OFFICE OF RAILROAD COMMISSION OF ALABAMA,

MONTGOMERY, ALA., October 20th, 1882.

To His Excellency, Hon. Rufus W. Cobb,

Governor of the State of Alabama:

In obedience to section 28 of an act, entitled "An act to provide for the regulation of rail road companies and persons operating railroads in this State," approved February 26th, 1881, the undersigned, the Rail Road Commissioners of the State of Alabama respectfully make this report of their doings for the year ending June 30th, 1882.

We follow the order of events in our first annual report by next reporting what was done by us in reference to the revision of the passenger and freight tariffs of each of the several rail road companies of this State.. Preliminary to this there was much work and considerable unavoidable delay.

The subject of revising these tariffs had engaged our attention as soon as we entered upon our duties, and from that time until it was accomplished we continued to direct our efforts to its consumation as soon as this could possibly be done in the manner contemplated and directed by the statute.

The sixth section of the statute indicates what the Legislature intended to be the basis of these rates, as fixed by the Rail Road Commission. It provides :

"That no rates or charge for service in the transportation of freight over any rail road shall be held or considered extortionate or excessive under any proceeding under this act if it appears from the evidence that the net earnings of such rail road for transporting freights if done without such discrimination on the basis of such rate or charge, together with the net earnings from the passenger and other traffic would not amount to more than a fair and just return on the value of such rail road, its appurtenances and equipments."

But, as will be seen, to arrive at what would be "a fair and just return on the value of such rail road, its appurtenances and equipments" from "the net earnings of its passenger and other traffic" rendered it indispensably necessary that before undertaking to revise these tariffs, the Rail Road Commissioners should have reliable knowledge of the value of each of these rail roads. their appurtenances and equipments; and further that they should see the tariffs they were to revise, and also the special rates of each rail road, and its entire traffic business, and gross and net earnings and expenses, and from these and other sources of information to prepare and compile for each rail road such revised passenger and freight tariffs as would allow to each of these railroads a fair and just return on the value of such rail road its appurtenances and equipments." During the month of March, in the year 1881, every rail road company in the State was called on by the Rail Road Commission to furnish this information of its own affairs.

The accumulation of this information would have required considerable time if the rail road companies had entered cheerfully upon the work of furnishing it as soon as they were requested to do so by the Commissioners. But they did not do this and could not be expected to do so. Some of them denied the authority of the Rail Road Commission to request it of them, and took the ground that under their charters their business could not be regulated in this manner by the State of Alabama, but informed us that as a matter of courtesy to us, they would furnish the information, though they desired us to distinctly under

stand that in doing so they waived none of their legal rights under their charters. Others protested against our right under the constitution and laws of the land to call on them for such information as an invasion of their private business rights. Those who neither denied our authority nor protested against its exercise, informed us that they were overwhelmed with other business, and would furnish us this information as soon as they could do so consistently, without sacrificing their other business. This excuse of being overwhelmed with other business was made by all of them as a ground of delay in forwarding to us this information.

We entered into no discussions with any of them as to the right and authority of the State of Alabama to exercise this jurisdiction, but while we were occupied with other matters pertaining to other duties under this statute, we continued to repeat our requests from time to time to each of them to furnish us this information. Some of them commenced furnishing us this information in the last of April, others in May, but we had not received the tariffs of all the companies which we were required by the statute to revise, until after the 1st of June, 1881. Knowing the connection that existed between these railroads very generally in their business with each other, and the similarity in many respects of their business, we had determined not to revise the tariffs of any rail road company until we had all the tariffs of every rail road company in the State before us, and had examined and considered each of them. Before we succeeded in obtaining all the information we desired, we could have had litigation with several of these companies respecting the obtaining of it, but we did not desire to have any squabbles and controversies with them in the courts, for we were satisfied that if there was anything of the kind it would be productive of still greater delay in revising the tariffs of the rail road companies. Litigation would have suspended the administration of the statute, until that litigation was finally decided--and this we did not desire.

While we were being subjected to these delays and embarrassments in administering this statute by these rail road companies, their "free-pass" partisans, their "special rate” favorites, and the favored few to whom they were giving secret rates, lower than to the public generally, were not idle. They were active in endeavoring to foment popular dissatisfaction with the statute, and with its administration by the Rail Road Commission, and to prepare the public mind for the failure of its administration, and for the refusal of some of the companies to adopt the revised tariffs when prepared and recommended by the Commissioners : and in these respect, they were aided by a few noisy demagogues who are always ready to seize upon and assail a statute, or an administration that they believe will be unpopular. The perpose and character of all this was so manifest that it failed to mislead any of the rail road companies into collision with the Rail Road Commission.

