arbitrarily requisitioned in times of peace by a strong government, amply able to pay just compensation.

That common carriers sometimes make voluntarily very low rates on certain commodities, to stimulate development, is no justification for forcing on those carriers, when their private services are compelled under government requisition, very low rates in place of the full and reasonable compensation to which they are entitled under the constitution. As sworn officers of the government you are under a duty to vindicate those constitutional rights rather than to yield them to anybody's specious pleas.

The act of 1916 commands this commission, in fixing rates, to consider the relation existing between the railroads and the government. But what does it mean? The act does not even intimate that in giving consideration to the relation existing between the railroads or public service corporations and the government, Congress intended that the commission should try to "gyp❞ the carriers. If the clause has any significance at all, it can only be as an authorization to fix rates materially higher than would be sufficient to merely provide just compensation.

It is a well-known practice of governments to pay mail subsidies to steamship lines. This government has done so from time to time in the past. I presume there are instances in which railroads have been similarly subsidized by governments for handling the mails. This paragraph does now exist in our law with reference to railway mail pay, however, and my point is that it may very well be used by this commission, on appropriate occasions, as one of the means by which it may discharge the constructive duty laid upon it by Congress to foster and preserve the national system of transportation. The clause in the law so strongly relied upon by the department not only does not support its case, but is authority in our favor.

Special Contracts

Section 5 of the Mail Pay Act of 1916 authorized the Postmaster General to make special contracts with railroad companies for the transportation of the mails where in his judgment the conditions warrant the application of higher rates than those justified in the law. The legislative history of the act will so show that Congress had in mind the extreme hardship and injustice which has heretofore been visited on many little railroads, and that Congress was led by the department to believe that such a provision would enable them to do justice to our little railroads. But the department has taken the position that while it, admittedly, did have the authority to make special contracts, it would not do so, because nearly every little short line could come in and show that its situation was a special one. It did not want to establish any precedents that would encourage this, so preferred not to exercise any of the judgment authorized.

I think it is clearly evident that it was within the contemplation of Congress that you may fix rates higher than might be sufficient to be merely just and reasonable. In other words, you have a margin of discretion above the line of just and reasonable compensation, but not below that line, since the Constitution forbids. Since the department refuses to do justice voluntarily, you should fix rates which will compel it.

Individual Rates

There is a marked distinction between the case of the Committee on Railway Mail Pay (for Class I roads) and our case. The large roads ask you to fix average

rates for all the larger roads. They freely concede, nevertheless, that the situation as to short lines is different, because, as a rule, each short line stands by itself. Our lines do not connect with each other, as a general thing; the element of competition between them for mail traffic is practically non-existent. No two of our lines are much alike. To classify them so as to throw them together in groups with substantially similar characteristics is impossible. A grouping by mileage is highly arbitrary because the traffic density per mile shows a very wide range. A grouping based on earnings would show a wide range in mileage. There is a wide range in the frequency of service. Since the department will not use the authority given it to fix special rates for all these special cases, we must necessarily appeal to you to fix rates which will not be less than just and reasonable to each carrier.

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We strongly oppose any average scheme of rates which would produce only an average just and reasonable compensation. The department itself seems to have latterly adopted the policy of seeking a reduction for individual lines to which an average increase has been applied. They will probably continue that policy hereafter, and it is highly probable that if an average rate is fixed for roads of our class, those who are below the line will promptly institute a new individual proceedings for the increase to which they feel individually entitled. That being the prospect, anyhow, we urge you to deal now with these short line rates on an individual basis in each instance, according to its own particular merits.

We made a special study on 173 roads to show that the present supposedly uniform rates do already, as a matter of fact, produce a wide range of pay per mile of service. Time will not permit an analysis of all that was developed; but we not only made the same space tests and financial studies as did the larger roads, but in addition to that, we made a series of careful studies, which we attempted to make complete for each individual road (but were not wholly successful in every instance) so as to give this commission all the facts we could command.

Those studies showed, among other things, the general condition of each short line, the revenue which would be derived from the space corresponding to the mail space authorizations on each road, if that space were employed for the transportation of passengers and express, and from freight at current rates. studies were made showing the "out of pocket" (wages) which could be directly allocated to mail service, the loss of freight to parcel post, and a number of other things.

Also

These various studies were brought together in three groups designated for convenience as Plans 1, 2 and 3, as fully explained in our brief. These three plans are shown with columns showing the percentage of increase needed under either plan, and then a column showing the average of all three groups of studies for each road.

Since the department has always laid stress upon comparison between the revenue derived by the carriers from express as compared with mail, we made that comparison as one of our studies.

We developed that comparison upon an actual count of all packages of express and of mail for a test month, mailsacks being counted as but one package. We compared the direct revenue from express with the mail pay for each road, and found that the revenue per piece averaged 7.83 cents from mail and 15.76 cents per piece from express. There were a few specific instances in which the revenue per piece from mail averaged a

little more than from express, and we then made a further study of the additional revenue derived from express, consisting principally of the amounts paid by the express company to railroad employees. When that element was taken into consideration, in all but five instances, the revenue from express substantially exceeded that from the mail. It should be remembered also that the low parcel post rates are continually taking freight from the express service on which we average 15.76 cents, whereas the mail pay rates average us only 7.83 cents per piece.

We do not place our whole reliance upon that express study, but it is highly relevant and is a material factor. In our exhibit we have added a column from the department's exhibit, showing the return from mail, and one showing the percentage of reduction if the minimum were abolished with no change in present rates. This statement portrays so graphically the ridiculous results from a strictly logical application of the only statistics which the department thinks are relevant, that I will refer to just two or three of the most extreme examples.

Take the Campbell's Creek Railroad. For a 14-mile haul of a 3-ft. unit, the carrier gets 78 cents a trip. The department says this is a return of 102 per cent and is consequently excessive.

Take the East Jordan & Southern, which gets $1.56 for a 3-ft. unit hauled 19 miles. The department says this is excessive because the statistical conclusion is that this $1.56 is a return of 148 per cent. According to the logic of the department, the Sardis & Delta, for handling a 3-ft. unit, putting on and taking off mail at every stop, makes a return of 286 per cent out of a rate of $1.37 per trip. Also note that by the abolition of the minimum they propose to reduce this excessive rate of $1.37 by 166 per cent.

It gets

Turn back now to Aberdeen & Rockfish. $2.89 per trip for a 3-ft. unit hauled 36 miles, and the department admits that even according to its formula, the road gets no return, the letter D meaning deficit; but vet the abolition of the minimum would increase the already existing deficit by 83 per cent.

Now note the fact that the average space authorizauon on the vast majority of instances is for only three feet.

Relative Increases as Between

Larger and Smaller Units

I have already discussed our desire to have rates fixed for each individual road, whereas the larger carriers want a uniform rate for all lines, though willing for our class of roads to be treated as exceptional. Our interests differ in another very material respect. They ask for a horizontal increase for all units, but a horizontal increase applied to the rates for a 3-ft. unit for short hauls means comparatively little money in the aggregate, whereas it would run up into large figures on the full cars and full train loads of mail over long routes. We have been unable to find out upon what theory the relation of the rates for the different classes of mail service were originally fixed by this commission, but it is our surmise that the commission probably arrived at some grand total figure of compensation for the carriers as a whole, and then attempted to apportion it according to its best judgment; but applied to the different units of service rates which were more or less arbitrary.

The mail service rendered by our class of short lines is almost wholly retail, whereas the service rendered by the large lines is retail on their branches and both whole

A

sale and retail on their main routes. It is conceivable that they might be quite content to take a loss on their inconsequential retail mail traffic if they can make a satisfactory profit on their wholesale long haul traffic. The car-foot-mile basis obscures and leaves wholly undetermined the relative fairness or unfairness of the particular rates for different classes of service. horizontal increase based on the statistical returns for the total car-foot-miles from all classes of their service might produce a result satisfactory to the larger roads as a whole, because the margin of compensation of the larger units may be large enough to absorb losses on the smaller units; but the roads of our class have no such possible advantage.

