. power, the repair of the cars, and all of the compensation of the men engaged in moving the trains and in securing the business. Q. What percentage of the aggregate receipts is the running expense of the road? A. It was in the neighborhood of 80 per cent., I think. I could tell you accurately by reference to the report. That is not far from right. Q. Then what would you say would be the net cost, including the interest on capital invested, of carrying a ton a mile on the route from Chicago to New York as near as you can get at it? Or, if you prefer to, confine it to the Philadelphia and Erie route. A. I should like to give you a little illustration to show how the cost differs with different circumstances. I had occasion to investigate two roads some three years ago, and to compare them. The one did a business I think of some 400,000,000 of tons one mile in a year; the other about 15,000,000, if I recollect right. The difference was very great. The cost per ton per mile on the road that did the large business was about one cent; on the route that did the small business it was about 51% cents. By Mr. DAVIS: Q. What caused that difference, if you examined? A. The large amount of fixed expenses and the small amount of tonnage moved. Out of every hundred tons of engines, cars, and freight moved over the smaller road, only 19 per cent. paid any money. I judge, though I do not know, that the kind of lading was light and bulky, and perhaps in very small quantities, while their fixed station expenses were probably large. It was a road that ran into New York. The road that did the large business-the Philadelphia and Reading-charged the public, I think, about a cent and three-quarter cents per ton per mile for doing the work. On the other it was 7 cents, and I think the Reading made much the most money on its capital. By Mr. SHERMAN: Q. The Reading has a very favorable descending grade nearly all the way? A. Yes, sir; but it is obliged to haul its coal-cars back without any loading, so that its trains only average, counting the round trip, half loading. Q. What is the aggregate tonnage of the Pennsylvania Central? Q. Assuming the tonnage from Chicago to New York by that route is 5,000,000, can you form any opinion of the cost per ton per mile of carrying that large business the thousand miles between Chicago and New York? Have you the means to give what you are satisfied is an estimate of the actual net cost? A. It would be but an estimate at the best, sir, and it would require some considerable reference to statistics to give. The best criterion, I think, is the actual charges for a term of years, that are about average years. Q. Actual charges or actual expenses? A. The actual charges, with the actual net financial results to the road. Q. How can you learn the results when we do not know the amount of capital actually in the road? A. I was thinking of the actual net profits; that is, the total amount of net profits. By Mr. CONKLING: Q. I observe in enumerating the elements of cost which entered the nine mills you spoke of furnishing motive power, wages, track and train hands, and of maintaining the track. Did that nine mills also include anything for the wear and tear of rolling-stock? A. I presume it did. The general idea is that rolling-stock ought to be kept in substantially as good a condition at the end of the year as it was at the beginning, but without knowing what the condition of the stock was at the end and beginning of the year I could not say. Q. But your understanding was that it included perpetual maintenance of rolling-stock? A. Yes, sir; substantially so. By Mr. SHERMAN: Q. Who of the gentlemen in connection with the Pennsylvania Railroad can tell us anything about the canal-water transportation? A. I think Mr. Kneass could, sir. By Mr. NORWOOD: Q. Are the rates on your line regulated by the rates on the co-oper ative lines? A. They are all fixed at the same time and of the same amount. The same parties, in most or many cases, fix the rates on both lines. For instance, the Lake Shore Road, over which we run west of Erie, on freight originating out of Chicago which we take, fixes also the rates on freight taken out of Chicago by the Red Line, which runs over the New York Central, and fixes also the rates upon the South Shore Line, which runs over the Erie Railway, or, in other words, the Lake Shore Road has on its route all known kinds of fast freight lines; that is, it has three different co-operative lines, and ours, which is a separate institution. The same general freight-agent always fixes the rates for all the lines there, so far as we understand it, the same. Q. I understood Mr. Hayes to say that the rates on his line were regulated to some extent by the rates on the water line? A. I think the rates on the rail routes are regulated to a certain extent, at certain seasons, by the rates on the water line. Q. Do you regulate your rates by his, or by the water line, independently of his? A. We do not regulate them at all. Q. I mean the