7
FULL TEXT OF FINDING THAT AFFECTS 7ESTERN FREIGHT RATES
THE MORNING OREG0XIAX, MONDAY, MARCH 8, 1900.
property, an estimate wai made showing i
the quantities of earth and rock work of
various kinds Involved In the construction
of the system as It then existed. Sin
that date the embankments have been
widened, curvatures have been reduced, and
many improvements requiring the movement
of earth and rock have been made. The
engineer of the company started with this
estimate of 183 8. which he said had been
carefully made and was, in his opinion, re
liable, added to this a certain per cent
for Improvements, and thereby determined
the quantities of earth and rock work which
would be requirvd to regrade the present
road.
A statement t was furnished showing the
length and character of all tunnels, the
length and character of all bridges, the
number of culverts, etc. The amount and
weight of the rils both in branch lines
end in sidings were given, together with the
number of ties per mile.
To these items, worked out In elaborate
detail, were applied the contract prices
then prevailing for the various kinds of
work and the prices at which materials of
different kinds could then be bought in the
open market. "Without attempting to ex
amine those details or to restate the com
putations. It may be said that, speaking
always in round numbers, the cost of con
structing the roadway of the Northern Pa
clfio Hallway as at present existing was
estimated by its engineer at $250,000,000,
Which Included an item of $20,000,000 for
contingencies and of $23,000,000 for interest.
This was stated by- the witness to be the
cost of reproducing the property at the
time he gave his testimony. In March, 1907.
He further said that curtain Items upon the
system as they then existed, like buildings,
water tanks, etc., wore worth less than the
cost of new structures of the same kind,
and he subtracted an item of $6,000,000 on
Recount of depreciation, leaving the present
value of the roadway, upon the basis of
what It would cost to reproduce the same,
at $244,000,000.
He further stated that to purchase the
equipment of the company new at that time
would have cost $53,000,00 0, but that this
equipment, owing to depreciation, was only
fairly worth $4 5,000,000. This would give
$289,000,000 as the falr value of roadway
and equipment estimated upon th-a- basis
of reproducing it In March, 1907.
To this cost of construction was added
an item of $107,000,000 for right of way
end terminal grounds and still another Item
for coal properties of $50,000,000, making
a grand total of $446,000,000 as the fair
value of the property of the Northern Pa
cific Railway Company upon which it was
entitled to earn a suitable return.
This valuation Is by no means guess. The
detailed manner in which it was made has
already been given. The prices applied were
corroborated by sev-eral witnesses of knowl
edge and standing. The figures were sub
- mltted to the engineer" of the Railroad Com
mission of the State of Washington, who
was engaged in making a valuation of
the properties of these defendants In that
state and who had come to have an ac
curate acquaintance with the physical
characteristics of these railroads In "Wash
ington and a considerable knowledge of
their history. He declined to -express an
opinion with respect to the value of the
right of way or the coal properties. He
estimated at $220,000,000 the fair value of
whloh was embraced In the $2S9,O0O,000
given by the engineer of the defendant,
thus reducing the value of roadway and
equipment $09,000,000. This witness also
filed a detailed statement showing the re
ductions made by him.
"We have carefully examined the state
ments of the defendant and of Mr. Gillette,
but It would not be profitable to attempt
here any analysis or criticism of them. As
usual, the truth undoubtedly lies some
where between these rather wide limits.
The value of the right of way and ter
minal grounds was reached by the same
dftaljed process as the cost of construction.
The land - agent of the Northern Pacific
Company furnished a statement showing
the quantity of land taken in each stats
and 1n case of the larger terminals for
each city and gave the value.
He proceeded upon the assumption that
a new road was to be located whore this
road Is and the right of way purchased or
condemned.
In giving his estimate of the cost of con
demning this rht of way the land agent
separates his estimate into two divisions,
pt yling one "large terminals." and the sec
ond, "other right of way and station
grounds." The so-called large terminals
are 13 In number; the amount of land
used in these terminal grounds is 4ti38
acres, and the estimated value $75,000,000'.
The quantity of land used in other right of
way is 152,185 acres, the estimated value
being $31,869,587. Subtracting from the
large terminals those in which the esti
mated value Is less than $1,000,000 each,
we have left -eight cities In which the esti
mated cost of condemning the land used
by the Northern Pacific Company for ter
minal facilities 1 $73,000,000, as against
$3 4,000,0 00 for the balance of its right of
way.
The complain aats attempted, to show by
cross -examlnatiosi and by the introduction of
sdme witnesses that this estimate for cost
of right of way waa grossly excessive, but
there is nothing In this reoord upon which
the Commission can intelligently criticise that
estimate. It la doubtless somewhat high, but
It is by no means certain that upon the basis
upon which It wai estimated it is extrava
gantly high. The main item Is for terminal
facilities in a half dozen cities, and the value
In thejM cagfts were estimated by Independent
witnesses, many of whom appeared before
the Commission.
It seema altogether probable to tts that the
money value of this property, not Including
coal properties, based on the cost of repro
duction estimated In the manner above stated,
would, in the Spring of 1907, have equaled
' at least $325,000,000. The operated mileage
of this system, as reported in its statistical
. return to the Commission for the year end
ing June SO, 19o7, was 5S10 miles, and the
above valuation would therefore mean a total
Of about $5rt,000 per mile.
Thle estimate seemes to cover slightly more
miles than a re reported to the Commission,
but this would not materially change the re
sult. In estimating fhe present money value of
lta property the Korthem Pacific puts upon
Its coal lands a valuation of $ft0.000,000. These
properties are certainly of great Importance
to that company. Eastern coal Is used upon
Its lines east of the Missouri River, which
are about 2300 miles in extent; but for the
8600 miles west of the river practically the
entire supply comes from the Northern Pa
cific mines.
The location of these xnlnem was given, but
need not be stated here. It Is sufficient to
Bay that the location Is such as to make
them almoex indispensable to the operation of
the railroad. The title to these coal prop
erties Is not In the .Northern Pacific Com
pany directly, but la. the Northwestern Im
provement Company, a subsidiary corpora
tlon of which the Northern Paclflo Railway
Company owns the entire bond Issue and
practically all the etock. The Improvement
company mines this coal and sells It to the
railroad company at so much per ton, in
addition to doing a certain amount of com
mercial business. The cost of producing the
coal at the different mine and the price
paid by the Northern Pacific were both given,
showing a handsome margin of profit to the
improvement company.
The bonds of the improvement company are '
$7,000,000 In amount and pay 4 per cent
Interest; the stock was eald to be $2, 775,000.