When we had in this manner and under these circumstances accumulated the necessary information to enable us intelligibly and understandingly to enter upon the work of examining and considering these rail road tariffs with a view to revising them and the tariffs of the rail road companies were before us, we spent all the month of June and a considerable portion of the month of July, 1881, in examining and considering these tariffs with reference to what they were, and what they ought to be when revised by us in the manner directed by the statute. This itself required laborious and painstaking work. There are about thirteen hundred different articles of freight in the first five or six classes of freight in each of these rail road freight tariffs according to their classifications. Besides these, there is in every such freight tariff, some articles of freight not embraced in these classes and which are called special articles of freight. After having made this examination, and given each of these tariffs, freight and passenger, this consideration, and prepared an outline of what in our opinion with the lights then before us ought to be the changes and reductions in each of these tariffs, we notified each of the rail road companies of this State of the days we had fixed for the revision of their tariff's respectively. This revision commenced on the 19th day of July and ended on the 27th day of August in the year 1881, and during this period we revised the freight and passenger tariffs of every rail road operated in this State. At this revision of its tariffs, each of these rail road com

panies except the Nashville, Chattanooga & St. Louis Railway was represented by some one or more of its principal officers, usually its cheif passenger and freight agents, and we gave all of them a full hearing, and considered the arguments and information which they produced before us, and in many instances we changed some of the calculations we had previously made, when we saw that their error was demonstrated by the information furnished by these rail road officers. As we have stated, The Nashville, Chattanooga & St. Louis Railway Company was not represented before us by any of its officers or agents. That rail road has but a small portion of its line in Alabama: and although a splendid rail road, with its track in most excellent condition, and operated by fine rolling stock, with the latest modern appliances and equipments, yet the portion of its road in Alabama is not remunerative in its local traffic.

After we had revised the passenger and freight tariffs of several of the rail road companies without any objection being made to our jurisdiction, we reached the Mobile & Ohio Rail Road Company. This was one of the companies that supposed that its charter placed it beyond State supervision or regulation. It appeared before us by its counsel as well as by its general freight and passenger agent. The following extract from the record of our Minutes will show what then occurred:

OFFICE OF RAIL ROAD COMMISSION OF ALABAMA.

MONTGOMERY, ALA., July 27th, 1881.

Wednesday, 10 a. m.

The Commission met pursuant to adjournment at its office in the city of Montgomery, on this the 27th day of July, 1881, at 10 o'clock a. m. There were present Walter L. Bragg, President, and Jas. Crook and Chas. P. Ball, Associate Commissioners, when the following proceedings were had, to-wit :

The Commission then proceeded to consider the revision of the passenger and freight tariffs of the Mobile & Ohio Rail Road Company, and pursuant to notice, C. J. Waller Esq., General Freight and Passenger Agent of said company, and E. L. Russell, Esq., General Solictor of said company appeared before the Commission to represent said company. And thereupon the said E. L. Russell, Esq., as General Solicitor of said company, presented to the Commission a paper, which was read and which was in these words

To the Honorable Commission

THE STATE OF ALABAMA,

July 27th, 1881.

of the State of Alabama:

While the management of the Mobile & Ohio Rail Road Company desire to agree and co-operate with your honorable Commission in the performance of your duty as prescribed by the act creating said Commission, yet the management of said road does not waive any of its powers or rights conferred upon the said Mobile & Ohio Rail Road Company in the 12th section of its charter passed February 3d, 1848.

Signed,

A. L. RIVES, Attorney and Agent of W. BUTLER DUNCAN,
Trustee and Receiver of the M. & O. R. R.,

By E. L. RUSSELL.

On motion of said E. L. Russell, Esq., it was ordered by the Commission, that the foregoing paper be spread upon the minutes, and that said paper be filed by the Clerk.

And the Commission then gave notice to said company through the said E. L. Russell, Esq., and the said C. J. Waller that the Commission had considered all the questions involved in said paper,and were of the opinion that under the law, the Commission had power to revise the passenger and freight tariffs of said company, and it was the duty of the Commission to do so, and that the Commission had the opinion in writing of Hon. Henry C. Tompkins, Attorney-General of Alabama, to this effect, and the Commission also gave notice to said company through the said E. L. Russell, its general solicitor, and the said C. J. Waller its general freight and passenger agent, that the Commission would revise the freight and passenger tariffs of said company, but in making the said revision the Commission did not intend to waive and did not thereby waive any right which the State of Alabama had, for any cause now existing or which may hereafter exist, to take legal proceedings in its own name and at its own instance or in its own name at the instance of any private person or corporation for the judicial forfeiture of the charter of the said Mobile & Ohio Rail Road Company.

