developing vegetable section bordering Lake Okeechobee on the east and southeast, 193 miles from New Smyrna where connection is made with the main line.

The growth of Florida could probably be considered normal until the early 1920's, when a boom of considerable proportions got under way. This exceptional activity reached its peak in 1926 when it collapsed with more or less disastrous results. The growth of the principal points in population on the Florida East Coast from 1910 to 1930 is shown below.

1 At the present time, Homestead is the most southern point of importance on the Florida East Coast.

The population of the entire State increased from 752,619 in 1910, to 968,420 in 1920, and to 1,468,211 in 1930.

Owing to the rapid growth of traffic in Florida which began soon after 1920, the Florida East Coast considered it imperative to doubletrack its line from Jacksonville to Miami, which construction was started in 1924 and completed early in 1926. In this connection it is of interest to note that the freight operating revenue of the Florida East Coast increased from approximately 6 million dollars in 1919 to $9,409,907 in 1923 and to $17,161,562 in 1926. Likewise the passenger operating revenue increased from $2,997,316 in 1919 to $4,595,452 in 1923 and to $9,782,820 in 1925. It should not be lost sight of, however, that the freight operating revenue of the Florida East Coast dropped from the 17 million dollar figure of 1926, shown above, to $4,794,371 in 1935, and that the passenger operating revenue fell from over 9 million dollars in 1925, to $1,905,752 in 1935. The in-bound and out-bound tonnage over the Florida East Coast to and from Miami alone is shown to have increased from 260,712 tons in 1922 to 936,698 tons in 1925, even though in the latter year the tonnage at this port was about equally divided between rail and water. The double-tracking of the line seems to have been warranted under the circumstances existing at the time, and it is now contended that the speedy operation which is necessary in the handling of this perishable traffic can be rendered much more efficiently and economically under the present set-up than would be the case if there were but a single-line track. Defendants concede the efficiency of the operation, but deny the economy claimed.

Following the destruction, by hurricane, of about 40 miles of the northern portion of the Key West extension in September 1935, application was made, and authority secured, for the abandonment of the entire extension south of Florida City, some 125 miles. This action was taken because it was found practically impossible to secure the necessary funds for rehabilitation, and also because of the diminishing traffic via Key West. Florida East Coast Ry. Co. Abandonment, 217 I. C. C. 325. The final credit carried to account 701, Investment in Road and Equipment, by reason of this abandonment, was $30,314,380. At the close of 1935, the Florida East Coast operated 685 miles of road, excluding the Key West extension, of which approximately 396 miles comprised the line from Jacksonville to Florida City.

On September 1, 1931, the Florida East Coast defaulted in the interest on its second-mortgage bonds, and as a result it was forced into receivership. During the 9-year period, 1927 to 1935, it failed by $21,722,420 to meet its fixed charges, and in 1936 it failed by $2,071,631. Its corporate surplus account has fallen from a balance of $17,554,752 at the end of 1929 to a deficit of over $5,000,000 at the end of 1936, or a loss in the surplus account since 1929 of $22,644,111. It is this condition which prompted the Florida East Coast to seek, through these proceedings, an increase in its divisions from its connections. In fact, it points out that in Southern Class Rate Investigation, 100 I. C. C. 513, we said, at page 651, that the Florida East Coast was entitled

as an originating or delivering line operating under relatively burdensome conditions, to favorable consideration in the division of the joint rates in which it will participate with other carriers.

And in the third supplemental report in that proceeding, 128 I. C. C. 567, at page 596, it was said that the financial problem of the Florida East Coast "is obviously one of divisions with connecting lines."

The matter of dividing the rates on citrus fruit as between the northern lines, on the one hand, and the southern lines, including the Florida East Coast, on the other hand, was decided in Atlantic Coast Line R. Co. v. Arcade & A. R. Corp., supra, hereinafter referred to as the Citrus Divisions Case, and two-figure factors were there prescribed for the determination of percentages to be used in the division of such rates after first deducting the Florida arbitraries which were set aside for the southern carriers, including

* During the same year (1936) the Coast Line had a surplus after paying its fixed charges of $1,920,559, the Southern Railway had a surplus of $4,304,926, while the Seaboard failed to meet its fixed charges by $6,097,462.

the complainant herein. In the prescription of these divisions, the Commission, of course, took into consideration, among other things, the financial condition of the respective carriers, the expense involved in the origination of this traffic, and the free reconsignment privilege in the South, and fixed factors for the southern lines which are relatively higher than the factors fixed for the northern carriers. In Divisions of Rates, Official and Southern Territories, 234 I. C. C. 175, decided July 25, 1939, and hereinafter referred to as the Official-Southern Divisions Case, we prescribed for future application just, reasonable, and equitable divisions as between the northern and southern lines of the joint rates on classes and on commodities in general, including those on Florida vegetables, applicable between official and southern territories. Our findings therein will result in reducing somewhat the divisions of the southern carriers on their Florida vegetable traffic.

It is the southern carriers' factors of the joint rates on citrus fruit and fresh vegetables which are here sought to be subdivided as between the Florida East Coast and its immediate connections.

The present divisions of the Florida East Coast on both citrus fruits and vegetables are based on the so-called gathering charges of that line which were first fixed by the Florida Commission sometime prior to 1908, in which year these charges were found not unreasonable in Fla. Fruit & Veg. Shippers' Protective Assn. v. A. C. L. R. Co., 14 I. C. C. 476. Although somewhat lower carload gathering charges were subsequently voluntarily established, such charges were found unreasonable in Fla. Fruit & Veg. Shippers' Protective Assn. v. A. C. L. R. Co., 22 I. C. C. 11, and a still-lower scale was there prescribed. Our order, however, was contested by the Florida East Coast, and as a result the gathering charges of that carrier were restored to the basis formerly in effect. (See Florida East Coast Ry. Co. v. United States, 234 U. S. 167.) The gathering charges of the other Florida lines which were prescribed in the above-cited case, 22 I. C. C. 11, were unaffected by the Court's order, and as a consequence the charges of the Florida East Coast became slightly higher than those of the other carriers. These gathering charges have always been considered subnormal by the Florida lines, and in fact, in Fla. Fruit & Veg. Shippers' Protective Assn. v. A. C. L. R. Co., supra, in considering these any-quantity rates on citrus fruit, we said, at page 485:

We feel that these local rates, although they are high in comparison with other local rates, are as low as should be established under all the circumstances.

And in connection with the any-quantity gathering charges on vegetables, the Commission said, at page 496:

While these local rates are essentially part of the through charge and should be dealt with by this Commission as such, it is difficult to see how these Florida railroads can render a proper service upon a lower scale of rates than is now applied.

It is pointed out that the gathering charges used in dividing the citrus-fruit rates represent but 31.5 percent of the present first-class rates for the weighted average haul shown in the Citrus Divisions Case of 174 miles, whereas the Commission prescribed rates on citrus fruit made 40 percent of the first-class rates. Florida R. Commrs. v. Aberdeen & R. R. Co., surpa. But it is also stated by defendants that their proportion of the through rates on citrus fruit is even relatively less, averaging from 30.4 percent to 31.1 percent of the first-class rates under the K-2 scale in the southern class-rate revision.

These charges of the Florida East Coast, together with the divisions which the defendant lines received on citrus fruit prior to November 9, 1928, and on vegetables prior to October 26, 1931, have been, and are now, being used as factors in dividing the charges accruing to the lines south of the Virginia gateways.

At the hearing, the Florida East Coast proposed a percentage basis for dividing the revenue accruing south of the Virginia gateways, which from representative points is as follows:

1 On traffic via Potomac Yard, Va., not handled via Richmond, the defendant carriers-would be allowed 3 percentage points more, and the Florida East Coast 3 points less, than on traffic through Richmond.

In its exceptions, complainant proposes a basis which is purported to have been arrived at under the formula used in Divisions of Freight Rates, 148 I. C. C. 457, 156 I. C. C. 94, and 203 I. C. C. 299, hereinafter referred to as the Western Divisions Case, with due

4 The significance of these dates is that on November 9, 1928, the revised rates on citrus fruit became effective that were prescribed in Florida R. Commrs. v. Aberdeen & R. R. Co., 144 I. C. C. 603; and on October 26, 1931, the revised rates on vegetables became effective that were prescribed in a subsequent report in the same proceeding, 177 I. C. C. 735.

allowance for certain revenue advantages of complainant, which, on the whole, is considerably more favorable to it than was originally proposed. For example, from Belleglade-Chosen the respective percentages now suggested are 66 percent to the Florida East Coast and 34 percent to the defendants.

The present rates on tomatoes, and vegetables taking the same rates, and on citrus fruit, from the following important origins to New York City, a representative destination, are shown below, together with the present divisions of such rates, in cents per 100 pounds, and the divisions under complainant's originally proposed basis:

It should be stated that much lower rates on citrus fruit have been voluntarily maintained to eastern cities to meet truck competition, and water-competitive rates, known as "sailing day rates", have been maintained during the height of the shipping season to the north Atlantic ports. It is understood that these rates have been divided in the same manner as the prescribed rates, and no different treatment is sought with respect to them from that asked with respect to the normal basis. Such competitive rates will not, therefore, be further discussed in this report.

Complainant contends that its present divisions do not cover the cost of service, and it estimates that its proposed basis will increase its revenue by approximately $300,000, an amount far short of solving its financial difficulties, and in fact insufficient to meet its fixed charges. Nevertheless, such an increase would alleviate to some extent its financial distress, and would, it believes, lend such encouragement to the creditors as to warrant the continued operation of the road. It asks that special consideration be given to the fact that it is the originating carrier; that its traffic density is much lighter than that of the defendant lines; that the defendants are much less

The vegetables taking the same rates as tomatoes are peppers, romaine, escarole, lettuce, eggplant, cucumbers, green corn, and beets, carrots, and turnips with tops. The present rates on vegetables were prescribed in Southeastern Vegetable Case, 200 I. C. C. 273.