It did not appear upon the hearing what divi
dends, if any, had been paid upon thia stock;
nor what the result of the financial opera
tions of the Improvement company had been,
but since the hearing and since the prepara
tion of this report the Improvement company
has paid a dividend of G29 per. cent and the
Northern Pacific Company, from the proceeds
y of this dividend, has dietrubuted to Its own
stockholders a dividend of $11.26 per share.
Cot of Original Construction Northern Pa
cific. The construction of the Northern Pacific
Kailway was begun in 1870, and the first re
ceivership occurred in 1S75. The present
auditor of the company testified that at the
end of that receivership the books of the
company showed cost of construction up to
that time to have been, in round numbers,
$05,000,000, and that the mileage then in op
eration was 660 miles. Considerable work
hrd been done in surveying and poaeibiy some
uncompleted construction may have been un
der way.
The second receivership began In 1S93 and
ended In the Summer of 3SDi. The same
witness testified that the books of the com
pany were better kept during this period
than during the first period. He had, how
ever, made no personal examination and had
no personal knowledge of the accounts end
could give no Idea of the meaning of ths
- figure. Ho sakl that tor him. the North
ern Pacific Railway Company began Septem
ber l, 1S96. The books showed that up to
that date $219,000,000 had been expended
upon ' roadbed and structures and $22,000,000
upon equipment, making a total of $241,000,
000. The mileage had Increased to 4500
mls, giving an average cost, therefore, of
about $53,575 per mils.
The testimony of this witness really
amounts to nothing more than a statement of
the figures which appear in the annual re
ports of the Northern Pacific Railway to
this Commission. We have no Information
as to the manner In which this construction
went on. nor as to the means of payment,
nor as1 to the amount of cash which this
book outlay represented. It is reasonably
certain that t:e road at that time" could not
have cost, upon any economical basis' of con
struction, anything like the amount shown
by the?e figures.
They Include the $65,000,000 which had been
expended in constructing the 550 miles of
road under the first administration of the
Northern Pacific Company. They include
the purchase of many branch Jin?. The
period over which these transactions ex
tended was one In which railway construction
represented almost universally, especially In
new sections of the country, extravagance and
Jobbery. The condition of the road then was
In no respect as good as today. The cost
of constructing the Great Northern, which
was completed !n 1F92. and which was prob
ably a better road then than the Northern
Paclflc In 1S0B, was stated by Its vice-president
to have been $27,000 per mile.
Upon the other hand, the money invested
In this enterprise up to September 1. 189d,
had not received. In all cas, regular re
turns, and possibly some of It had received
no returns. Rates of Interest upon the mort
gages were high, but that inter was not
In all caei paid. The auditor testified that
on the averaare only eVxty-four tone-hundred
ths of 1 per cent was paid In the way
of rifvldends upon the capital stock of the
Northern Pacific Company between the end
of the first receivership and September 1,
1S96.
Beginning with September 1, 1S96, we have
a more intelligent and reliable account of
thf financial operations of this company,
and one whlh may fairly be said to be sat
isfactory. Sine that dat the company has
expended something over $3,ooo.00O, making
a total expenditure of $m24,000,0K). Ths
milrape ha In the meantime Increased from
45O0 to 697 miles, as stated by the auditor;
WlO miles n given in the annu.il report to
this Commission. This makes the cost of
construction. Including equipment, something
over $50,000 per mile.
It will be seen from the above statement
that it Is utterly Impossible to know what
amount of money has been actually expended
in constructing the Northern Pacific proper
ties up to the present time. Previous to
September 1, ISfltt. the account which we
have Is entirely unreliable. It Is Impossible
to say either what cash was Invested or what
return has been paid upon the Investment.
Capital irat ion Northern Pacffl c.
The so-called "Northern Pacific System.
at the time of the last receivership con
sisted of eome 30 Independent properties op
erated under one management. The purpose
of the reorganization plan by which that
receivership was terminated was to trans
form this heterogeneous maes Into a homo
geneous whole, and the effect of It has been
to consolidate all these properties into one
compact system. Under this reorganization
scheme $13. 000,000 of 4 per cent bonds,
known as "prior Hen" bonds, were secured
by a first lien upon the entire property, and
$rAftOO.ooo of 3 per cent bonds, known as
"general Men" bonds, were secured by a sec
ond mortgage upon the fame property. Of
the.e two issues '$25,COO.ooo rf the prior lien
bonds and $4.0O.OOi of the general lien bonds
were reserved in the treasury of the com
pany for the future development of the prop
erty. The balance was either lesued In pay
ment of various niorteaR8 previously exist
ing against the properties, at prices named
in the plan of reorganization, or held by the
company as security for the payment of such
mort gapes when they fell due.
In 1000 a mortgage of $20.oo0,noo was
was placed upon the St. Paul & Duluth
division of the Northern Paclflc Company, to
ne usv, in payment for the St. Paul & Du
luth Railroad, which was purchased by the
Northern Paclflo at about this time. Of
these bonds $8,000,000 are outstanding. Cer
tain of the prior lien bonds have been retired.
so that the total bonded Indebtedness of the
Northern Pacific at the pre.?nt time is $1R7.
000,000 bearing an average rate of Interest
of something less than 4 per rent and carry
ing fixed charges of substantially $7,000,000.
As a part of this same reorganization nlnn.
$75,000,000 of preferred st ick and $R0,Ort0.00O
of common stock were issued. By the terms
of the Issue the preferred stock might, at
rertaln Intervals during the next 20 years,
be retired at par. This privilege was sub
sequently taken advantage - of. and for the
purpose of secu rln g fund s with which to
make the payment a corresponding amount
of common stock was Issued. The only sto;k
of the company today is, therefore, common
stock and the total l;sue Is $155,000,000.
It appears from the record that the old
Northern Paclflc Company had both a pre
ferred stock and a common stock and coun
sel for that company states in his brief that
the amount of the preferred was $51,000,000
and of the common $49,000,000. Of the new
stocks. $2,500,000 of preferred and the same
amount of common were reserved as a
treasury stock and for reorganization pur
poses. Of the balance, a certain amount
of preferred seems to have been used In the
satisfaction of mortgage Hens. The balance
was exchangable upon the following terms:
V'pon payment of $10 a share of preferred
stock was Issued to stockholders having
$50 of old preferred stock and $50 of old
common stock, and a share of new com
mon stock was lamed In exchange for a
share of old common stock upon payment
of $15 In cash. The new preferred stock
seems to have been practically all taken up
under the plan of reorganization, but a large
number of shares of common stock was not
subscribed for by the holders of the old
common stock and this was subsequently
sold to Mr. James J. HtlL and. his asso
ciates, for $15 per share.