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Freight Car Loading

WASHINGTON, D. C EVENUE freight car loading in the week ended January 28 amounted to 902,832 cars, a decrease of 41,047 cars from the corresponding week of 1927 and of 22,864 cars from 1926. Loading of grain and grain products, livestock, forest products and miscellaneous freight were larger than a year ago but coal loading, amounting to 176,139 cars, represented a decrease of 48,553 cars. Loadings in the Northwestern and Southwestern districts were larger than in the corresponding week of last year but in other districts were less. The summary, as compiled by the Car Service Division of the American Railway Association, follows: Revenue Freight Car Loading

Since Nov

Official Party at State House, Montpelier tional, and numerous representatives of the press. At all stations along the line citizens had turned out en masse with bands and flags to greet the train, and there were short talks by the Governor, Receiver John W. Redmond of the Central Vermont, and Sir Henry Thornton, president of the Canadian National.

At Montpelier, the capital of the state, the party left the train and adjourned to the state house where a large audience assembled to be welcomed by the mayor of that municipality and by the mayor of Barre and to hear

addresses by the Governor, Receiver Redmond, Sir Henry Thornton and Homer Skeels, attorney for the Montpelier & Wells River.

Desolation Still Apparent

Signs of desolation are still all too apparent in the valleys of the Winooski and White rivers, traversed by the Central Vermont. The railroad, while restored to through service at restricted speeds, is still far from its original condition. Tracks are supported in many places by trestles, in lieu of embankments or steel bridges washed away. There is little ballast in the track where flood damage occurred. The track at many places is badly out of line and surface, due to the difficulties of new embankment. There is still much shoo-fly construction which will require straightening. The road was fortunate, however, in being able to get all its washed out track jacked up before it was frozen in.

Nevertheless the accomplishment in restoring the line is remarkable, since the reconstruction forces have had to deal exclusively with frozen materials with constant reworking necessary to keep the new embankment in place. Permanent reconstruction cannot be begun before the spring thaw and will probably not be completed before June 1.

The flood loss to the inhabitants of Vermont has been widespread. True, the damage was restricted to relatively narrow valleys, but it is the valleys in Vermont where most of the people live and conduct their business. A disaster scourging the same area or even many times the area of hill tops would have inflicted nothing like the damage done by this flood. The waters descended so quickly that protective measures, such as were possible in the case of the Mississippi flood, could not be taken. There was no warning in the Vermont flood and the entire damage was done in a period of 24 hours. Not only were a large number of lives lost and homes destroyed, but the very means of livelihood of many of the

ember Flood

The Road Had to Restore Many Washed Out Bridges.

people was taken from them along with all their personal property, since mills, warehouses and stores were seriously damaged or destroyed. Fertile farm land was scoured down to bed rock in many cases or overlaid with a deposit of stone, and much live stock perished.

To add to the trials of the afflicted territory, communication with the outside world was removed-the railway and highways were washed out, bridges were swept away and telegraph and telephone lines broken.

Reconstruction work began immediately. Communication was established with isolated communities over mountain roadways. The railroad pushed its reconstruction from both north and south and started a construction gang into Montpelier from the east, repairing the Montpelier & Wells River as it went, and as soon as its line at Montpelier was reached it was able to take up the battle on two more fronts-northward and southward. In addition, individual jobs of reconstruction were started at many other points which could not be reached by rail by sending in motor truck construction gangs. Telegraphic and telephonic communications of a sort were quickly restored.

Thoroughgoing Economic Revival

Impossible without Railroad

However, with all the improvement possible in the first few weeks following the flood, assuring a supply of the bare necessities of life and some communication, no earnest revival of the economic life of the section was possible without the railroad. The section is ordinarily of easy access to the large centers of population which surround it. For the past three months only tedious, slow and costly methods of transportation have been available. The movement of freight in bulk has been impossible, with the consequence that the revival of the industrial and economic life of the section has made little headway.

