REPORT

OF THE

RAILROAD COMMISSIONERS.

10 Honorable JOHN YOUNG BROWN, Governor of Kentucky:

We have the honor to submit the Sixteenth Annual Report of the Board of Railroad Commissioners, with such general information with reference to railroads in this State and throughout the United States as may be of interest to yourself and the General Assembly.

The Inter-State Commerce Commission has just issued a preliminary report on the income and expenditures of railways in the United States for the year ending June 30, 1895. The report includes the returns from 650 roads whose reports were filed on or before November 9, 1895, and covers the operations of 164,529 miles of line, or 92 per cent. of the total mileage in the United States. The gross earnings were $1,903,022,853, of which $293,465,792 were from passenger service, $683,022,988 from freight service, and $26,217,595 were other earnings from operation, covering earnings from telegraph, car mileage balances, switching, etc.

The operating expenses were $677,667,635, leaving net earnings of $325,355,218 as compared with net earnings of $320,137,670 for the same roads in 1894. Reduced to a mileage basis, gross earnings were $6,096, operating expenses were $4,119, and net earnings were $1,977, or a decrease in gross earnings of $13 per mile as compared with 1894, and of $1,094 per mile as compared with 1893; a decrease in operating expenses of $44 per

mile as compared with 1894, and of $757 per mile as compared with 1893.

Net earnings show a gain over 1894 of $31 per mile of line, :.bût a decrease of $337 per mile as compared with 1893. Passenger receipts fell of $177 per mile as compared with 1894, while freight receipts show a gain of $149 per mile. Passenger receipts were $336 per mile less than in 1893, and freight receipts show a decrease as compared with that year of $755 per mile. These data are also shown by groups, disclosing that the largest gain in net earnings has been in groups I, III and IX.

Income from sources outside of the operations of the roads was $33,057,243, making total income available for the payment of fixed charges and dividends $358,412,461. Total deductions from income, including fixed charges, were $336,351,946, and dividends paid were $53,135,545, leaving a deficit from the operations of the year of $31,075,030. The dividends paid by the same roads the preceding year were $61,504,785.

The report of the Interstate Commission shows that the bonded debt of the railroads of the United States is over $5,350,000,000, at an average interest of 5 per cent., or carrying an interest charge of $267,500,000. Only one railroad in twenty has made any provision for the payment of its bonded indebtedness by a sinking fund, which shows what a narrow margin many of the railway companies are doing business upon. The fixed charges, current expenses and dividends, if any, are paid, leaving no balance to be set aside for the payment at maturity of bonded debts.

It is owing to this that so many of the railroads are in the hands of receivers, a decline of business or a few months of mismanagement rendering a road unable to meet its obligations, and forcing the creditors to seek the management of the courts through a receiver.

These changes frequently result in reorganization, scaling of the bonded debt, or, in other words, in wiping the slate of enough of the obligations to bring down the expenses of the road to its earning capacity. This condition of affairs fills the stock markets with many speculative stocks-stocks which have little or no value of themselves, but are used by specu

lators for purely gambling purposes, and often demoralize legitimate stock operations.

It is said that about one-half of the railway bonded debt is held in England, where the high rate of interest promised makes them popular as investments.

The Louisville and Nashville Railroad Company, more than one-third of whose system lies within Kentucky, and comprising more than one-third of the railroad mileage and twofifths of the value of railroad property of this State, shows an increase of gross earnings for the year (entire system), the total being $19,275,993.79 as against $18,974,336.93 in 1894, an average of $6,521.01 per mile in 1895 as against $6,418.97 in 1894. Great economics in operating expenses last year, however, necessitated an increase in expenses this year to keep the property in safe condition, and the net earnings per mile were $2,367.48 as against $2,405.49 in 1894, The per cent. of expenses to earnings in 1894 was 62.53; in 1895, 63.69. The company included $279,583 of construction outlays directly with the expenses; it has allowed for a net charge of $175,000 on account of the sinking funds; it has also allowed $6,887 for the year's pro rata of the discount on bonds sold; and that $697,669 of advances to the South and North Alabama, made in past years, have been charged against the income of the late year. Yet, after making all these deductions and allowances, as well as providing for fixed charges and operating expenses, the income account shows a surplus on the operations of the twelve months in the sum of $700,585. The deduction for advances to the South and North Alabama is, of course, a wholly exceptional item, not likely to occur again another year. Adding this, therefore, to the $700,585 surplus, to show the results on the basis of the regular calls, we get a surplus balance of $1,398,254. The company has $52,708,620 of stock outstanding, and thus it earned 25 per cent. for its shareholders in a phenomenally unfavorable year.

The gross earnings of all lines in Kentucky in 1894 were $16,939,558; in 1895, $17,147,201, an increase of $207,643. The net earnings in 1894 were $5,666,400; in 1895, $5,648,229, a decrease <of $18,171, indicating an additional expenditure of $225,000 in maintenance of roadway and rolling stock.

The following companies, from operations in Kentucky, showed gross earnings increased or decreased in 1895, as compared with 1894, as follows:

The Louisville and Nashville's increase in gross earnings upon all its lines (2,955.98 miles) was $334,353, showing that all save $41,997 of this was made upon the 1,213.50 miles in Kentucky.

The following table shows the mileage, valuation and State taxes of the railroads during the past five years:

The taxes on the 1895 assessment are of course not yet due. We have no means of ascertaining what additional sums are collected of the railroads as county, municipal and school district taxes.

The entire taxes of the Louisville and Nashville Railroad Company in Kentucky-State, county, municipal and school district-all based upon the valuations by this Commission, for the four years 1891 to 1894 inclusive, were as follows: 1891, $169,918.21; 1892, $207,153.51; 1893, $210,421.76; 1894, $194,760.58.

The most significant railroad event for the year in Kentucky was the opening of the Louisville and Jeffersonville bridge to traffic, and the construction of a freight house, round house