The capitalization of the Northern Pa
clflc Railway at the present time, therefore.
Is about $342,000,000, or substantially $57,
800 per mile of line. It was said that the
capitalization of the old companies embraced
In the present system was approximately
$380,000,000.
The statistical report of the Northern
Pacific for the year ended June 80, 1007,
shows that this company has voted an
additional Issue of $95,000,000 of common
stock, none of which was at the time of
the filing of that report outstanding. There
is nothing In this case to show the necessity
for or purpose of this stock Issue.
The Northern Pacific and the Great
Northern companies own Jointly the Burl
ington system and have each Issued their
obligations in the sum of $107,000,000 In
payment for that property. We have treat
ed the property as worth the Indebtedness
and have made no account of this $107,000,
000 of obligations upon the part of ths
Northern Pacific Company.
Earnings Northern Paclflo.
The preferred stock Issued In aooord
ance with the clan of reorganization was
entitled to a dividend of 4 per cent before
anything was paid upon the cottnmon
stock, and this dividend was regu
larly paid down to the time when
that stock was retired by the Issue of an
equal amount of common stock. - No divi
dends were paid on the common stock until
1SU9. when a dividend of 2 per cent was
declared. In 1900 this was increased to 8
per cent. In 1001 to 4 per cent, in 1905 to
6 per cent. In 1903 the conversion of pre
ferred into common stock occurred and the
dividend of that year was equivalent to
about 64 per cent upon the entire stock
issue. Beginning with 1904, 7 per cent
dividends have been regularly declared.
The first full year in which this propf
erty was operated under the new manage
ment after the receivership was that ended
June 80. 1898. Beginning with that year the
cotmpany has. In addition to the payment
of its fixed charges. Interest and dividends,
as above stated., shown each year the fol
lowing amounts Invested in permanent im
provements and remaining as surplus. By
"surplus" Is meant what Is left after all
expenses have been deducted and the ap
propriation for 'permanent Improvements
made:
Permanent
Year. Surplus. Improvements.
181S $ 2.8U7.874.0O $ 811.709.35
1SW9 1,033,2S2.5 2.175,61.ltO
1U00 1.0S3, 818.76 3.000,000.00
J -KM 1.002,618.54 2.011.285.00
1!W2 1,547,286. IS 3.04)0,000.00
10O3 1.64.1.130.81 3.000,000.00
1VK4 1.37!,:J21.9S 3.0OO.OOO.OO
1VM5 3.01fl.31.St5 3,000.000.00
1106 5,542, 51D.m 3,000,000.00
1007 32.C.:.92D.43
Totals S31.77G.714.41 f 22,099,613-61
In the year 190 this company. In addition
to the permanent Improvements and sur
MEMBERS INTERSTATE COMMERCE COMMISSION, WHICH DECIDED SPOKANE
RATE CASE
MARTIN" A. KNAPP.
plus above stated, charged off an Item of
$?,031,0S0. 16 as depreciation of equipment.
The roadbed and structures of the Northern
Pacific have undoubtedly been fully .main
tained out of operating expenses; indeed,
the complainants insist that very exten
sive betterments to th property have been
charged against the coat of operation. It Is
probable that the equipment of the company
has also been maintained as part of the
operating expense", but It might easily
happen that hls would not be tr-ue, and we
have, therefore, made no account whatever
of this Item In stating the net renults of
the financial operations of that company.
Cost of Reproduction -Oreat Northern.
The Great Northern Railway gave evidence
tending to show the cost of reproducing its
properties estimated upon the same brifds
as already explained In case of the North
ern Pacific. 1 ii some resper-t this tetim-my
with respect to the Great Northern Is more
satisfactory than that furnished by the
Northern Pariflc The engineer of this
company testified that there were In the
offices of the company detailed surveys
showing the quantities of earth and rock
In case of K2 per cent of the entire system.'
and that it was possible to make a very
close estimate with respect to the remain
ing 18 per cent. It also has a detailed ac
count of Its tunnels. bridges, culverls,
weight of rail, number of lies, amount of
ballast, etc. To these quantities It applied
the market prices prevailing in the Spring
of 1907, thus working out In detail the cost
of reproduction. This aggregates in all
$-115,000,000. Including $41,000,000 for equip
ment and $87.0K),0OO for right-of-way.
The expense of right of way is estimated
by this company in the same manner - aa
by the Northern Pacific The value outside
of terminaJs is $27,000,000, that of termin
als, $00,000,000. The terminals named em
brace 1 7 cities. Seven of these are esti
mated at less than $1,000,000 each and dis
regarding these, we have an estimated value
of $55,000,000 for terminals at 10 points
The total above given includes $15,000,000
for contingencies. $:-t.5O0.O00 for general and
lefcal expenses, $:t7.5OO.0O0 for Interest. The
prices charged are in many instances some
what too high and the method of computa
tion not strictly accurate. On the whole,
however, we are Impressed that this esti
mate has been prepared in good faith and
with treat ar.
It was submitted to Mr. Gillette, of the
Washington Railroad Commission, already
referred to. for his criticism and revision.
Tn his opinion the estimate as given should
have been reduced some $S0.000.OOO In all.
leaving a total of $335,000,000. Here, as In
case of the Northern Pacific, it Is probable
that the truth lies between the extreme of
his estimate and that offered by the defend
ant. For our present purpose this estimate of
the Great Northern Is rendered largeiy use
less by reason of the fact that the intleasre
covered by the est Imate seems to be ran i
cally different from that covered by he
reports of that company to this Commission,
upon which our information as to its finan
cial operations are based. The statement of
th engineer covers 6523 mils of main
track, while the report of the Great North
ern to the Commission only covers 5135.
The cost of reproduction per mile of main
track, as stated by the engineer rf that
company would be $02,500. This is probably
in the vicinity of $10,000 per mile too high.
Assuming that the cost of reproducing the
whole 0523 miles was $52,500 per rntle. as
we have lndlrated, the cost of reproducing
the 5335 miles, covered by the report of the
Great Northern to us. would be not far
from $70,000,000.
These estimates of the cost Vf repro
duction In case of both the Northern Pacific
and the Great Northern were made in the
Spring of 1907, and It was said in the tes
timony that the cost of reproduction, not
Including the right of way. at that time
would have been from 12 to 15 per cent
higher than three or four years before. The
cost of const ruclng these properties when
these estimates were made would probably
exceed by C'i per cent the cost of con
structing them when the Pacific extension
of the Great Northern waa built.
Tills investigation conclusively shows that
if any Importance whatever Is to be attached
to the cot of reproduction in the establish
ment of railway rates, the valuation must
be undertaken by the Government Itself. No
Individual has the means and no individual if
he had the means could afford the expense of
procuring - even a rough estimate, accurate
within" reasonable limit, of the cost of re
building either.of th?se defendant properties.
In the present case we are impressed that the
engineers of the defendants have proceeded In
good faith, and the complainant were for
tunate in being able to submit their esti
mates to the rrltlclsin of a witness un
usually well qualified to pass an opinion upon
their accuracy; but even so we have little
confidence In the reliability of the conclusion
resched. There can be no satisfactory
knowledge upon this point until public au
thority makes a detailed valuation upon m
uniform basis.
The Great Northern Company owns either
all or practically all of the capital stock of
certain railroad companies which are op
erated not by the Great Northern Company
as such, but by the subsidiary company it
self. The statements of the Great Northern
showing cost of reproduction evidently In
clude this mileage, upon the theory that a
railroad whose stock was entirely owned by
the Great Northern Company was In fact
part of that railway system.
Cost of Original Construction Great North
ern. There Is no evidence In this record from
which any satisfactory conclusion can be
reached as to the actual amount of cash ex
pended In the construction and development
of the Great Northern Railway system. As
Is well understood, the basis of that system
Is lta leasehold Interest In the 6t. Paul. Min
neapolis & Manitoba Railway, of which It
took possession In 1890. The Manitoba Com
pany Itself was organized In 1879 and began
operations In 1SSO by acquiring certain other
railroads which were in the hands of re
ceivers. The first acquisition by the Mani
toba Company represented 665 miles of com
pleted road and a land grant of 2.000.000
acres, and the price paid was about $7,000.
000. It Is impossible to follow accurately
the development of the Manitoba system
from 1880 to 1890.
One of the first acts of that company was
to issue to its stockholders $16,0u0,000 of
stock, for which no money .was ever paid.
Subsequently . $5,000,000 of stock wax dis
tributed among stockholders at par, and this
made up the capital stock of the Manitoba
Company when It leased Its property to the
Great Northern.
Very early In Its history It Issued $10,000.
000 in bonds, which were apportioned among
Its stockholders at 10 per cent of the face
value. These bonds were perfectly good and
were saleable upon the market at par.
The first dividend paid upon the capital
stock of the Manitoba Company was in
August, 1882, and was prr cent. From
that time on dividends continued to be paid
at the rate of 6 per cent or more down to
the date of the lease. The Great Northern
by the terms of this lease guaranteed the in
terest upon the bonds of the Manitoba Com
pany which were then outstanding or which
might be Issued In the further construction
of that road and also guaranteed & dividend
upon Its stock. This $2o,O00,O00 of Mani
toba stock was subsequently retired In ex
change for $25,000,000 of Great Northers,
stock.
The last annual report of the St. Paul,
Minneapolis A Manitoba Railway to thjs
Commission before Its property was taken
over by the Great Northern wm for the year
V ' I XL
- - x '-
JAMX8 S. HARLAN.
ended June SO, 1889. According to that-, re
port the company then owned 2,718.89 miles
of railway and operated under contract cer
tain additional lines which brought the total
up to 303O.16. Its outstanding capital srock
was $20,000,000 and its outstanding bom's
were $50,y85.OOO, making a total capitaliza
tion. In round numbers, of $?9.4tt er mile.
It reported the total cost of Its road and
equipment at $78.52.595.70, or approximately
$28.00 per mile.
It will be remembered that of the $20,000,
OOO of stock $15,000,100 had been a gratuity
and that of the $00,000,000 of bonds $10.
OoO.OOCO had been issued to the stockholders
at 10 cents on the dollar.
This company also owned, according to
this report, certain stocks and bonds In other
railway companies which were really a part
of its system, amounting to about $20,000,000
par va lue, and the purpose of the organiza
tion of the Great Northern seems to have
been to capitalize a part or the whole of
these securities. The first issue of capital
stock by the Great Northern Company was
for $20.000.000,. for which stockholders paid
only 60 cents on the dollar.
Htlll later the Great Northern issued $25,
000,000 of its capital stock in exchange for
the $20,000,000 of Manitoba. stock, upon
which, by the terms of its lease. It had
guaranteed a tl per cent dividend. No money
was ever paid for either of these Issues.
Tne balance of the stock Issued from time to
time by the Great Northern Company seems
to have been paid for at par. The stock of
that company was, during the period covered
by these Issues, very much above par upon
the market, being at the time of one Issue
$J64 per share. This new stock was In all
cases Issued proprotlonately to holders of
Great Northern slock at par.
"What was done with this money so realized
from the sale of the balance of Its stock
does not very clearly appear. The Mani
toba road provided for the extension of its
line to the Coast, a distance of something
over SX miles, by Issuing a mortgage for
$Ro,000,000. In the aeveiopment of Its sys
tem the Great Northern Company has some
times built railroan, becoming it-self the
owner of their capital stork; It has some
times built rallroaas by advancing the money
and afterwards capitalizing the Interest of Its
stockholders In that property. After spend
ing days In examining the annual report to
this Commission, the annual reports to tts
stockholders, current accounts in financial
Journals, It Is still Impossible to state with
any degree of accuracy what money has gone
into the properties of the Great Northern
system either the M35 miles which It now
operates or the 6523 miles which It control
and which are really a part of Its entire
property. It would be difficult to devise
a m heme better intended to confuse and to
conceal than that employed In the develop
ment and operation of the Great Northern
Railway e yet em.
Capitalization Great Northern.
The
"he outstanding capital stock of the Great
rthern Company, accordtng-to Its last re-
t to this Commission. 1 $149,577,300 at
Nori
port
par.
Th Great Northern Company Itself
has no bond'
-,1 lndbtednew, It 1. Impossible
ictly the funded Ind-Merines, or
to state exact
the capitalization
. h . 1 J. Z
the propertln, whlrh
of
enter into either the mileage operated by the
.ret jsormern or the total mlleaite In which
It le Interested. The Km Mem Railway of
Minnesota embraces r0 miles, with a, capital
stook or ,16.000,000 and a bond Issue of
.70O.00O. The Great Northern Kiiaranteea
B per rent on the stork and the interest on
the bonds. The St. Paul. Minnpolls A
Manitoba lease, to the Great Northern 8S7B
mile-. It reports am outstanding bond 1
siie of Of n.V. lncludlna- $12,000,000 of
Improvement bonds leaued to the Great North
ern Itself and a stock lsmie of J-.V. 000.01.
whir, as we have already seen, has been re-
tiren ny an Issue of Great Northern stock.
The remaining mileage operated h, the Greai
Northern tiled no rertsWlth thl. Comm-
slon and we have no Infnrm.tin. .A i -
capital arcnunla
Kara I nice Great Northern.
The Great Northern Railway Company la
an operating and holding company exclusive
ly, owning- no railway It-elf. Ai previously
atated. it owns , a ho'.f Interest In the Bur
lington svatem. whlrh It carries In Its ac
counts at 107.oro.ooo. and again which It
assume- a liability of a Ilk. amount. This
aseet ham been treated as offsettln the 11a
omty. It appears from the last annual report
or that company to thla Commission that
the Great Northern had In Its treasury
stocks which it valued at $7. 000. 000 and
bonds which It valued at S;-.000.000. making
In all MOO. 000. 000. Those stocks and bonds
are all Inter. -t-paylnr securities and are
or two classes.
It has been already stated that the Groat
Northern Company Issued Its own stork In
the amount or t25.000.O00 par tn exchange
for the Manitoba stock amounting to $10.
000.000 at par. This Manitoba stock is now
carried as a treasury asset by the Great
Northern Company, and In its income ac
count, as stated to this Commission, it Is
charred with dividends on this stock and
credited with the same dividends as rental
paid for the Manitoba property. This, of
course, produces no effect upon the net re
sult, but does swell the amount of Income
which the Great Northern derives from
other sources than operation.
That company also owns the stocks of
certain railroad companies which operate
their own properties and par a dividend
to the Great Northern Company. Por ex
ample. It has $5,500,000 of the capital stock
of th Wllraar Sioux Falls Railway Com
pany, npon which that company pays a
dividend of 7 per cent. This, of course.
Is distinct from operation, and It should be
remembered, therefore, that the financial
report of the Great Northern Company, as
shown by Its returns to tlve Interstate Com
merce Commission, does not merely repre
sent the results from the operation of the
5335 miles which It operates, but Includes
as well tlve Income which It derives from
Its ownership of some 1200 other miles of
railway which are a part of lta system, but
which are controlled throush stock owner
ship and not by lease. These companies
are accumulating; a aurplus on their own
account, and hence the financial statement
of the Great Northern does not fairly rep
resent either the operating results from
Its entire system or from the mileage which
it operates itself. With this explanation
we give below for the various years since
1890 the surplus, the permanent Improve
ments, and the dividends paid by the Great
Northern Railway Company.
By "surplus" Is meant what remains after
payment of dividends, fixed charges taxes
and all other expenses, and the deduction
of "permanent Improvements."
Permanent Dlvl-
Improve- d'nds.
Year.
1S91 ..
1892 .
1893 ..
1J-S4 ..
1895 ..
18S6 .,
197 ..
1898 .
1899 .
19110 .
1901 .
1903 .
1903 .
1904 .
1905 .
ISO .
Surplus.
.$ 988.621
943.473
. 1.182.830
Illicit
169.508
. 1.042.647
. 1.207.267
. 2.071.7GS
. 1.787.191
. 2.21,7.761
I 2.VlV.990
4.133.979
. 3.432.181
. 5.137.376
meats. P. C.
- W
t
6
C
7
2.250.000
1.800.000
1.S00.O0O
1.689.0K4
2.000.000
$.000,000
2.023.843
3.000.000
.U0.1
4
t .?
f ,!
V i
JCTSOX C. CLEMENTS.
1907 . 2. 155. 70S
Total $33.791.L68
Deficit In 1S94 104.153
4.S4.7 7
$:7.62S.73
$3S.6S7,115 .
The complaints make certain claims with
respect to the matters hereinbefore stated
touching the value and earnings of these
properties and as to the conclusions to be
drawn from those facts, which may be con
sidered here.
Northern Pacific Coal Iands.
They Insist that the coal lands of the
Northern Pa rifle should not be Included In
the valiu of that property upon which
the company Is entitled to earn a return.
This position Is well taken. Those lands
are certainly of the very first Importance
to that railroad and It might have been
both a wise and a proper thing to msrko
this provision for the future. In that case
the public could not well find fault If It
were compelled to pay Interest upon what
ever outlay was reasonably necessary; but
if the public Is roqulred to pay upon the
value of these lands it should also have ths
benefit which accrues from their ownership.
As it Is, the title to these properties la
vested in an Independent company. That
company conducts the mining operations and
sells coal both to private consumers and
to the railway, and It makes from Its rail
way fuel, according to the statement fur
nished us. a handsome profit. The railway
pays as a part of Its operating expenses
fur its coal at this price, so that the pub
lic once pays a return upon these properties
when the railroad buys Its fuel coal at
the figure now charged. To permit the
valuo of these properties to be used for
the purpose of swelling the amount upon
which an Income may be demanded by the
Northern Pacific Railway Company would be
to compel the public to pay twice upon
this part of the Investment.
Great Northern Ore Certificates,
The annual report of the Great Northern
Railway Company for the year 1900 contains
an Item under deductions for the y?ar of
$1,851,364, and the report states that this
amount has been chargvnl off by reason of
the transfer of certain securities of the
company to the Iake Superior Company,
Limited. It seems that such a company
was organized and did take title to various
properties and securities formerly owned
by the Great Northern Company. In this
manner the Lake Superior Company ob
tained title to certain lands In the state
of Minnesota containing extensive deposits
of Iron ore. These lands have since been
transferred to trustees and a contract for
the taking out of the ore has been entered
Into with the United States Steel Corpora
tion. A certificate waa tssuoa to each holder
cf t
the
share of Great Northern stock entitling
holder of such certificate to a pro
portionate share in the Income received
," " Th. or certYnc. t
1 orV J0"" Th V .
by these trustees from the operation of the
I worth on the market at one time B0 each;
..... . ,.rir... ,,
today. February , 1903. the markvt price
la about $71. and they have a prospective
value very much itreater If the quantity of
ore Is anything as larite as the estimate and
the leases aos fullllled according to their
terms.
When It la remembered that none of the
Great Northern stock, waa Issued for more
than par. It will be seen that the holder
of a share of this stock could by the sale
of his ore certificate have realised nearly
enough to reimburse him for the original
cost of his stock. A considerable part of
the Great Northern stock was Issued as a
! r " "a"1 "Presonted no cash
danoa. These ore cert.ncate. at ISO each
VOUIQ con.iuci.uij iui. ....... . . ..
stockholders all the money ever actually ad
vanced to the Great Northern Company li
payment for stock. The complaints In
sist that In determining what returns these
stockholders may demand from the public
the fact that this stock represents prac
tically no. Investment of cash must be kept
In mind by this Commission.