The return of the railroad to service, however, makes

an isolated farm house a flag was waved in greeting as the train moved cautiously along.

Appreciate Dependence on Railroad

On the various occasions where addresses were made, the public authorities without exception complimented the railroad management upon its untiring effort to restore service and dwelt upon the engineering triumph of completing such a heavy reconstruction project in such a short time, during a Vermont winter. They likewise evinced a thorough appreciation of their dependence upon the railroad for the resumption of their customary economic life. Moreover, they expressed gratitude to the

At Two Places New Benches Had to Be Cut into Hill Sides

Canadian National for its executive and financial cooperation with the smaller company in aiding its restoration, which the smaller line could not have accomplished with such celerity had it been forced to depend entirely upon its own resources. Gratitude to the Canadian National extends to its owners, the Canadian people, and the occasion was made one of recognition for international co-operation and sympathy.

Plan a Better Road Than Ever

The railroad officers who spoke gave recognition to the hardy optimism of their patrons. Sir Henry Thornton stated definitely the policy of the Canadian National Railways looking to the restoration of the Central Vermont to an even better physical condition than before, and its maintenance as a link in a through line from New England to the West.

As an indication of the magnitude of the work accomplished and still in hand by the railroad the following table of forces and equipment is given:

Revised Substitute for
Rate-Making Rule Proposed

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WASHINGTON, D. C. EPRESENTATIVE Newton, of Minnesota, on February 1 introduced in the House in revised form his bill to substitute for Section 15a of the Interstate Commerce Act a new rule of rate-making which omits the recapture scheme and also all reference to a percentage of fair return based on valuation. The new bill, H. R. 10,376, like the bill which he introduced last March and like the bill H. R. 8,833 which Mr. Newton introduced on January 7 by request, carries out the proposal for a substitute for the present rule of rate-making endorsed by the National Industrial Traffic League at its last annual meeting. It includes, however, several provisions not in the previous bills on this subject. The House committee on interstate and foreign commerce is expected to hold hearings on the bill after it concludes the hearings now in progress on the Parker unification bill.

The latest Newton bill provides that in the exercise of its power to prescribe just and reasonable rates the Interstate Commerce Commission "shall initiate, modify, establish or adjust such rates so that carriers as a whole (or as a whole in each of such rate groups or territories as the commission may from time to time designate) will, under honest, efficient and economical management and reasonable expenditures for maintenance of way, structures and equipment, have opportunity to earn an average annual net railway-operating income sufficient, as nearly as may be, to pay the interest on funded and other outstanding indebtedness and to provide such return upon the properties devoted to public use not represented by indebtedness, as shall in the judgement of the commission maintain a proper basis of credit to enneeds of the country: Provided, That the commission able the carriers as a whole to meet the transportation shall have reasonable latitude to modify or adjust any particular rate which it may find to be unjust or unreasonable, and to prescribe different rates for different carriers or for different sections of the country."

The earlier bill did not include the reference to groups of carriers and its standard for the amount of allowable net railway operating income was the amount "sufficient, as nearly as may be, as the basis of such credit as in the judgement of the commission may be requisite to meet the transportation needs of the country."

Whereas the former bill would direct the commission to fix a period of years for which the average net income shall equal the amount found necessary, the new bill says that "in determining the amount of net railwaycarriers shall have opportunity to earn, the commission operating income which the public interest requires that shall consider, among other things, the requirements of commerce for improvements and extensions of carrier property and the cost of obtaining capital therefor, and also the railway-operating revenues and cost of service for such period as shall, in the judgment of the commission, reflect average or normal conditions." Also the commission would be directed to "investigate and determine from time to time what return shall be required to comply with the law and shall make public its findings and conclusions with respect thereto."

Upon passage of the bill the commission would terminate all proceedings then pending for the recovery of "excess" earnings, cease to make cash loans from the general railroad contingent fund, and distribute to the carriers the amounts recaptured under the present law.