"The Southern Railway in Mississippi was valued for rate-making purposes at $4,470,537 (84 I. C. C. 253). The carrier claimed a value of $6,948,749. or 55 percent more than the Interstate Commerce Commission valuation. This he was voluntarily sold to the Columbus & Greenville Railroad for $35,000 18 I. C. C. 153). The sale price was 0.08 percent of the Interstate Commerce Co mission value and 0.05 percent of the value claimed by the railroad.” The railroads show an investment in 1937 of $26,063,943,472 in table 13 of the report.

It is contended here that there are no highway transportation facilities which are economically wasteful beyond the ability of the traffic to support becaus the traffic is supporting its facilities. However, some place between $13,000000,000 and $26,000,000,000 is a figure which the railroad traffic is able to sp port, and whatever that figure may be, the difference between it and $26,000000,000 represents the economical wasteful railroad property or facilities, Referring to the third paragraph of Nature of the Problem, the first sentere "The railroads have been the greatest single factor in shaping the deve ments of our country."

As this remark is in the past tense, i. e., "have been," we can accept it. B in 1939 this distinction cannot be accorded the railroads. If any "single factor can claim superiority over another today, it must be the automotive industry The questions foremost now will not be decided on the basis of "have betS but on "are," and the sooner the railroads are alive to this fact the sooner the "forward looking" view will become focused.

That the railroads are indispensable is a matter of opinion. That they for an important part of our national transportation facilities cannot be questioned but let us see the opinion of others, espectially regarding the "extraordinary enterprises of war." In hearings before the Committee on Roads, House of Rep resentatives, Seventy-fifth Congress, third session, on H. R. 3838, page 49, where Col. Russell P. Hartle, United States Army, War Plans Division, General St said: "War can be conducted without railroads but not without roads."

On the subject of employment the railroads employed, as shown in table 16 f the report, 940,000 employees in 1938, and for 1937 in the automobile industry there was employed 6,037,000, as shown on page 3 of Automobile Facts and Figures, 1938.

The automotive industry (see Automobile Facts and Figures, 1938) ranks first as consumer in the following raw materials:

Referring to paragraph 4 of “Nature of the Problem," the efficiency and adapt ability of railroad service is true only by comparison with itself as stated. I' lack of efficiency and adaptability to business generally is one of the reasons w motor transportation has progressed so rapidly and over such an extended field. No stronger evidence of proof of the economically wasteful structure of th railroads can be had than the fact that one-third of its mileage is in bankrup or receivership. This statement further verifies the relationship of uneconomica. operations and wasteful facilities as approximately one-third of the total raiir

structure.

While the railroads have been forced to reduce the number of employees, this has been offset many times by the additional demand for personnel of the aut tive industry and especially highway transportation, which, in the commerc field alone, requires over 3,000,000 men. The transportation field as a whole has constantly added to its pay rolls in recent years, and probably more in proporti than any large industry in the country. The reason for this has been the decand of the transportation user for immediate movement of certain kinds of goods relatively small consignments and frequency of service. Such handling throng

any small individual units is more economical even though it does entail an normous amount of personnel.