Without atiompilns to determine what
the rights of the public may have orig
inally been In th-ese ore lanus a question
which could not be IntelllKently determined
upon this record It Is difficult to see how.
at the present time, any practical applica
tion can be made of the ld-a of the com
plaints. These certificate are transferable
and they are In no way connected with
the sto k on account of which they w ere
originally issued. The stockholder having
received his certificate might sell his stock
and retain the certificate or sell the cer
tificate and retain bis stock. It Is alto
gether probable that the ownership of
stock and certificate In many cases has
ceased to be the same. How. then, could
we aay that the holder of Great Northern
stock who has purchased hla stock In open
market, who does not today own and never
haa owned an ore cerUllcale. can b- account
able for the value of those oro lands T Cer
tainly thla was s mot momentous transac
tion to th holders of this $li.o.ooo.uuu of
Great Northern stock, for on the basis of
past market prlcea It represented to them
from $75,000,000 to $1 J4.000.e0tl In money,
but apparently this Commission. In the de
cision of the Questions before It. can make
no account of that transaction.
Distribution of Creavt Northern Stock at Pax.
Of thla same character la the contention
of the complainant with repect to the
manner In which the stock of the Great
Northern Company has been Usued.
It has been already said that since about
1903 the stock of this company has sold
upon the market at above par It haa also
appeared that all the slock. Issues of the
cunn-any after the nrst. wlln the exception
of that Issue made to retire the Manitoba
stock were distributed pro rata among the
holders of the stock of the company at par.
The actual market value of tue stock at
the time of these various Issues so distrib
uted ranged from lo to -' per share.
A stockholder couid therefore have paid
$100 for nla share of stock and at once
sold the same upon the market for a much
higher price, thus realising rrom the trans
action irora 40 to 14 per share. The
complainant Insists that this manner of
selling slock Is vicious and unlawful, and
that In determining the return to these
stockholders we must have In mind the
benefit conferred upon those stockholders
by this operation.
Assuming, without deciding, that the com
plainant Is right In Its position that this
practice is both unlawful and unwise, how
can we. In this proceeding, take any prac
tical note of what has been done? This
stock Is selling today. January. 1U0S. upon
the market al something less than $120 per
share. If the original stockholder haa re
tained and now owns hla stock he paid
$100 In the beginning, haa received a regu
lar dividend, and now owns his stock at
the above advance. While the profit to him
has been a handsome one. there Is certainly
nothing here which would call for a penal
izing of the stockholder. Suppose, now.
that Instead of retaining the stock, the
stockholder sold the same to some Innocent
purchsser who paid the market price and
who has continued to own the atock from
then until now. Thla present stockholder
paid perhaps $264 a share for his stock.
He haa loal $ 144 per share. 6houd ire, for
k 1 .
that reason, compel him to sustatn a fur
ther loss?
The manner In which this stork has been
manipulated may furnish a strong argu
ment against the propriety of permitting
the sale of new stock In this manner, but
so far as this particular company and the
stock already issued are concerned the
transaction Is ended and can be given no
practical conslderat Ion In determining what
rates snail be charged br the Great North
ern Railway company.
AY ate red Stock -Great . Northern.
Of the f l.WOOn.ooo of the capital stock of
the Great Northern Railway Company out
standing. $"0.Ooo.vO0 hnn been t.vtued with
out the payment to that company of any
money con'.df rat!ou. The complainant in
sists that we should deduct f r.m the out
standing capital Jtork of the !reat North
ern Kailway Company this $30,000,000 and
allow that company to earn dividends not
upon $l5i.ooii.ooO. Its artual tuue. but upon
$120,000,000, the amount for which cash was
received.
This cia'.m Is undoubtedly mmewhat dif
ferent fr-jm the two preceding. A stock
holder by the purchase of a share of stork
becomes a part of the corporation and must
of necessity stand like every other stock
holder w hose stock Is of the same grade.
If the stock of, the corporation has be-n In
flate!, his stock, even thouch he pns par
for it. become telnted with that Inflation.
As a practical matter, this mut be so. Iut
!n- !
we very much doubt whether In determ
Ing what rate of dividend the stock of a
railway company may earn we can properly
deduct In every Inntanre watered piock. It
in im possible to distinguish the spurious
from the genuine. Those who received their
stock without consideration have uiu.illv
parted with It. and that very stock, if It j by the Government Itself or by a private cor
could be Identified. Is owned by Its present t pom lion under franchise from the . Govern -
possessor for a valuable consideration. The
w-hole Mock ha- gone upon the market, haa
wmfil a market value, has bc-ome the
subject of Investment by Innocent stock
holders. W- mav undoubtedly and we
should have In mind the manner In which
this stock was issued and the con-ideratl-'n
wl.loh was paid f-r It. but we do not think
that we should, for example, treat the out
standing tapital stock of the Great North
ern Railway as 120.Ooo.oOrt and not $l.v.
000. 0oo. These transaction ought to have
been prevented to beqln with. Great eums
might have been properly saved the puhlic
by suitable supervision at the outset, but
the evil has been done and for the most
tart onnnot be safely undone. If this Gov-
t ernment In the past has permitted the
"capitalization" of earnings and securities
and the "conferring of benefits" It oucht r.ot
fod.iy to penallxe the Innocent holder of
tne values thus created.
Price Paid for Northern Paclflc Stock.
The same observation applies to the claim
of the complainants that we ought to es
tablish the earmnea to which the Northern
Pacific slock Is entitled in reference not to
the present value, but to the original cost
of thla stock. It will be remembered that
of the $1 j.VnOO.OOO common stoek of that
company, now outstanding $7S.0vn.noo was
originally a preferred stock and $SO.OOO.OOO
a common stock; that the preferred stock
waa Issued upon the payment of $10 per
hare In exchange for one-half share of old
preferred and one-half share of old com
mon, and that the $So.ooo.ooo of common
stock was issued In exchange for common
stock share for share, upon the payment of
$15 in ensh. It is urged that this old com
mon stock was utterly worthless and the
preferred atock of very little value, so ths
thla stock was really sold for $10 and $!."
per share. Jt Is still further pointed out
that a very large quantity of the common
stock was never taken under the tlan of
reorganization and was sold for $13 per
share.
Vndoubtedly thla fact must be kept In
mlnvi by the commission in determining
what earnings the Northern Pacific stock
may fairly tlemaml. but If thnt stock, esti
mated upon whatever may be the proper
basis, whether by the money whleh had
gone Into the property or the cost of repro
ducing the property or the earning capacity
of the property upon the basis of a reason
able rate. was actually worth $luo per
share, the mere fact that It sold at that
time for murti less Is no reason why we
should limit Its earnings today.
Counsel for the complainants suggests
certain other questions which are not equal
ly free from difficulty. The foregoing state
ment f facts shows that the Great North
era Railway since IS00 has paid a dividend
upon its outstanding stock, which was for
the first year 314 per cent: for tho years
"-i'. us:'. INO. 1S!1. 1S!7. 3 per
cent: for the year lsci'J. ft per cent:
6i tjer cent, and for the remaining time 7
per cent. tne first Issue of Great Northern
stock waa at .V centa on the dollar, and.
as we have Just seen, the total Issue em-
nntvea .i..,u""."'mi at par, for whleh no
money was actually paid. The dividends
paid by the Great Northern have yielded
Its stockholders an ample return upon the
Investment. In addition to this, that com
pany since It began operations haa shown a
surplus. Including its Investment out of
earnings in p-rmanent Improvements. of
some j.o.oih.mhm. The Manitoba Company.
In addition to the raymcnt of ri1vilenls
upon Its i-work. of which three-fourths was
an absolute gratuity, accumulated during
the ten veers of Its existence a eiirnlus of
some $10,000,000. It does not nppenr what
surplus may have been accumulated bv the
other companies which the Great Northern
controls.
Now. the complainants Insist that thla
$70,000,000 has been obtained bv tho Impo
sition of unjust and unreasonable rates;
that It belongs not to the Great Northern
Company, but to the public which haa paid
thfso rates, and that upon whatever basis
we fix the return to which this company Is
entitled, we must Brut deduct this $70.
00O.000. A somewhat similar Question Is raised
touching the estimated value of th. rirhi
of way. which Is embraced In the cost of
the reproduction of these properties It
will be remembered thst the total value of
the structures and equipment of the North
ern Pacific Cnmpnr.y was stated by us to
be not far from $2.V. 000. Vm. This repre
sents the total cost at present prices of re
producing that entire property Now it
was estimated that the land upon which
this structure stands was worth $107 000
000. almost one-third of "the entire value
of the property Itself upon the basis of re
prod uctlon.
Mu--h of this right of wav was given to
the Northern Pacific originally bv the Gov
ernment and by Individuals. a considera
ble part of It has indeed t een since acquired
t large expense. ,,,t still the total cost to
that company of this rlpht of may has been
but a fraetlon of the amount at ehleh It is
carried into t run cost of reproduction The
complainants Insist that the defendant
Northern Pacific I'tm.ninv canr.ot charge
the public with this enormous sum for
which It haa never paid.
These two questions are not by any means
tho same, but t':e ergument by wh!ch they
are sustained on the part of the complain
ants Is substantially Identical and mar be
briefly stated.
In 1S72 a considerable part of the business
portion of the City of Ru.-ton was destroyed
by fire. The legislature of the State of
Massachusetts, then In session, authorized
ISoston to Issue It bonds for the purpm of
loaning money to Individuals with which to
rebuild this burnt district. Suit having
been brought by a taxpayer to restrain the
city from this action on the ground that
the statute authorizing It was unconstitu
tional, the Maasachusetta 'court enjoined the
bond lssi:e.
lta decision wm placed noon The ground
that no public tax could be levied for the
benefit of a private enterprise. No matter
how great the Indlre-t benefit to the entire
City of ItnMon might be from the rebuilding
of these burnt st'.rrs promptly, the loan In
the firs-. Instance waa to a private Individual;
the publlienrnt.-ws only an Incident.
Hence, thj . an obligation which
might finally neceesitate the Impcstng of a
public tax waa unconstitutional and void.
Lowell va. Boston. Ill Mast. 4.M.
Somewhat before the great Boston fire the
legislature of the State of Wlseonsta au
thorized the County of Fond du T-c to make
a money contribution la aid sf the construc
tion of a certain railroad In that county, and
the county. In pursuance of this act of the
Legislature and in observance of lta require
ments. Issued certain notes to the railroad
company. These note were not raid at ma
turity anil suit waa brought agslnst the
county by a bona fide purchsser Into whoesi
handa they had previously come.
i The Supreme Court of the State of Wis
consin held that the act of the Legls!ature
authorising this expenditure of money by the
county was unconstitutional for the reason
that It involved the levying of a public tax
for the benefit of a private enterprise. It
was said by the court that this railroad,
while .eomellm-a spoken of as puhllc. was
eseentlally a private undertaking; the funds
with which It wss constructed were private;
its operation and control were private; its
profile belonged to private individuals. Hence,
the County of Fond du Lao could not by a
general tax subsidize thle) private venture.
This holding of the State Court was re
versed by the Supreme Court of the United
States. It waa conceded in ' the opinion of
that court that no public tax cou!d be laid
for a private enterprise, but It waa e!d In
the most emphatic terma thnt the ccfurtrue-I-mi
of a railroad was not a private work.
The service which it performed was public;
Its rates and lta operation were subject to
KPuMla control. The (act that the agency
designated by the Legislature for the per
formance of this public function happened
to be a private corporation was of so sig
nificance; the purpose and not the means
selected for the perrormance f that purpose
must control. Since the purpre waa public.
the Legis.ature might authorize the count v
to levy a public tax In furtherance of th:
enterprise. The court used the following lan
guage:
"Whether the use of a railroad la a pubf
or a private one depends In no measure
the question who constructed It or who owl
It. It has never been considered a matter J
any lmtniriance that the road was built ,
the agency of a private corporation. No
ter who la the agent, the function perfoa
Is that of the state. Though the ownrj
Is private, the uce Is public So turrJ
bridges, ferries and canals, although
by Individuals under public grants
companies, are regarded as pub:tei Jurl
riant to exact tolls or charge frelj
granted for a service to the public.
are compellable to permit the public to use
their works In the manner In which such
works can be ued. That al! persons may
not put their own cars upon th road and
us their own motive power, has no bearing
upon the question whether the road ts a pub
lic highway. It bears only upon the mode
of use. of which the LegisUiture ts the ex
clusive Ju.:ge." Oicott vs. the Supervisors,
1G " a:.:Jl
The levying of to by a railway for its
transportation service Is In essence the Im
poking of a tax upon the public which re
quire that service. This has always been
held of tolls, ImpojwHi for the use of a
turnpike. whether rrovuied miint&lni
rr.ent. Hussey v.. St.irey. 4 B. & Ad.. OS. and
there can be r.o dlnvrence in principle be
tween the to'!- rxsc'.ed f ir the rlgit of pass
age over a highway and the charge for the
transportation or rre:Rht or passengers upon
the railway. Railroad Commiss:oners vs.