line over which you run. A. The method of fixing is about this: The various freight representatives of the different roads going eastward from Chicago usually fix unitedly upon the rates which are to govern all shipments out of Chicago by each of the lines, their own roads, and the lines running over them. Q. Does that include Mr. Hayes's line? A. Yes, sir; and the Red Line and our line and any other line. We would get our information from the general freight-agent of the Lake Shore Road, and he from the general freight-agent of the Michigan Central. Now, what governs that joint convention in determining the rates which should rule on their respective roads is sometimes the competition of water routes, and sometimes other considerations. At the present moment the competition of water routes does not affect it at all. The rates last week were higher by lake and rail through from Chicago to New York than they were by all rail through from Chicago to New York. That arose from the fact that the lake rates from Chicago to Buffalo depend upon the fluctuating demand for transportation. They will sometimes not only vary day by day, but hourly through the day. If there happens to be a large influx of vessels brought in by a favorable wind the rates will go down, and the reverse will take place when there is reverse condition of things, and this action takes place instantaneously, and ordinarily without any combination on the part of the vessel-owners. Last week there was a sudden call for much transportation, I suppose caused by some sudden foreign grain demand. It was in excess of the capacity of the lake to furnish, and vessel-owners rapidly advanced their prices from 6 to 15 cents a bushel. Now, that, added to the rail price east of Buffalo, or east of Erie, made a higher rate than the current all-rail rate from Chicago at the same time, quite considerably higher; so that last week in adjusting the rail rates they were not at all affected by the lake rates. But the probabilities are that they (the rail rates) will be soon advanced, and because of the demand which caused the just-described advance in the lake rates to take place. Q. There was an advance in the rail rates last week, was there not? A. Yes, sir; of 5 cents toward the close of the week; but it took place several days after this advance on the lake. By Mr. CONKLING: Q. Why was that advance at that time? A. On account of the demand for transportation. The demand is very large just now. Q. Nothing else? A. I think not, sir. By Mr. NORWOOD: Q. Such pressure occurring suddenly when freight by water goes down, do you lower your rates accordingly? A. If it is a sudden spurt there is no change. Very often there is a large rail demand and corresponding call for transportation by water. Q. Then do your rates go up where there is a large rail demand? A. Yes, sir; it is a manufactured article, though a service, and is produced by the consumption of labor and material, and its price is regulated by supply and demand. Q. Your rates, then, are pretty well regulated by supply and demand? A. Yes, sir. By Mr. CONKLING: Q. You hold a thing as worth just what it will bring? A. Yes, sir. By Mr. NORWOOD: Q. You are not regulated, then, by a percentage of profit upon your investment? A. Practically we are. That is inevitable. Q. But that is not standard with you. Of course you go in for the profit-I understand that—but I mean to say, that is not the standard by which you are governed? A. No, sir; I do not think it is the standard by which the price of transportation is governed any more than that by which the price of any other manufacture is governed; but it is substantially done, because, if the charges were unreasonably high, the large profits would tempt the creation of new competitors, and reductions would follow. By the CHAIRMAN: Q. But as to railroad lines; they would not build new railroads? A. There would be probably what would be as good for the public, a great enlargement of the capacity of the present rail lines. By adding two tracks to each double-track road now existing you can serve the public cheaper than by building another double-track road, because you can devote two tracks solely to freight, and save in various ways, but especially in two ways. You save the delay to your freight trains, and you thereby are enabled to move many more tons in a given time. The more tons you move in a given time the less the cost per ton required to meet an interest on the outlay for the track and equipment. Q. What are the other non-co-operative lines in the United States beside yours? A. As I stated, there are a large number in Pennsylvania, which are there by virtue of State legislation; they have always been there. Some are very small, and some larger. Q. Do they operate upon any of the great lines running east and west! A. They do not go beyond the borders of the State of Pennsylvania, I think, unless they may perhaps run into Maryland, on the Cumberland Valley Road. Q. Do you know of any other non-co-operative