per mile and the Missouri, Kansas & Texas, north, only 10.24 mills
per ton mile? It is a digression, but it may here be remarked that the Mis-
souri, Kansas & Texas’ revenue per ton per mile lacks only a fraction of a
mill of being as high as the Texas average, notwithstanding all the rate com-
parisons, and the same appears to be the case with two other roads in Group
8, viz: the Chicago, Rock Island & Pacific and the Atchison, Topeka & Santa
Fe. Also the Southern Pacific in Group 10.
Conceding that the freight rates are higher in Texas than in the groups
which Mr. Colquitt names and on the railroads in those groups, which were
used for comparison with Texas, why should they not be higher, when there
is such a great difference in the density of freight traffic in Groups 6, 8 and
10 than in Group 9 and in Texas?
We give below the number of tons of freight carried one mile per mile of
line, for the vear ending June 30, 1904, taken from the very same volume from
which Mr. Colquitt obtained his figures of revenue per ton per mile (page 72).
Why did Mr. Colquitt omit even mention of so important a factor in railroad
earnings as density of traffic? *
Group VI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681.022
Group VIII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 444,815
Group TX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397,163
Group X. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 533,919
To this we add the density of freight traffic in Texas (computed by the Inter-
state Commerce Commission method, so that the comparison will be a true One):
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 406,711
Following this we give for the information of the committee a statement of
the density of traffic, both passenger and freight, for all of the Interstate Com-
REDUCTION OF PASSENGER FARES. 69
merce Commission groups for the year ending June 30, 1905; and also for the
Texas railroad companies for 1905 and 1906. In order that the relative densi-
ties may be more easily perceived, we have inserted percentage columns, basing
the percentages on the group having the greatest density of passengers or freight,
respectively. For example, in 1905, the density of passenger traffic in Group IX
was only 17.33 per cent of that in Group I (the New England States), and
the density of freight traffic on the Texas railroads was only 16.45 per cent
of that in Group II (New York, Pennsylvania, etc.).
DENSITY OF TRAFFIC ON RAILROADS IN DIFFERENT SECTIONS OF THE UNITED STATES.
Data copied or computed from statistical report of the Interstate Commerce
Commission for the year ending June 30, 1905.
Density Of passenger Density of freight
trafflic. traffiic.
Territory covered. Number of Percent- || Number of | Percent—
passengers age to tons of freight age to
carried one group of carried one group of
mile per mile greatest mile per mile greatest
Of line. density. of line. density.
Group I........................... .......................... 299,527 100 00 679.393 30.38
Group II................ .................................... 255,718 85.37 2,200,372 1U)0.00
Group JTI........................... ....... .............. 124,286 41.49 1,457.855 66.25
Group IV ................................................. 60,892 20.33 778.670 35.39
Group Y. "..….….........…. .......... 65,810 21.97 565,008 25.68
Group VI................................................... 89,618 29.92 702,510 31 93
Group VII.................................................. 71,396 23.84 639,489 29.06
Group VIII.................. * * * * * * * * * * * * * * * * * * * * * * * * * 66,491 * 22.20 435,282 19.78
Group IX..... ................................. .......... 51,904 17.33 367,799 16.72
Group X.............................. ..................... 111,016 37.06 507,053 23.04
United States................................... 109,949 36.71 861,396 39.15
From Statistics of Railroad Commission of Texas.
Texas (1905) (a)............. ... ........................ 54,822 18.30 374,828 1703
Texas (1995) (b) ............................. ......... 52,941 17.67 361,962 16.45
Texas (1906) (a).................................... ..... 58,718 (C) 430,251 (c)
Texas (1806) (b).......................................... 56,420 (C) 413,414 (c)
(a) Density, trackage rights eaccluded, which, however, is not the basis on which the Inter-
State Commerce Commission figures of density are computed.
(b) For purposes of comparison the figures in this line should be used, as they are reached
|by the same process that is used by the Interstate Commerce Commission, viz: by including
the mileage of track used by two or more companies, as many times as there are companies
SO using, in arriving at the divisor to be used in the computation. For Texas this adds 414.81
miles in 1905 and 497.41 miles in 1906.
(c) Comparison of relative density for 1906 Cannot yet be made.
Referring to page 54 of the manuscript testimony, Mr. Colquitt stated “table
No. 11 in the fifteenth annual report of the Railroad Commission shows that
upon the entire amount of both stocks and bonds, $396,000,000 dollars of them,
after paying operating expenses, the earnings from operation, or the earnings
from income, amounted to 4.77 per cent of the entire stock and bond value.”
An examination of table No. 11 of said report, which had not reached the
public when Mr. Colquitt testified, shows that it relates to properties repre-
sented by $389,831,427 of stocks and bonds, not $396,000,000 as stated, a dif-
ference of $6,168,572; 4.77 per cent of which equals $294,240.93.
It is also found that in table No. 11, in the instance of the Gulf, Colorado
& Santa Fe Railway, that while the mileage exterior to Texas has been excluded
and the pro rata share of bonds and stock appertaining to that mileage has
also been excluded, yet the income from operation of that mileage (100
"niles) has been included, and consequently the percentage stated, 4.77 per
cent, is erroneous. Assuming that the footing of the column in table No. 11
70 REDUCTION OF PASSENGER FAREs.
headed “Income from operation year ended June 30, 1906, is correct, viz:
$18,582,459.09, there should be deducted income from 100 miles of the Gulf,
Colorado & Santa Fe Railway in the Indian Territory $1,440.58 per mile (see
table No. 6 of Texas Commission Report), or say $144,058, leaving $18,438,401.09.
It is further found that the said 4.77 per cent relates solely to income from
operation, that is, the moiety of gross earnings which was left after the payment
of operating expenses only. Out of that 4.77 per cent the railroad companies
had to meet interest on their funded debt, interest on their current liabilities,
rentals paid for lease of road and equipment (in some instances), permanent
improverneat, taxes and Sonne few other items:
In order to find what per cent of the income from operation of the railroad
properties shown in table No. 11 (the one referred to by Mr. Colquitt), would
be available for payment of interest on funded debt and dividends on stocks,
it will be necessary to refer to table No. 24 of the same report, and here a
difficulty is met with, in that while table No. 11 refers entirely to Texas, table
No. 24 does not show separately for Teacas the expenditures by the Gulf, Colo-
rado & Santa Fe and Texas & Pacific Railways for taxes, permanent improve-
ments, rents paid for lease of road and other deductions for the year. In the
case of the Missouri, Kansas & Texas of Texas, there is no complication in
this respect, its operated road in Louisiana not being owned by it.
This makes it necessary to take into the consideration the operations, etc.,
of those two companies exterior to as well as in Texas, and add them to the
amounts shown in said table No. 11, before making the computation, as follows:
Stocles and Bomds.
Amount shown in table No. 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $389,831,427.00
Add for Gulf, Colorado & Santa Fe Railway . . . . . . . . . . . . . . . . . . 3,803,971.00
Add for Texas & Pacific Railway. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,170,291.00
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $431,805,689.00
Income From Qperation.
Amount shown in table No. 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,582,459.09
Add for Gulf, Colorado & Santa Fe Railway (nothing—already
included—see paragraph 3 hereof. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add for Texas & Pacific Railway. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,457,080.20
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,039,539.29
Other Income During the Year.
Amount shown in table No. 24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 513,065.07
Less amount pertaining to one road not listed in table No. 11.. 11,895.24
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 501,169.83
Taages.
Amount shown in table No. 24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,594,825.90
Taxes claimed by State, but not admitted by the railroad com-
panies, not less than . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000.00
$ 1,894,825.90
Less taxes paid by companies shown in table No. 24, but not in
table No. 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,935.18
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,889,890.72
Permanent Improvements.
Amount shown in table No. 24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,174,161.87
Less expenditures shown by companies listed in table No. 24, but
not in table No. 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,247.41
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,163,914.46
REDUCTION OF PASSENGER FARES. 71
Rents Paid for Lease of Road.
As per table No. 24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 215,637.74
Other Deductions for the Year.
Amount shown in table No. 24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 445,987.10
Less amount pertaining to road not listed in table No. 11 . . . . . . . . 34,613.75
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 411,373.35
Recapitulation.
Income from operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,039,539.29
Other income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 501,169.83
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . ‘. . . . . . . . . . . . . . . . . . . . . . . . $ 20,540,709.12
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,889,890.72
Permanent improvements. . . . . . . . . . . . . . . . . . ... • * * * * * 2,163,914.46
Rents paid for lease of road. . . . . . . . . . . . . . . . . . . . 215,637.74
Other deductions for year . . . . . . . . . . . . . . . . . . . . . . . 411,373.35
Total. . . . . . . . . . . . . . . . . . . . . . . . … 4,680,816.27
Balance applicable to payment of interest on bonds, other
interest and dividends on Stock. . . . . . . . . . . . . . . . . . . . . . . . . . $15,859,892.85
On $481,805,689 of stock and bonds (see preceding paragraph), this balance
would amount to only 3.29 per cent. And still this would leave no provision
for payment of interest on the floating debt of the Texas railroad companies.
Table No. 24 of the Railroad Commission shows that $1,668,939.64 of such
interest accrued during the year ending June 30, 1906. Deducting from that
amount $19,513.64, account of the Gulf & Interstate, leaves $1,649,426 for the
roads considered in the foregoing computations. That amount deducted from
the balance of $15,859,892.85 above shown, leaves but $14,210,466.85 available
for payment of interest and dividends on $481,805,689 of bonds and stock, or
less than 2.95 per cent.
The Supreme Court of your State has recently affirmed the existence of in-
tangible assets of railroad corporations over and above the value of physical
properties, and have held that the State Tax Board is constitutional.
If to the valuation made of the physical properties of 11,408.67 miles of
Texas railroads made by the Railroad Commission of Texas, viz: $188,600,939.63,
there be added the intangible values of the same roads made by the State Tax .
Commissioner, viz: $152,534,115, their total value as established by the State,
acting through its own officers, amounts to $341,135,054.63. Making a proper
reduction for an error in a column in table No. 11 of the Railroad Commis-
sion’s last report, the income from operation, for the year ending June 30,
1906, of these roads amounted to $18,438,401.09, which is 5.405 per cent of
such total valuation. Deducting $5,600,000 (which is a conservative and fair
estimate for Texas portion), for taxes, permanent improvements, rents paid
for lease of road, interest on current liabilities and other legitimate charges
upon income, except interest on funded debt, there remains of the $18,438,401.09,
income from operation, the sum of $12,838,401.09, as a return on the State’s
own valuation of the properties. This sum amounts to only 3.763 per cent on
such valuation.
It is true that the income from operation on the same Texas railroads for
the current year, when the accounts are wound up, will show a considerable
increase, but in the enjoyment of the unexcelled prosperity prevailing in the
State as pictured in the Governor’s message, are the railroads to be made the
only exception ? Even should the railroads for the current year considerably
increase their earnings, should not the stockholders be entitled to some recom-
pense therefrom to compensate them for the long series of years in which they
have received no dividends on their stocks? A farmer who has had hard times
and no profit on cheap cotton for a series of years is now permitted to reap a
harvest on good crops and high prices for two or three years to compensate
72 REDUCTION OF PASSENGER FARES.
him for his losses and his struggles in the past. Why apply a different rule
of morals to those who have invested their money in railroads? In this con-
nection we wish to emphatically assert that there is no material amount of
water in the stocks and bonds of Texas railroads. This fact was established
by the testimony of witnesses (without denial) in the former suits with the
Railroad Commission, which testimony is yet on file in the Federal Court at
Austin. By a section of the act creating the Railroad Commission, passed in
1891, mow Article 4570 of the Revised Statutes, it was substantially made the
duty of the Railroad Commission, and they were given full power to ascertain
whether there was any water in the stocks and bonds of the Texas railroads,
and it was made their duty to report the facts as found to the Attorney
General, and file a duplicate thereof with the Comptroller, and to print the
information from time to time in the annual reports of the Commission. After
the lapse of fifteen years if the Commission has failed to report to the Attorney
General any fictitious stocks or bonds, or water therein, it is about time that
this unjust suspicion formerly prevailing against the railroad companies should,
in common fairness, cease. However much the earnings may increase for the
present fiscal year, they will not be more on a general average than what the
Texas railroads are justly entitled to earn on the money actually invested in
the same. They ask that they be allowed to enjoy a little of the current pros-
perity, and that they receive at your hands a fair and square deal. In this
connection your attention is invited to the fact that the Intangible Asset Taw.
having been affirmed as constitutional by the Supreme Court, will necessarily for
the current tax year cause a large increase in the taxes of the railroads, and that
your Committee on Taxation and Revenue will probably demand an increase
of railroad taxes in other directions, and that various bills are pending before
this Legislature, which, if passed, will increase the expenses of the railroads
as well as hamper their operations. If rates are cut, taxes and expenses in-
creased, the railroad companies will be denied any share in the present pros-
perity, or opportunity of recompense for past losses. Mr. Colquitt intimated
in his testimony that bonds of Texas railroads could be disposed of on a 4 per
cent basis. We are authorized in writing by Mr. J. Lane, formerly president
of the Cane Belt, to state that after his best efforts he could only dispose of
the 5 per cent bonds of that company, approved by the Railroad Commission, for
80 cents on the dollar, and we are authorized in writing by Mr. J. H. Kirby,
formerly president of the Gulf, Beaumont & Great Northern Railway Company,
to state that after his best efforts he could only dispose of the 5 per cent
bonds of the Gulf, Beaumont & Great Northern Railway Company, approved
by the Railroad Commission, at 90 cents on the dollar. The Pecos & Northern
Texas Railway Company is one of the few Texas corporations that has earned
dividends, and it has paid a larger rate of dividends than any other railroad
company in the history of the State. That company proposes an issue of bonds
to provide for extensions in Texas. We are authorized in writing by Mr. E. P.
Ripley, financial director of the company, to state that he will pay a very
liberal commission to any gentleman who will sell those bonds on a 4 per cent
basis. Will you accept the opinion of men who in practical life have gone up
against the proposition and know whereof they speak, or that of a mere theorist?
It may be that some of the bonds of some of the old established Texas lines who
have demonstrated their ability to earn and pay interest can be sold on the
4 per cent basis, but these bonds carry a higher rate of interest agreed by
the railroad companies to be paid under the authority and sanction of the
laws of Texas, and the former holders thereof who took the risk of the invest-
ment were entitled to the benefit of any rise in the value of their bonds. Would
any of you consider for a moment an attempt to arbitrarily cut down the rate
of interest on bonds issued by the State of Texas because several years after
their issuance they might sell above par 7 In the forum of law, of ethics, of
good common horse sense, would such a proposition be entertained with regard
to any other character of institution than a railroad company ? If, however,
you will refer to pages 25, 26 and 27 of the thirteenth annual report of the
Railroad Commission, to which Mr. Colquitt alluded, you will see that on a
general average the bonds of the Texas railroads therein cited were not in
1903 and 1904 selling anywhere in the neighborhood of a 4 per cent basis.
For instance, there was in the latter year (which year’s figures are used herein
REDUCTION OF PASSENGER FARES. 73
when same were quoted) bid for the first mortgage bonds of the International
& Great Northern on a basis of 5.02; for the second mortgage bonds on a
basis of 5, while on the third mortgage 4 per cent bonds there was bid (in
1903) only 57 cents on the dollar, a basis of about 7 per cent; on the first
mortgage 4 per cent bonds of the Missouri, Kansas & Texas of Texas, guar-
anteed by the Kansas Missouri, Kansas & Texas, there was bid 102, while on
the second mortgage bonds of the Missouri, Kansas & Texas, likewise guaran:
teed, there was bid only 86 cents; on the San Antonio & Aransas Pass 4 per
cent mortgage bonds, interest guaranteed by the Southern Pacific Company, there
was bid 89.75; on Texas & New Orleans first mortgage 7 per cent bonds there
was bid 101.375; Texas & New Orleans consolidated 5 per cent bonds asked
105.5. These latter bonds mature in 1943, while the 7 per cent bonds were
about due, which accounts for the comparatively low amounts bid for the
7 per cent. Texas & Pacific first mortgage 5 per cent bid at 120.625; second
mortgage 5 per cent incomes, sale at 94%; Galveston, Harrisburg & San Antonio
first mortgage eastern 6 per cent bid 109; second mortgage eastern 7 per
cent bid 103; first mortgage western 5 per cent 110.50; Houston & Texas Cen-
tral first mortgage 5 per cent, 1123; general mortgage 4 per cent bid 95;
Houston, East & West Texas first mortgage 5 per cent bid 1033.
In his testimony referring to the pamphlet signed by a committee composed
of Messrs. Fyfe, Askew and Hawks, Mr. Colquitt stated: “They have selected
arbitrarily groups of railways or States for comparison for purposes of dis-
paragement of the Texas conditions and the Texas rates, evidently without
explaining the reasons why differences which appear in the figures which they
quote exist.” The committee did not arbitrarily select anything. The infor-
mation given by Interstate Commerce Commission groups was given for every
group. See the pamphlet. As to information given by States, everything was
given that the committee could procure. In reference to prices paid for coal,
nothing on that subject was withheld, either as to rates outside of or in Texas.
Mr. Colquitt states that the above committee failed to state in their pamphlet
comparative cost of bridge timbers. The committee had no recent data on
this subject, but if Mr. Colquitt will refer to the sworn testimony on file
in the Federal Court at Austin in the old rate suits he will see that consid-
ering the rapid decay of bridge timbers in Texas, due to our damp climate,
the cost in the long run is probably higher in Texas than the general average
in the United States, if not higher than in any State. Mr. Colquitt criticised
the comparison made by the committee of the cost of passenger engines. Pas-
senger engines of the Atlantic type delivered at Houston to the Galveston,
Harrisburg & San Antonio Railway Company in 1905 cost $19,000, and prices
have since increased. It is true that these engines are larger than those
in use in 1893, but necessarily so on account of the heavier cars and more
rapid speed now demanded by the public. In support of his criticism Mr.
Colquitt referred to second-hand freight engines purchased by the Gulf, Colo-
rado & Santa Fe, and as to those engines he understated the amounts paid
therefor. The committee was dealing in a comparison of first-class new pas-
senger engines.
Mr. Colquitt expressed the opionion “that the Texas lines that belong to these
systems in the final accounting do not get credit for what they earn.” If Mr.
Colquitt had any knowledge on this subject, he should have given it, and
being without knowledge, before even expressing such an opinion, he should
put in months of his time in ascertaining the truth, rather than ask an intelli-
gent committee of the Texas Legislature, in the discharge of their sworn duty
under the Constitution of Texas, to accept his opinion as against the reports
of the Texas railroad companies, sworn to by their officers, whose reputations
for integrity and veracity are as good as that of Mr. Colquitt. He stated “that
if these railroads, in my judgment, earn twice the money they earn now they
would never pay a dividend—they would never pay a dollar of dividend on
the stock.” We think in our judgment that if these companies had twice the
net earnings which they now have, they would spend twice the money that
they now do in permanent improvements, reduction of grades, alignments, bal-
lasting tracks, new bridges, heavy rails, better depots, more adequate terminal
facilities, additional locomotives. coaches and cars, which would be better for
Texas than the payment of dividends, and for these reasons, although the
74 REDUCTION OF PASSENGER FARES.
earnings may increase the companies may not pay dividends for several years
to come. However, if Mr. Colquitt implies that they would fail to pay divi-
dends on account of any improper manipulation of their earnings, we replidiate
his judgment in the matter as without facts to sustain the same. The reports
of the Interstate Commerce Commission and of the Texas Railroad Commission
show that the Pecos & Northern Texas Railroad has paid large dividends on
its capital stock. As the stock of this company is owned principally by an
outside company, such payment of dividends would seem to negative Mr. Col-
quitt’s insinuation that such outside ownership of stock is the cause of failure
of other Texas companies to pay dividends. Mr. Colquitt intimates that the
reports of Texas companies are made up in outside offices and that the Texas
officers sign the reports and know nothing of their contents. It is possible
that with some fragmentary line here and there this may be true, but in the
main this insinuation made by Mr. Colquitt is wholly unwarranted.
Mr. Colquitt stated that while on their face the arrangements for divisions
between the Texas lines and outside companies were fair, that in their applica-
tion they might not be fair. He referred to several instances where he claimed
the Texas line had not got its proper division, but on demand of the railroad
representatives refused to give any reference to the dates, way-bills, bills of
lading, and even failed to name the railroad in question, so that it is impos-
sible for us to ascertain the corectness of his statement or offer any legitimate
explanation that may exist therefor. Will the enlightened Legislature of Texas
convict us on this character of star-chamber testimony ?
Mr. Colquitt stated in his testimony that the Atchison, Topeka & Santa Fe
had, according to the report of the Interstate Commerce Commission for the
year 1904, paid 4 per cent on the common stock and 5 per cent on preferred stock
of stock representing the $63,000,000 of value south of Red River. The Atchison
Company did pay the dividends referred to on its common and preferred stock,
and because the Atchison Company had exchanged certain of its stock for stocks
of Texas companies, the Interstate Commerce Commission arbitrarily appor-
tioned the amount referred to by Mr. Colquitt south of the Red River. The
dividends paid by the Atchison Company worc paid out of its own resources
and earnings from all resources. The same argument might be advanced by
Mr. Colquitt if the Atchison Company had paid these dividends from the earn-
ings of a gold mine in Africa. The reports, both of the Interstate Commerce
Commission and the Texas Railroad Commission show that neither of the
Texas companies of which the Atchison owns stock (except the Pecos & North-
ern Texas) earned anything during the year in question, or in other years
that could be applied to the payment of dividends on the stocks of these com-
panies. The Atchison Company has never issued anything like $63,000,000
of its stock in the acquirement of the stock of Texas lines, and the amount
which the Atchison Company so issued, without having any accurate figures
before us, we believe can not exceed $7,000,000 to $10,000,000. The appor-
tionment of the Atchison stock by the Interstate Commerce Commission on a
mileage basis south of the Red River is purely theoretical. Mr. Colquitt
stated that the expenses charged by the Gulf, Colorado & Santa Fe for main-
tenance of equipment is out of proportion to the value of equipment owned.
This is true. The Gulf, Colorado & Santa Fe uses a large amount of equip-
ment which belongs to the Atchison Company and the expenses of maintaining
that equipment is divided between the two companies in proportion to the
number of miles run by the equipment over their respective lines, and the
proportion of such repairs of Atchison equipment charged to the Gulf, Colorado
& Santa Fe is included in the charge on the books of the Gulf, Colorado &
Santa Fe to maintenance of equipment. Mr. Colquitt could have easily obtained
a statement of these facts if he had asked for it. In addition to paying its pro
rata of the cost of maintenance of such equipment, the Gulf, Colorado & Santa
Fe pays the Atchison interest on the value of the equipment in proportion
to the number of miles run on the Gulf, Colorado & Santa Fe. That is, it
pays interest on the value of the equipment only while in the actual use of
the Gulf, Colorado & Santa Fe. This arrangement is more favorable to the
Gulf, Colorado & Santa Fe than if it owned all of its own equipment, for in
the latter case it would pay interest on the value thereof, whether in use or not.
Mz
* Ş.
* Mr. Colquitt intimated in his statement that he was laying before the
REDUCTION OF PASSENGER FAREs. 75
committee a great deal of information that was startling to the attorneys of
the railway companies. In this he was in error. He may have mentioned some
minor details that we are not cognizant of, but his main points have been
thrashed over in the old litigations and disregarded by the courts as of no
Value, and were not new to us.
Mr. Colquitt said that in his opinion Texas is the best part of the Missouri,
Kansas & Texas system and of the Atchison, Topeka & Santa Fe system, and
also of the Cotton Belt system, and that the Southern Pacific Company owns
roads in Texas as good, or better, than any of their own in California. The
tables hereinbefore presented relating to the density of both passenger and freight
traffic show that this opinion is not well founded.
Mr. Colquitt referred to a low rate put in on application of the Texas &
Pacific between Dallas and Fort Worth to meet the competition of the Inter-
urban lime. We are surprised that Mr. Colquitt, in view of his very elaborate
knowledge and learning in transportation topics, should make this reference.
The Commission by its own rule allows the long to meet the short line rate
on the theory that the long line had better carry a part of its business for
low rates than to lose it altogether. A manufacturer will frequently sell a
Surplus at a margin of profit which would ruin his business if applied gen-
erally. If the Texas & Pacific on the business between Fort Wortli and Dallas
only made the expenses of axle grease and the rent of the passenger space in
the car without any contribution to the expenses and interest charges of the
road, it would be a little better off than if it had not attempted to handle the
business, but if the same rate were applied generally over its line to all
business, it might have resulted in such loss as to force it into bankruptcy.
Mr. Colquitt says the Texas roads “do not get 3 cents out of the mileage
that they interchange with their dominating parent lines—they don’t get 23
cents.” They get just as much as they would get from a wholly different line
in Texas under similar circumstances as to direct or indirect routing between
points, homeseekers’ rates, etc.
On page 95 et seq. of the manuscript Mr. Colquitt quoted from a reply to
a question asked of him directly by one of the members of the House com-
mittee, the question having been “if the Legislature reduces the maximum
passenger fare from 3 to 2% cents, what will the probable reduction amount
to in dollars?” To this he very frankly and correctly replied “that any figures
in answer to this question furnished by me would be an approximation or
estimate or opinion.” He, however, went on to state that, in his opinion, the
railroad companies of Texas do not get 3 cents per mile on more than 50
per cent, if that much, of their total gross earnings from passenger charges.
It is our opinion, based on the statements of passenger men, whose daily
business it is to handle the details of adjusting rates with reference to the
maximum rate, and the rates between termini, that not less than 60 per cent
of the passenger revenue is derived from the full maximum of 3 cents for
each mile actually traveled, excluding only such mileage on longer routes
between termini, as are in excess of the mileage of the shortest line betwen
such termini. To explain this latter proposition, we cite again an example
which has been used before in illustration, viz: The distance from Denison
to Dallas via the Houston & Texas Central Railroad is seventy-three miles,
and there being no shorter route between those cities, the Houston & Texas
Central applies the full 3 cents fare to each mile, $2.19, and actually collects
$2.20, being entitled to the odd cent under the statute. The Missouri, Kansas
& Texas Railway of Texas also has passenger trains which run through the
same cities, but by way of Greenville, a more circuitous route, requiring 106
miles of railroad to be traversed. A passenger from Denison, via Greenville
to Dallas, is furnished with a ticket at the Houston & Texas Central price,
$2.20, which it will be noticed figures out only 2.075 cents per mile. And
this rule applies all over Texas, in both passenger and freight business, as a
common sense business proposition, even if it were not required by authority.
The Denison and Dallas instance is just one used for illustration. If the com-
mittee will look over the Texas Commission railroad map of Texas they will
find numerous similar instances. Those situations affect the revenue per pas-
senger per mile on every railroad of any consequence in Texas, and aid largely
in producing the result that under a 3-cent statutory rate the average rate of
g
76 REDUCTION OF PASSENGER FARES.
only about 24 cents was received for the miles actually traveled by pay pas-
sengers on the Texas railroads during the year ending June 30, 1906.
Now, let us see how a 2% cents statutory rate would work in the Denison-
Dallas instance: Houston & Texas Central rate, seventy-three miles at 2%
cents, equals $1.82%, say $1.85; Missouri, Kansas & Texas of Texas, by way
of Greenville, $1.85, divided by 106 miles equals only 1.745 cents per mile.
Several passenger agents of extensive experience testified before the com-
mitte that in their opinion in order to induce people to travel on excursions
and the like it is necessary to make the excursion rate considerably lower
than the regular rate, and that in their opinion if the maximum rate was
reduced from 3 cents to 24 cents, it would cause a corresponding reduction
in excursion and all other rates. -
If their opinion is correct, and we think that their opinion is entitled to
as much weight as Mr. Colquitt's (and he only claims to give an opinion),
then it necessarily follows that as a reduction of the basic rate from 3 cents
to 24 cents is a reduction of one-sixth, that such a reduction applied on
$16,144,818.96, the revenue from passenger fares strictly of the Texas railroad
companies for the year ending June 30, 1906, would have resulted in a loss
to said companies of $2,690,803.32.
We further add that, as the operating expenses for performing the service
required to earn the sum which was earned, would have been just the same
under reduced rates, that this sum would have reduced the net earnings by
$2,690,803.32.
Mr. Colquitt referred to the excessive prosperity of the Houston & Texas
Central. Sworn affidavits of witnesses on file in the Federal Court show that
that road cost more than the aggregate of its stock and bonds. If all of the
earnings of that road, above operating expenses and fixed charges, including
what it receives from the sale of lands, were applied to the payment of dividends
in past years when the owners of the stock earned nothing, we believe that
the picture of the prosperity of this road would be dispelled.
On page 54 (of the manuscript) Commissioner Colquitt further states that
“in my (his) judgment this property can all be reproduced at the figures
which the Railroad Commission estimated it to have cost, even at the enhanced
or increased prices in material,” and then goes on to state that “this property,”
meaning the railroads which had been valued by the Texas Railroad Commission,
had earnings for the year ending June 30, 1906, equivalent to 9.85 per cent
on the Commission’s valuation. Turning to tables in the report of that Com-
mission for the said year which bear on this subject, we find (see table No.
11) that said 9.85 per cent refers to “income from operation,” that is, to the
amount left of gross earnings, after deducting operating expenses only, and
does not refer to met earnings. Further that in table 11, the income from
operation of 100 miles of the Gulf, Colorado & Santa Fe main line of railroad
from Red River to Purcell, Indian Territory, is included in the percentage,
but the Commission’s valuation of the Gulf, Colorado & Santa Fe ends at
Red River, therefore the percentages set opposite the Gulf, . Colorado & Santa
Fe and opposite the Texas roads as a whole are erroneous and misleading.
But only to a trifling extent compared with the Commission’s valuations as
they stand on the records today. Many of these valuations were made ten
to twelve years ago, and no change has been made in many of them, notwith-
standing millions of dollars have been spent in additions and betterments to
the properties, much of which has been paid for by borrowed money.
Mr. Colquitt presented figures on pages 55 et seq. of manuscript to show
that prices of labor had not increased 25 per cent from 1891 to 1906. We
have not data with which to check his figures except to very limited extent:
Texas & New Orleans data in our hands show increases in nine out of fifteen
classes of employes as follows:
Enginemen, from $3.90 to $4.45 per day.
Conductors, from $3.14 to $3.67 per day.
Other trainmen, from $1.53 to $2.63,
Machinists, from $2.31 to $3.36 per day.
Other shopmen, from $1.48 to $1.93 per day.
Section foremen, from $1.87 to $1.94 per day.
REDUCTION OF PASSENGER FARES. 77
Other trackmen, from $1.33 to $1.35 per day.
Telegraph operators, etc., from $2.82 to $3.20 per day.
“All other employes,” from $1.64 to $1.70 per day.
There were decreases in six classes, of which Mr. Colquitt mentioned three;
there were increases in nine classes, of which Mr. Colquitt also mentioned
three.
(See page 219, First Annual Report of the Railroad Commission of Texas;
also report of Texas & New Orleans Railroad Company for year ending June
30, 1906, on file in the Commission’s office.)
Mr. Colquitt quoted Gulf, Colorado & Santa Fe changes in wages correctly
as far as he went, and rather fairly. There were, however, increases in nine
classes of employes and decreases in six. .
We have no check on the Texas & Pacific figures for wages. Mr. Colquitt,
however, stated that there was some increase.
In the case of the “Cotton Belt,” Mr. Colquitt mentioned a decrease in one
class only.
In the case of the Houston & Texas Central, decreases are mentioned in two
classes only—but the average, he said, increased 4 cents per day, which would
equal $45,625.60. .
In the case of the Houston, East & West Texas Railway, Mr. Colquitt men-
tioned only three classes of employes and they were decreases in each instance.
We find that five classes increased as follows:
I891. 1906.
Enginemen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4.49 $6.42
Other trainmen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.08 2.23
Other shopmen. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.74 2.27
Other trackmen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.15 I. 16
Firemen . . . . . . . . . . . . • * * * * * * * * * * * * * ~ * * * * * * * * * * * * * * * * * * * * * * * * * * * 1.49 3.60
For the Fort Worth & Denver City, Mr. Colquitt mentioned four classes, two
of which had increased and two decreased wages in 1906. We have the data
for fourteen classes, all of which increased, except the two mentioned by Mr.
Colquitt. He stated that there was an increase in the general average of 5
cents per day. This would amount to $26,286.80.
We have not the data to check the Galveston, Harrisburg & San Antonio.
No fair comparison of it, however, could be made without considering all the
properties which constituted the Galveston, Harrisburg & San Antonio on June
30, 1906. In 1891 it was, practically all main line, on which employes, even
of the same classification, needed to be of a higher grade.
Mr. Colquitt said the average for the San Antonio & Aransas Pass Railway
was $1.68 per day in 1891 and $2.04 per day in 1906. That amounts to 21.4
per cent, and makes a difference against that company’s net earnings for 1906 of
$207,145.80. .
On the International & Great Northern we find that nine classes increased and
six decreased.
If the Texas railroads on the average are not earning extortionate returns
on their honest investments, it is not material to the issue whether wages have
increased or decreased.
Concerning Mr. Colquitt's statement “that the average earnings per passen-
ger mile for the Santa Fe in Texas is equal if not greater than in Group 8,
where it has its principal mileage,” conceding that such is a fact, it signifies
nothing. It should be greater because the density of passenger traffic (in 1905)
in Group 8 was 66,491, and in Grop 9 it was 51,904. A showing that the
density of the passenger traffic was as great or greater on the Gulf, Colorado
& Santa Fe than on the Atchison, Topeka & Santa Fe, might be germane to
the matter under consideration by the committee, but average earnings per
passenger per mile, not considered in connection with the number of passen-
gers hauled (as before stated), signifies nothing. -
Much of the Atchison mileage in Group VIII is in Colorado, New Mexico and
Western Kansas, where the population is even sparser than in Texas. Passen-
ger rates in those sections are as high, if not higher, than in Texas.
Mr. Colquitt refers to the low rate per ton per mile on the Galveston, Har-
78
REDUCTION OF PASSENGER FARES.
&
risburg & San Antonio Railway Company. This is caused by the immense
amount of trans-continental traffic moving over that line, which must neces-
sarily be carried at a low rate. This business moves in train lots. An engine
hooks onto the train at Galveston and the only thing thereafter is to change
engines and crews at division points, and the train is delivered at El Paso to
the connecting line without any terminal expense. Mr. Van Vleck, manager
of that road, in an affidavit on file in the Federal Court at Austin, estimated
that the cost of handling the Texas traffic was at leasts five times as much
as handling the trans-continental traffic, and gave many details in support
of his estimate.
Mr. Colquitt expressed the opinion that the freight rates actually charged
under the Commission were not lower than the freight rates actually charged
before the Commission. In support of this opinion he offered a comparison of
the beef cattle rates now with what he supposed to be the beef cattle rates
before the Commission, but upon the old tariff with which he compared being
read to the committee it appeared that the rates were on range or stock cattle.
The rates on beef cattle are now and always have been higher than on stock
cattle. This was the only evidence produced by Mr. Colquitt in support of
his opinion, and it was no more evidence than it would be to compare the
rate on brick before the Commission with the rate on cotton now.
We submit the following comparisons of freight tonnage, freight revenue and
revenue per ton of Texas railroads, by years, from 1892 to 1906, inclusive:
What revenue
Average T lf ht, Nº º
I'êven U16 Otal freigh een lincle I’ e
Yoar. Tons. received Teven Ule. 1902 basis— Difference,
per ton. $2.08.44 per
t, OIl.
1892 12,742,656| $ 2.06.444 $ 26,384,875 90 $ 26.384,875 90|.............. .........