Portlsnd at Oxford R. K. Co.. 83 Me.. 27:.;
Wahae-h r.y. Co. va Illinois, lis U. S.. Asti.
From these, cases and from many others
cited In the brief of the complainants. t-
which no reference Is here ., made, the 'fol
lowing general principles are sought to be
dedm-ed :
The providing of the highways) of a na
tion Is an art of sovereignty essential to the
exu-tcn.-e of the nation. These highways
may be provided directly by. the Government
Itself or by private Individuals under swn.-
tlon or the Government. If the duty le dele
gated to a private Individual, that Individual.
whether person or corporation. Is tho agent
of tho Government and acta subject to the
a ell-know n laws of agrncy. If being au
thorized to impose f.r Its service a reaaon
ablo charge, it In fact Imposes one that ts
exceealve. it Is answerable to the Govern
ment. If having lmio-cd excessive tolle.. It
still haa In Its ptiseorjslon the surplus over
and shove what would have resulted from a
fair charge, that surplus belongs to the peo
ple and is held hy the private corporation for
the benefit of the people.
Value of Northern Pacific Right ef Way.
The practical Importance of thla queetlon
will be readily apprehended. The Northern
Pacific Railway extends through a compara
tively thinly settled portion of this country.
Ir. comparison with other sections land valuea
along lta line are small, lta lines penetrate
no city which can fairly be called a great
city. Nevertheless, the cost of Its right of
way equals almost cne-thlrd of the entire
cost of reproducing that property.
The original rnrt of thla right of way to
tho Northern Pa. -trie Company waa Insignifi
cant aa compared with the present valuation
placed upon it. What of It wan taken at
the time of the original construction cost
practically nothing. Much of It was given
hy tho Government for the purpose of a right
of way. which, it should be noted, la en
tirely distinct from the land grant of tho
company. Tre terminals In Spokane are
malniy located upon the right of way or the
railway. They cost the railway nothing
whatever and they are extended in thla state
ment at $7,000,000.
A considerable portion of Its terminal prop
erty In Seattle has hern purchased within ths
Inst reven or eight years, but the prices paid
r-.r thin were nothing like the values now
placed uion it. It was said by one witness
tor the defendants that the terminals of the
Northern Pacific and Great Northern tn Seat
tle had appreciated within the last f-w yeara
l.o per cent and that portions of their ter
minal lands had increased within thai time
from 000 to r.o per cent.
Whatever may he true todav In the com
paratively near future the structure of the
railways or thla country will be less In value
than the land uton whleh they stand esti
mated aa the value f the right or way has
been estimated In these cases. Whether un
der the laws and Constitution or the United
Mates, our rallroals can demand a return
m... ..my upon tne money which ha- been
actually invested In theoo properties, but also
upon this value, which has grown from si-mo-,
n-thlng to vast proportions without the
expenditure of money or the ast-imptlon of
risk. Is a question of tremendous Importance
Klaborate briefs have been s-ibmltt1 bv
counsel, at tho request or the Commission
upon this question, but It do., net seem profit
able to dlscuee or docile it in this connection.
Yte sha.l assume. In nlrposlng of this case, that
the cost of reproduction u properly eeslmated
upon the basis followed by the.-e defendants
and that the Item of value of right of wav lei
' eiauu as a nan or ths. " ... 1 . . -
Item.
other
Snrplns Tlarntnga.
rom now to the complainants- claim
that the surplus which has been accumu
lated by these defendants from earnings
should bo first subtracted from the value of
their properties In determining the amount
upon which they may properly earn. The
contention of counsel Is that this surplus
Is a fund held by the railway company as
trustee for the public, whlrh this Commis
sion should In some way manago to redis
tribute to the public in the establishment of
Just and reasonable rates. The railway 1s
certainly an agent of the Government in
the construction and operation of lta prop
erty, and It Is only allowed to charge for
Its services a reasonable compensation.
l.es It. from this follow thst the surplus
of the Great Northern Railway, for ex
ample, which la said to be ;o.O0O.O0, Is
held by that company tn trust for the
public? I'oes It follow, ew-n. that the value
of this property today should be decreased
by $70,000,000 upon the theory that the
public has paid Into the property that
amount T
It la well understood that rates by all
lines to Spokane from a given K astern desti
nation must be the same. We have already
held that In establishing a reasonable rate
tho strongest line should not alone bo con
sidered; the necessities of the w-eaker line
must also be taken Into account. In the
application of this principle It Is evident
that a rate might be fixed which would
fay a very moderate return by one Una
and a very handsome return by the other.
Under the operation of these rates the
Great Northern, by reason of lta cheaper
construction and Its easier operation, might
accumulate a surplus, while the Northern
Paclflc did not. If so. could it be said that
the surplus of the Gruat Northern had been
Improperly accumulated when lis relea had
been Just and reasonable? roea the mere
fact of the accumulation of a surplus by a
particular road show that the ratea upon
tnat road hive b.-en excessive?
But aaaume thai they have been. Thia
$70,000,000 to which the complainants re
fer In case of the Great Northern surplus
is the result of the operations of the Mani
toba and th Great Northern companies
since the year 188u; that Is. for 27 years.
During all that period this surplus haa
been gradually accumulated and haa gone
Into the property. Should the Govern
ment today take note of that surplus for
the purpose elther of so retiuctng the rates
of the company that no earnings can be
made upon this much of the property or
with a view to tn some sense turn that
surplus back again Into the hands of the
public?
There la no bsoiute test of a roasunable
rate, and the Government haa supplied none.
During all this period the excess has gone
Into the property, which haa gradually be
cotm more valuablu, and thla Increased
value haa reflected Itself in the market
price of the securities of that company.
It Is Impossible to restore what haa been
Improperly taken In th way of excessive
ratea to those persons from whom it has
been received. The Government, under those
circumstances, cannot lay hold on this
surplus aa a fund held in truat for the
public.
This case strongly Illustrates the fact that
If any Government tribunal Is to do Justice
between the railway and the public. If It
is to feel any confidence In the correctness
of Its conclusions, its aupervialon muat be
contlnuoua and not spasmodic. Ther must
be some point of departure and from that
point the knowledge of the Government
4 Concluded, ea Pace
fv
V.
f
r
1