It has been estimated by Mr. Laurence A. Rossman, in The Motor Coach Proves s Value, that in the make-up of an average passenger train, it is necessary to ansport approximately 8 tons; 16,000 pounds per passenger hauled, while in n average motorbus the comparable weight has been reduced to approximately 200 pounds, or a difference of over 13 times. This illustrates the economic aste of motor power and the advantage to the country as a whole that these vings in motive power have meant when translated into manpower. New construction in the railway industry has ceased. This is at least one step the right direction, but has this come about through the efforts of railway anagement? Probably not. More probably through the fact that the public ill no longer invest money in expansion of facilities which are over extended ow to the point where one-third of such facilities should be abandoned. But what of abandonment? The committee is silent on this subject. The atement has been made that abandonments are hard to make because of the fect or necessity of the service to the shipper. Let us look at the Interstate ommerce Commission's Fifty-second Annual Report, page 120, to quote: "During the year ended October 31, 1938, 127 applications were filed for perission to abandon 2,470.615 miles of railroad lines or the operation thereof. he Commission granted 123 applications, of which 51 were contested and 72 contested cases, involving 69.13 miles of main line and 1,050.317 miles of anch line, of class I carriers, together with 894.608 miles of so-called short nes, of which 528.412 miles constituted the entire lines of the applicants and 6.196 miles portions of such lines. Information is not available as to the tal number of miles which were actually abandoned under the permissions anted. In proceedings in which certificates were issued, covering 1,654.136 iles of road, the estimate of average annual losses from continued operation · of future annual savings resulting from abandonment amounted to $893,777. proceedings covering the remaining 264.079 miles, estimates of losses or savgs are not given. The figures for annual losses are based largely on the sults of operation in recent years. Mileage and possible losses or savings in ackage-rights abandonments are not included.

"It has been shown in certain cases that the necessary cost of rehabilitation or bringing up deferred maintenance of tracks which were permitted to be abanned, aggregating about 856 miles, would require an expenditure estimated at 3.227,666. Since this amount would necessarily be expended in order to connue operation, abandonment would result in a saving which to that extent can, ith considerable accuracy, be estimated in advance."

Now to analyze these figures. Out of 127 applications 123 were granted. This ould lead to the belief that the Commission has to a very high degree cooperted in the matter. Of the 123 granted, only 51 were contested. No one appared to protest abandonment on 72 applications. This is 57 percent of all pplications, and of the protested 43 percent we may assume that only 4 applitions or 3 percent carried protests with enough weight before the Commission > justify denial.

It is evident from the committee's report that their conception as to the railad problem relates extensively to matters of regulation of other forms of ansportation and its administration.

There is one other subject which we cannot overlook, because it contains such isstatements of fact tending to erroneous conclusions on the part of the reader. hat is the portion under the subheading, "Subsidization of highway transortation."

We are not commenting upon the cost of maintenance and interest on track acilities, except to say that there is nothing disclosed to show what amount used in applying the 4-percent interest rate and that if this is valued two or hree times its actual worth, this percentage would change accordingly from to 12 percent.

Let us examine first the 9 percent of revenue for taxes. Under "Taxation" ve find that the total railroad taxes were $325,665,165 for the year 1937, inInding $32,048,000 for Federal income taxes. On the other hand, reference is nade to "highway transportation" as paying 4% percent of its total revenue. We must assume that "highway transportation" means motor carriers "for hire," is these are the only highway transportation operations which receive a revenue rom their operations inasmuch as all other forms of highway transportation re privately owned and used and have no given revenue accruing directly to hem as compensation for services rendered. Now let us compare this 4%

percent highway transportation tax as set up by the railroads, of which they make no explanation. These revenues and taxes for this type of operation are not easy to find and, as a matter of fact, are impossible to obtain, except what may be available through the records of State regulatory commissions and the Interstate Commerce Commission, for companies operating in interstate commerce. An analysis was made of records of the Interstate Commerce Commis sion, and of 200 class I bus-operating companies, 181 were available for com parison. A summarization of these companies disclosed a total of 10.13 percent of all operating revenue was paid out in taxes, exclusive of Federal and State income taxes and excess-profits taxes. Now let us adjust the railroad taxes to the same basis for comparison. If $325,665,165 represents 9 percent of revenge, and we deduct $32,048,000 for Federal income tax only, not including State, we have $293,617,165, and divide this by $36,185,018 ($325,665,165 divided by 9) we have 8.11 percent. We have then a comparable comparison of 10.13 percent for bus operations and 8.11 percent for railroad operation instead of the statement of 4.5 percent for highway transportation and 9 percent for railways.

III

Analysis and comments on the Highway Costs study prepared for Mr. J. J. Pelley, president, Association of American Railroads.

Returning to page 50 of the report of the Committee of Six, "5. Governments. aid to Transportation, Highway Carriers." Now we come to the question highway subsidy. This is a highly controversial question.

There is no question that Federal, State, and local governments have spent billions of dollars in constructing and maintaining the highways over which all forms of highway users operate, not just commercial busses and trucks. As matter of fact, some highways are for passenger cars exclusively. Now let us try to analyze the various types of vehicles to determine, first, if possible, a comparison of each type and its relative importance to the whole so we may determine the class most affected by these charges of subsidy.

P. 21, Motor Truck Facts, 1935, from Survey of 11 States by U. S. Bureau of Public Roads.

Thus, from the above, commercial busses and trucks referred to by the comnittee amount to 2.19 percent of the total highway users, while private trucks, which includes all farm trucks and private passenger cars, make up 96.42 percent of the highway users, while tax-exempt vehicles of the Federal, State, and local overnments make up over half as much as all commercial common and contract arriers.

The "compensate in part" is the controversial question. "Available informaion" is questioned. The statement should read "available estimates," and this is vhere the controversial character of the whole question rises. It is necessary to nake so many estimates and assumptions of fact that it is possible to obtain any orm of answer that may be to the advantage of those who make the estimates and assumptions. With these facts in mind, any study or estimates which will be of any value must be made by a wholly impartial individual or group.

As to the requirement of stronger pavement and bridges and increased mainenance expense due to size, let us quote from some of the authorities on this natter:

"Comparison of the number of heavy trucks registered in certain States with he existing mileage of high-type roads, and particularly of portland-cement conrete, in the same States leads to the conclusion that such roads have been built rimarily in response to the demands of traffic in general, rather than specifically o support heavy loads."-The Taxation of Motor Vehicles in 1932, by the United States Bureau of Public Roads, October 1934, page 4.

"The maximum difference in width between the ordinary farm truck and the videst trucks and busses appears to be only 1 foot, and with millions of men, vomen, and children, competent and incompetent, experienced and inexperienced, ober and drunk, driving cars up to 70 or 80 miles an hour and killing 30,000 people year and injuring 1,000,000 a year, it seems to me absurd to say that 20-foot roads are being built because 1 or 2 percent of all vehicles are a foot wider than ordinary arm trucks.”—R. L. Morrison, professor of highway engineering and highway ransport, University of Michigan.

"I think it is generally true that most highway bridges were designed to carry vehicles with 15 tons on the rear axle even before the advent of the trucks."F. Lavis, consulting engineer, New York, N. Y., member of the National Research Council.

"Contrary to the popular impression, the concentrated loadings of motor vehicles which may legally be used on our highways are not increased over the loads which were provided for prior to the advent of a single motortruck or bus. The specifications for the early macadam roads in this country generally provided for a 10- or 15-ton road roller with two-thirds of the weight on the rear axle should be sed."-Thomas H. MacDonald, Chief, United States Bureau of Public Roads, in Current Phases of Highway Building and Maintenance, pages 11 and 12. "The present opinions of those responsible for the design and construction of pavements in Iowa is that if there were no commercial busses and trucks using Those roads at all for hire, we would still build about the kind of system we have at present so far as thicknesses go.”—Dean Anson Marston, Iowa State College. "It is difficult to assign any additional cost in our highway construction as being entirely due to heavy truck traffic. * * As regards the thickness of the pavement, it is my opinion that frost action is the most destructive force we have to contend with, and it is necessary to design a slab which will not break up and crack under these forces. Such a slab is amply sufficient to carry any traffic which may move over it."-Maj. William G. Sloan, State highway engineer of New Jersey.

"Agitation for motor-vehicle taxation is changing as experience indicates that the destruction of highways does not arise so much from their use by motor vehicles as from the effects of cold and heat, of contraction and expansion and the other elements of natural depreciation."-L. A. Rossman; in Railways and Highways, Grand Rapids, Minn., 1935, page 21.

An analysis of the phrase "annual payments" will show charges to the highway user which cannot be substantiated in either construction or maintenance costs actual or implied and as these charges run into hundreds of millions of dollars the whole statement may be challenged.

Referring to the special highway studies quoted by the committee and as previously stated, as the highway subsidy question is so controversial, the estimates and assumptions must be known to determine the fairness of the results. However, as these studies are for individual States under unknown circumstances or knowledge of their original purpose, they will be ignored for the broader study itself.

130981-39-pt. 4——31

In connection with the question of highway subsidy, let us develop some of the history of what has been done. This matter was analyzed to a lim degree by Harold G. Moulton, president of the Brookings Institution, and associates, and is taken up in the book, The American Transportation Profes prepared for the National Transportation Committee. The conclusions in clap ter XXV, "Highway development and financing" are of interest.

"The period from 1921 to 1931 shows an unmistakable trend in the metho of financing rural road development in the United States. State general fun have been progressively relieved from participation in highway deve« prz»» until by 1930 the maintenance of State highways and the creation of additada. highway facilities was being financed exclusively by revenues derived fre special motor-vehicle taxation and by contribution from the Federal Gover ment. This tendency was not limited to State highway programs. The resa't importance of general-fund revenues in the financing of local roads consiste.! decreased throughout the period, though at a slower rate than in the case of State financing. Thus at the beginning of the period, special-user taxes a counted for only one-tenth of all income available for rural road work 18 and local) while by the end of the period this source of revenue was prodes more than one-half of the income available for rural-road purposes,

"All of the quantitative data presented in this chapter are designed solely indicate general trends in the rapidly shifting methods by which the deve se ment of highway facilities has been financed during the past decade. Then & not tell us whether user taxes are adequate to cover the highway costs pr. pers allocable to them."

And in chapter XXVI, "Who pays for the highways," he has this to say: "Looking forward, it is reasonable to assume that for the country as a who if not for all States, contributions from highway users will be sufficient to e** the full cost of State and county highways and an increasing portion of tes roads. We conclude, therefore, that, on the whole, highway users are now a ing for those highways which are of general use. Local highways are still be. » paid for, in the main, by local beneficiaries.”

Regarding "II. Allocation of highway costs between types of vehicles," VMoulton says:

"At the present time, therefore, it is impossible to answer the ques”. whether passenger-automobile traffic is subsidizing the truck and the b vice versa. In some States the passenger car may be contributing dispropor tionately, while in other States the opposite may be true."

This is the earliest information on the subject available at hand and although various State studies had been made along similar lines and for various pa poses prior to this, they do not deal with the problem as a whole.

The next work along this line was by the Coordinator of Transportation covers subsidies to all forms of transportation. A tentative report with respect to highway transportation was submitted to a limited number of sources an which were the railroads. However, as the original report was started in the latter part of 1933 and is now nearing completion, it may be assumed that de study, when completed, will be a rather complete analysis of the situation should be of material interest as it represents the efforts of an utkass organization.

In the meantime, the railroads have had prepared a study named "Highwir Costs" published January 30, 1939. It is understood that this study was after the railroads' analysis of the tentative report of the Coordinator. T report was made at the request of Mr. J. J. Pelley, president. Associat American Railroads, by three individuals, evidently hired for the purpose the following discussion of this report it will be advisable to bear in 20 that by reason of the report's origin, it is subject to the charge of busi cannot be charged to the study by Mr. Moulton or to those being made by

Coordinator.

On page 1 of the report will be found a summarization in graphic form bez st "Highway costs and their allocation for the year 1932." The use of the "costs" here is erroneous, misleading, and bears no relation to highway will be proven from the figures and statements of the report.

Of the total charged to motor vehicles, 90.4 percent, or $505.332.00 in $231,583.104 is from an assumption of an interest and tax charge which figure built up entirely on assumption and is not substantiated or repre by actual costs. Therefore, 44.5 percent of the cost to highway users of highways, as shown in the report, can be eliminated as not being repressed