And thereupon the Commission heard statements from the said C. J. Waller as such general freight and passenger agent respecting the passenger and freight tariff of said company, and also upon the same subject from the said E. L. Russell, Esq., after which the Commission proceeded to revise and did revise the passenger and freight tariffs of said company which was done in the following manner: The Commission on separate sheets of paper made the changes which in their judgment were necessary to avoid unjust discrimination and to reduce said tariff to just compensation, which changes having been examined and considered by said C. J. Waller as General Freight and Passenger Agent of said company were accepted by him for said company. The Commission then handed to said general freight and passenger agent for said company a copy of all of said changes, and also a notice in writing, that said tariffs as revised must be printed by said company and two copies of the same presented to the Commission for examination and certificate within fifteen days from this date, and that said revised freight tariff must go into effect on the 1st day of September next, and that said passenger tariff as reduced by said company to four cents per mile on the 1st day of July, 1881, and now existing and approved by the Commission, should continue in effect without change.

The Commission kept one copy of every such paper so handed said general freight and passener agent as a record of the office, and for public information, to which reference is hereby made for a full and complete explanation of this minute entry, the said tariffs being of such shape and so voluminous that they can not be transcribed upon the minutes.

A. M. BALDWIN, Clerk.

*

W. L. BRAGG,

President Rail Road Commission of Alabama.

This was the first, last and only plea to the jurisdiction of the State which was in any manner offered by any rail road company during the revision of these tariffs by the Commission. But other events occurred of a different character which will illustrate the questions involved in these revisions, and as such we report them.

The Louisville & Nashville Rail Road Company operates eight rail roads in Alabama. Before and at the time we commenced the revision of the tariffs of the other rail roads, the passenger tariffs on all the rail roads of the State was five cents per mile, except the Alabama Great Southern which was four cents per mile, and the Tuskegee Narrow Guage

which was about ten cents per mile. But when the Louisville & Nashville Rail Road Company saw that we had put the passenger fares of the Montgomery & Eufaula Railway, the Western Rail Road of Alabama, the Selma, Rome & Dalton Rail Road, and the Alabama Great Southern Rail Road each at three cents per mile, then that enterprising company suddenly on the first day of August 1881, and only a few days before the tariffs of its eight Alabama rail roads were to be revised by us according to previous notice, put into effect a new passenger tariff over all these eight rail roads by which it fixed its passenger fares on each of them as follows:

Straight unlimited ticket 5 cents per mile.

Limited ticket 4 cents per mile.

Round trip ticket 31⁄2 cents per mile.

Thus revising the Rail Road Commission of Alabama instead of being revised by it. To the mere manner of this we did and could have no objection, but it was none the less our duty to examine, consider and revise it.

When the tariffs of these eight rail roads came up for revision before the Rail Road Commission of Alabama, the Louisville & Nashville Rail Road Company insisted on its new passenger tariff being low enough, and as low as the service could be done. Here was a

field for enquiry and light.

A protracted discussion on this subject ensued between Mr. C. P. Atmore, General Passenger Agent of that company on one side, and the Rail Road Commission of Alabama on the other, an illustration of which may be seen from the concluding portion thereof in the Appendix to this report under the head of "Discussions on Passenger Fare Reductions." The result was that passenger fares on four of these roads, namely, the Nashville & Decatur, the South & North Alabama, the Mobile & Montgomery and the New Orleans, Mobile & Texas were each placed by the Commission at three cents per mile, and on the rail road from Montgomery to Selma at four cents per mile, and on the Wetumpka Branch, the Pensacola & Selma, and the Repton Branch each to remain at what they were when the revision of rail road tariffs commenced, namely five cents per mile.

THE TARIFFS IN FORCE PRIOR TO AND AT THE TIME OF REVISION BY THE RAIL ROAD COMMISSION OF ALABAMA.

The tariffs we were called on to revise were very generally the outgrowth of years in the practical business of the transportation service of rail roads. Except in the case of through rates of passengers and freight, and the competition of some local points in the State, direct competition had little to do with their creation. Nor were they based to any appreciable extent on the mere cost of transportation, but they were regulated more by distance, the nature and value of the articles transported, and what costs of transportation such articles would bear with reference to their value without such transportation and with it. They were made to enable each company to obtain the best return it could under all the circumstances from its transportation service. They were made in most instances for companies having a very large bonded debt as shown in our first annual report and as will also appear in this report. Many of them had been in force for years and had undergone no material change during all that time although for several years there had been a steady increase and improvement in rail road business and in the value of rail roads. While in nearly every instance the investment made in them by those we found operating these roads was greatly less than their cost of construction yet these tariffs had remained substantially the same during the period to which we have referred notwithstanding the increase in the business of rail roads and the improvement in the value of this class of property. We examined into the affairs of these rail roads and we found them as estimated by the companies and their gross earnings, expenses, net earnings and per centage to the cost of rail road and equipment to be about as set forth in the following table: