Mr. ELLIOTT. I think, Mr. Winslow, you have got to consider the New England situation as a whole. When it comes to what will be the ultimate disposition of the roads in that territory, you open the door to a very, very difficult question. There are some who advocate going back to the plan that was tried out seven or eight years ago, of putting all the steam railroads in New England under one company. That was the plan that Mr. Mellen advocated, and it had some advantages; but the Government took the position, as you know, that it was not a good plan and we had the long drawn out dissolution proceedings and we are now trying to get that finally wound up and adjusted. Others take the position, and I incline a little to that view myself, that the best health for New England and the best health for the New England roads would be, if it could be brought about, to do with some of the properties what has already been done with the Boston & Albany road, that they be a part of one of the great trunk lines; that there would be greater benefit to the people of New England if New England could have two or three great systems there which were closely affiliated with some of the longer-haul roads outside of New England; but I have not felt that that was a matter that could be settled by congressional act. I think time and events have got to develop that. The point I am making to-day is that the situation is so serious as to income and outgo that it seems to me it puts upon Congress the burden, so far as it has the power, of trying to arrange while this reconstruction period is going on so these roads can live, of bringing the relation of income and outgo a little more as it used to be prior to the war. Mr. WINSLOW. Are you familiar with the Maine Central road in the last 8 or 10 years? Mr. ELLIOTT. Well, I know something about it. Mr. WINSLOW. How does its condition to-day compare with its condition before Government operation? Mr. ELLIOTT. Very bad, indeed. The Maine Central, I am sorry to say, has not been able to make any kind of a showing during that period. Mr. WINSLOW. Can you fairly set forth the general changes that have taken place in that road in respect of its financial condition? Mr. ELLIOTT. I could not with the figures I have with me to-day, Mr. Winslow, but I want to ask permission to submit as a part of my testimony a very complete statement about that. What I have just read is simply a digest showing the results for New England as a whole; but the statement to be filed will show the results on each one of the New England roads for the test period and for the period during Government control, and that will set forth the results of the Bangor & Aroostook and the Maine Central, and each one of them independently. But I do know of my own knowledge that during governmental control both the Bangor and the Aroostook and th Maine Central's results have been extremely unsatisfactory, even more so than the Boston & Maine and the New Haven. The statement referred to by Mr. Elliott is as follows: THE NEED OF THE NEW ENGLAND RAILROADS FOR REMEDIAL LEGISLATION BY CONGRESS. Data compiled under the direction of the following conference of representatives of New England railroads: Gordon Abbott, chairman reorganization managers, Boston & Maine Railroad. George W. Anderson, former member of the Interstate Commerce Commission, and trustee of the Boston Railroad Holding Co.'s interest in Boston & Maine stock. Edward G. Buckland, president New York, New Haven & Hartford, Central New England & Rutland Railroad Cos. Howard Elliott, chairman committee on intercorporate relations, board of directors, New York, New Haven & Hartford Railroad Co. John Henry Hammond, acting president Bangor & Aroostook Railroad Co. Henry J. Hart. vice president Bangor & Aroostook Railroad Co. James H. Hustis, temporary receiver, Boston & Maine Railroad. Morris McDonald, president Maine Central Railroad Co. James L. Richards, member of executive committee, board of directors, New York, New Haven & Hartford Railroad Co. Edward C. Smith, president Central Vermont Railway Co. The purpose of this statement is to show: (1) What will be the financial condition of the railroads of New England if returned to their owners without increase of revenue or remedial legislation by Congress; (2) that the present compensation guaranteed by the Government should be continued until such remedies have become effective. The statistics presented combine the results of operation for the Bangor & Aroostook, Boston & Maine, Central New England, Central Vermont, Maine Central, New Haven, and Rutland roads for the "test period" (July 1, 1914, to June 30, 1917, inclusive) and for the 18 months of Federal control (Jan. 1, 1918, to June 30, 1919, inclusive). Similar statistics for each of these companies separately are annexed to this statement. NOTE. The Boston & Albany, being leased to and operated by the New York Central, has not been included. During Federal control expenses have increased so much more proportionately than revenues that there is not now enough left to keep the railroads solvent. In other words, out of every dollar received from railroad operations in New England the companies would, if the properties were now returned to them, be compelled to pay out 98 cents for operating expenses, taxes, joint facility and equipment rentals, and would be able to retain only 2 cents to meet interest, rentals, and other fixed charges. CHART I.-Distribution of each dollar of operating revenues combined New England $1 of operating revenue: railroads. Average of test period (1915-1916-1917)— Balance available for fixed charges... Taxes, joint facility and equipment rentals. Fuel. Labor. Average of 18 months' Federal control (Jan. 1, 1918-June 30, 1919)— Balance available for fixed charges.. Taxes, joint facility and equipment rentals. Cents. 22 8.2 - 19.9 9.5 40.4 2.3 24.9 13 Fuel... Labor.. 53.8 To help meet these charges the railroad corporations have had nonoperating income (received from investments, rentals, etc.) which, added to net Federal income, produced a gross income as follows: With this gross income the companies must, when the properties are returned, pay fixed charges which can be closely estimated from the following table showing these charges for the "test period" and for the 18 months of Federal control. Deductions from gross corporate income (interest, rentals, and other fixed charges, excluding dividends). Interest, rentals, and other fixed charges, excluding dividends. CHART II.-Financial situation of combined New England railroads based on actual Annual average of test period: $42, 614, 828 32, 967, 506 Interest, rentals, and other fixed charges, excluding dividends.. 9,647, 322 11, 719, 609 35, 065, 632 Deficit.... 23, 346, 023 This means that the New England railroads will be bankrupt if their properties are returned without immediate and adequate increases of revenues or a continuation of the compensation until remedial legislation is enacted The far-reaching effect of such a bankruptcy is evident from the fact that the total interest-bearing obligations of the New England railroads in the hands of the public are in excess of half a billion dollars. The present dependence of the railroads on the guaranteed compensation is strikingly shown in the following chart: CHART III.-Relation of net Federal income to guaranteed compensation, combined New England railroads. Annual average of test period: Annual compensation guaranteed New England railroads, based on test period 1915, 1916, 1917 (100 per cent).. Annual average of 18 months Federal control: Amount by which Railroad Administration failed to earn annual guaranteed compensation................ $34,819, 880 29, 611, 507 Net Federal income (15 per cent)....... 5, 208, 373 The reason for the transition to a heavy deficit during the 18 months of Federal control is apparent from the following comparison with the test period of the important items of expenses and revenues. For purposes of comparison, the chart also shows work performed during each of the periods. CHART IV.-Increases in chief items of expenses, revenues, and units of work, combined New England railroads. [Flush lines represent annual averages for test period. Indented lines represent amounts and percentages of increases of period of Federal control over test period. Total figures are shown in appendixes B and C.] |