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About fifty articles have been given special commodity rates and it is proposed to advance these also, the percentage varying from 63 per cent in the case of clams and quahogs, which are important products of the islands, to 140 per cent in the case of crated bicycles. Apparently the increase on these commodities has been adjusted largely to "what the traffic will bear."

The other tariff under suspension would cancel the present joint class rate and commodity tariff between the islands and about 35 points located on the New Haven railroad in eastern Massachusetts, including Boston, making the through rate equal to the combination of the locals. In the case of class rates to

and from Boston the change would be as follows:

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The "proposed" rates in this table are formed by adding to the existing local rates of the railroad company between Boston and New Bedford the proposed local rate of the steamboat company between New Bedford and Martha's Vineyard or Nantucket. Application, however, has been made by the railroad company in other proceedings to increase its own local rates, and an increase on interstate traffic has been approved by the Interstate Commerce Commission under date of April 16, 1918. If a like increase is approved for intrastate traffic, the through rate between Boston and the islands would still further be increased beyond the point shown in the above table, as follows:

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Based on a test study of the traffic in three representative months of the year, the company estimates that the increase in rates would net about $10,400 on the port to port traffic and about $2,800 on the joint traffic, a total of about $13,200. This is an average increase of less than 16 per cent and seems low, in view of the figures already given showing the percentage in the various class and other rates. It can only be accounted for by a preponderance of traffic like fish, where the increase is slight.. Changes in interstate rates covering chiefly traffic to and from New York City, Providence and Pawtucket, which have already gone into effect, are estimated to yield about $3,000 additional revenue per year.

The New Bedford, Martha's Vineyard and Nantucket Steamboat Company has been in existence for many years. It was the result of a consolidation, authorized by special act of Massachusetts (St. 1886, c. 8), of the New Bedford, Vineyard and Nan

tucket Steamboat Company and the Nantucket and Cape Cod Steamboat Company. These were both Massachusetts companies, incorporated, respectively, in 1854 and 1855. Control was acquired by the railroad company through its subsidiary, the New England Navigation Company, in 1910. In connection with the investigation of the "capital expenditures, investments and existing contingent liabilities of the New York, New Haven and Hartford Railroad Company," made by this Commission in 1915– 1916, counsel for the railroad company stated that the "purchase was not made by the New Haven on account of any desire to extend its own activities, but because the purchase was urged upon us by those who were then endeavoring, somewhat unsuccessfully, to run the property." However that may be, it seems to be true that the physical condition of the property has been improved since the acquisition, and that until very recently the earnings showed a similar improvement.

In 1910 the company owned four steamboats. Since then one new boat has been acquired and two of the old boats have been sold. Dividends on the stock have been paid as follows:

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In the years from 1913 to 1916, inclusive, earnings were so good that in addition to paying 10 per cent dividends, the company rolled up a surplus which amounted, on December 31, 1916, to $213,168.89. While 1917 was a poor year and resulted in a reduction of surplus, nevertheless at the end of that year it amounted to $192,306.53, without including a depreciation reserve of $48,950. The surplus alone equaled 135.7 per cent of the outstanding capitalization, while surplus and depreciation reserve together came within $5,000 of equaling the total book value of permanent property.

The need for additional revenue is based upon the results from operation in recent months. In the year ended December 31, 1917, the company failed to earn operating expenses by $18,248.12. This was due to a decrease in revenue, in comparison

with the previous year, of $16,974.94, and an increase in operating expense of $45,469.57. Traffic and revenue were less, indeed, than they were in 1915, as the following table shows:

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This falling off seems to have been due largely to the decrease in the summer business caused by the appearance of the German submarine off Nantucket and also to the poor cranberry crop. The rise in operating expense in the same period is shown by the following table:

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The increase in expense has been caused chiefly by advanced wages and the rise in the cost of fuel. The mileage covered by the boats in 1917 was slightly less than in 1915. Coal cost $56,207, as compared with $31,951, and transportation and terminal wages increased from $51,707 to $73,828. The total increase for fuel and these wage items amounted to $46,377. In 1912 coal cost $3.68 per ton, in 1916, $4.49, and in 1917, $7.21. During the current year the price may average even higher. The expense in 1917, however, was further increased by an expenditure of about $21,200 in rebuilding the wharf at New Bedford. Similar expense was incurred in 1915 when the terminal property at Nantucket was rebuilt, but such reconstruction charges are abnormal and are not likely to recur in the immediate future. Some income,

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also, was lost during the year by the failure to reinvest $120,000 of surplus funds which were invested in notes of the New England Navigation Company until these were paid off on May 1, 1917.

Summing up this phase of the matter, the company failed, in 1917, to earn operating expenses and fixed charges by $20,856.68. To make good this deficiency, pay dividends of 7 per cent upon its stock and increase its surplus account by $10,000, in addition to the $8,950 which was reserved for depreciation, about $40,000 additional revenue would have been needed. In making this computation, allowance is made for the risk of the enterprise, the liability to fluctuations in amount of traffic, the low capitalization in comparison with the cost of the permanent property, and the fact that the company, owing to its association with the New Haven railroad, secures the services of executive officers practically without charge.

Assuming, then, that the 1917 operations showed a just and reasonable need of about $40,000 additional net income, does it follow that the tariffs now under suspension should be permitted to become effective? In considering this question, every means by which this net income may be secured must be given due weight. The table presented above shows that the company obtains more revenue from passenger than from freight traffic. Recently it filed with the Commission a tariff substantially increasing summer excursion rates between various points on the mainland and the islands, and also making certain increases in the local summer passenger rates from port to port, and this tariff has gone into effect. Predicated upon last year's sales, it is estimated by the passenger department that this new tariff will produce about $16,000 increase in revenue for the steamboat company.

This change, it will be seen, reduces the amount of additional net income needed from $40,000 to about $24,000. As above shown, however, in 1917 about $21,000 was expended on the wharf at New Bedford, and there seems no reason to anticipate a similar expenditure in 1918. Some additional income might also be obtained from the investment of a substantial portion of the surplus funds. Furthermore, if traffic, which fell off because of unusual events in 1917, should return to normal volume in 1918, this in itself would go far to make good the deficiency, without allowing for the items just mentioned. Under the circumstances it does not seem to the Commission that the need for the increase in freight rates embodied in the tariffs under suspension has been clearly demonstrated by the evidence so far submitted.

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