lines in the United States except those you have mentioned? A. No, sir. The Merchants' Dispatch, on the Central, I think, is a co-operative line. I think there is an oil company, or, rather, a car company, for the transportation of oils, which owns its own cars, and gets an allowance from the Lake Shore and New York Central Roads for car service. By Mr. NORWOOD: Q. You heard Mr. Hayes's statement about the amount of tonnage in the country? A. I did. Q. Do you corroborate his statement? A. I heard him as he went along, and my impressions are that his statements were correct. By the CHAIRMAN: Q. Has the increase of tonnage upon other roads been about or anywhere near the equivalent of that on the Pennsylvania Central Railroad, per annum? A. I think so, substantially. Q. Reading their reports I find that the average increase for the last five years has been about 800,000 tons per annum. That is my recollection of it. Am I about right? A. I cannot give you the amount per annum, but I know they have doubled about every four years in their tonnage. Q. On the assumption that the increase is the same upon the other roads, take the five leading roads to the east, the aggregate annual increase would amount to four million tons per annum. That is about equal to the entire tonnage of the Pennsylvania Central four years ago. A. I think it was more than four millions four years ago. Q. Five years ago it was four millions. Now if that increase is to continue in the future the conclusion I draw-and I want to know wherein it is defective-is this: That if you were to construct a new double-track railroad every year with the capacity of the Pennsylvania Central Railroad five years ago, the additional business each year would give that new road a business equal to what the Pennsylvania Central had five years ago. Am I wrong or not? A. I think so, for this reason: If you have analyzed the tonnage of the Pennsylvania road, you will find that the bulk of its increase has not been in what is technically called through-tonnage; that is, tonnage interchanged between widely-separated places in the West and the East, but in what is known as local or short-movement tonnage. Now, that tonnage is a matter of growth, and tolerably slow growth, and a new road built through a new country would have to wait its time and gradually build up its local trade before it could reach anything like that figure. Through-tonnage does not increase at that rate. Q. The inference I draw from my position is this, that it will be in a very few years impossible for the existing railroad lines to convey the freight from the East and West. A. This increase is not in the through-tonnage. Q. There is a large increase of that, you know? A. O, yes; but the bulk of the increase is in the local tonnage. Coal is a very large item. The coal transportation of the Pennsylvania Railroad Company last year was three and a half millions, or very nearly one-half of its entire tonnage. Q. Do you think that increase has been regular upon all the roads for the past few years? A. It has been very regular, but the bulk of the increase on all the roads has been its local tonnage, which could not be transferred to a through-line. Q. But I am looking to the overburdening of your own line? A. Two additional tracks on each of the four roads mentioned would provide for the growth of the through-tonnage. There is not 4,000,000 tons increase on the Pennsylvania Road a year. Q. Yes, but there is about 800,000; and I say, if you add two additional tracks every five years to the Pennsylvania Central, you will have at the end of that period as much freight for the new tracks as you had five years ago for the other tracks, and that the same thing would be substantially true of all the other roads; so that, unless some more liberal facilities for transportation are devised, it seems to me that the present railroads will have to very much increase their tracks. A. They do not seem to have anything like reached to the present capacity of their tracks. I think the Pennsylvania road has been increasing, without increasing its track-room, about 25 per cent. a year. Q. What do you estimate as the capacity of the Pennsylvania Central as it now exists for moving freight eastward, or has your attention been directed to that? A. It would be only an opinion. At the present time I know that its limit is not found on the main line, on which the trains move, but at its termini, where the discharging of the cars is clogged for the lack of discharging facilities. It could move vastly more than it is moving now. By Mr. NORWOOD: Q. Are your charges affected in any manner by the shortness of the grain-crop in the West? Suppose there is a short crop, do you raise or lower your rates; or if there is a large crop, do you raise or lower your rates? A. I suppose that, indirectly, they are affected by that, but it comes in a different shape. It is affected by the demand for transportation; if that is slack the rates have to be lowered. When the transportation |