JS93. 15,162,630 1.86.509 28,409,628 49 31,302,339 88 $ 2,892,711 39
1894.................. ................. 13,285,477 1.78,847 24,676,878 51 27,427,070 14 2,750,191 63
1899.................................... 15,591.262 1.88.9 29,485,756 q2 32,187,224 92 2,721,468 50
1896 . 14,510,919 1.75 2 25,503,939 37 29,956,921 62 4,452,982 25
1897....... ........................... 16,342,302 1.70.2 27,961.284 15 33,737,701 94 5,776,417 79
1888 ................ ................. 18.590,046 1.63.7 31,090.851 32 38,378,034 56 7,287, 183 24
1899.................................... 20,924,890 1.62.3 34,089,602 20 43, 198,179 91 9,108,577 71
1900.. 22,350,607 1.50.8 34,412,371 06 46,203,420 32 11,711,049 26
1901................. ........ ......... 25.238,983 1. 67.8 42,628,201 80 52,104,366 06 9.476,164 26
1902........................ .... ... 26,426,412 1.57 2 42,008,023 87 54.555,741 99 12,547,718 12
1903 ........ .......................... 29,959,203 1.45.7 44,855.498 52 61,848,977 04 16.993,478 52
1904.............. ..... ............... 30,492.944 1.45.0 45.68),616 60 62,950,853 31 17,261,236 71
1905................. .................. 30,653,070 1.52.8 46.990,118 54 63,281.423 83 16,291.305 29
1906. 34,998,754 1.48.4 52,085,231 03 72,252,827 71 20,167,596 68
Totals....................... . ................ . ................. $ 536,331,877 is $675,769,959 13 $139,438,081 35
Tommage increased 174.66 per cent. Freight revenue increased 97.41 per cent.
Average revenue per ton decreased 28.12 per cent.
It is probably well to state that if any rebates were paid by the Texas
railroads in 1892, our understanding is that the amount of such rebates was
deducted before stating the sums aggregating $26,384,875.90 total freight rev-
enue of that year, and therefore that the basis used for comparison is the
amount received, eacclusive of rebates. -
From the above it follows that if the railroads had enjoyed the same revenue
per ton in 1906 as in 1892 they would have earned in freight $20,167,596.68
more in 1906 than they did earn. It is true that the Texas railroad companies
are earning more gross and more net than they did prior to the Commission,
but as appears from this table, that result follows from the large increase
in traffic, notwithstanding the decrease in rates. Most of the Texas railroads
were built when the country was sparsely settled and undeveloped, and they
did not expect to make a great deal of money the first few years. They did
expect, however, that when the country was settled and traffic increased they
would make more money. Will any fair man deny them this right?
REDUCTION OF PASSENGER FARES. - 79
CONCLUSION.
If this House will appoint a committee of three of its ablest members who
will sit as a court, giving the necessary time without having their attention
diverted by other absorbing subjects, hear the evidence under oath with the
right of cross-examination, we believe that we can demonstrate to such com-
mittee that all conditions considered, the railroads of Texas are being paid
by the people of Texas less for the services rendered than is paid by the people
of any other State to the railroads of such State, and further, that all condi-
tions considered, the people of Texas are getting cheaper transportation, freight
and passenger, than the people of any other civilized country. The fact that
the passenger rate may have been cut by the Legislatures of several other
States is, according to the Supreme Court of the United States in Smyth vs.
Ames, which we have quoted, and according to ordinary justice and common
logic, no reason why it should be done in Texas, when the conditions in Texas
as to density of traffic, cost of operation, net earnings applicable to the payment
of dividends on stock, etc., are so materially different from what they are
in such other States. Tet us remind you again that what we may gain by
the abolition of free passes will be absorbed over again by increase of taxation.
Some people, notably the drummers in their communication, are laboring under
the delusion that the Democratic party at Dallas called for a reduction in
the passenger rate. There is no such intimation in the platform—read it. The
issue was made in the campaign by two candidates for Governor, but the
platform committee ignored, on this subject, the platform of each of those
candidates, from which we think that it may be reasonably argued that the
Democratic party was opposed to, rather than in favor of the reduction of the
passenger rate.
Respectfully submitted,
H. M. GARWOOD,
H. G. ASKEW,
J. W. TERRY,
For Railway Companies.
EXPLANATION.
All the above matter preceding is what was furnished the Journal Clerk
for publication under order of the House, March 12, 1907 (see page 880, House
Journal, Regular Session Thirtieth Legislature), but the Journal Clerk has
deemed it proper, as this document is published for general information, to
append hereto the final reports of the committee on the bills before it, embodying
the subject matter under consideration, as they appear in the Journal:
REPORTS OF COMMITTEE ON COMMON CARRIERS.
CoMMITTEE ROOM, AUSTIN, TEXAS, February 21, 1907.
Hon. Thos. B. Love, Speaker of the House of Representatives.
SIR : Your Committee on Common Carriers, to whom was referred House
bill No. 64, have had the same under consideration, and beg leave to report
the same back to the House with the recommendation that it do not pass.
ROBERTSON of Bell, Chairman.
COMMITTEE ROOM, AUSTIN, TEXAs, February 21, 1907.
Hon. Thos. B. Love, Speaker of the House of Representatives.
SIR: Your Committee on Common Carriers, to whom was referred House
bill No. 271, have had the same under consideration, and beg leave to report
the same back to the House, with the recommendation that it do not pass.
ROBERTSON of Bell, Chairman.
(See House Journal, page 605.)
80 REDUCTION OF PASSENGER FAREs.
COMMITTEE ROOM, AUSTIN, TEXAS, February 21, 1907.
Hon. Thos. B. Love, Speaker of the House of Represchtatives.
SlR : Your Committee on Common Carriers, to whom was referred House
bill No. 272, have had the same under consideration, and beg leave to report
it back to the House with the recommendation that it do pass, with amendments,
and Mr. Henderson, a member of this committee, has given notice of a minority
report. Mr. Bartlett has been appointed to make a full report thereon.
RoBERTson of Bell, Chairman.
(See House Journal, page 726.)