APPENDIX No. 5.

ANSWERS TO INQUIRIES IN RELATION TO COMMERCIAL MOVEMENTS TO AND FROM THE STATE OF IOWA, THE VARIOUS LINES OF TRANSPORT FROM THAT STATE TO SOUTHERN AND EASTERN MARKETS, STATE REGULATIONS OF FREIGHT-CHARGES ON RAILROADS AT THE WEST, AND THE GENERAL COURSE OF COMMERCE OF THE NORTHWESTERN STATES, BY COL. MILO SMITH, OF CLINTON, IOWA. 1876.

Question 1. Please to present statistics of the tonnage passing down the Mississippi River at each bridge, and statistics of the tonnage passing over each bridge at each railroad crossing below Saint Paul, Minn., and above Saint Louis.

Answer. The season of navigation for 1875 commenced April 5 and ended November 19, lasting 229 days.

The total tonnage of steamboats and barges employed in the transportation of freights passing the bridge at Dubuque was, of boat-measurement, 253,955 tons. Of this amount 100,000 tons stopped at Fulton, delivering at that point 70,000 tons (of 2,000 pounds) of grain and flour. The total amount passing the bridge at Clinton was 153,955 boat-tons. Of this amount 42,126 boat-tons stopped at Rock Island, leaving 111,829 boat-tons going to Saint Louis carrying 43,320 tons of merchandise, 88 per cent. of which was grain and flour.*

The tonnage (of 2,000 pounds) passing the Dubuque bridge during the season was 113,320 tons, of which 93 per cent. was grain and flour; passing the Clinton bridge, 58,320 tons; passing the Rock Island bridge, 43,320 tons; passing the Burlington bridge, 46,522 tons; this is a fair estimate of the river-tonnage.

The number of tons of freight passing east over the bridges across the Mississippi River is as follows:

This does not embrace the 70,000 tons left by steamers at Fulton, and going east over the Chicago and Northwestern Railroad, consisting wholly of grain and flour, and all coming from west of the river, nor the amount left by steamers at Dubuque, Prairie du Chien, and La Crosse, or from points where there are no bridges.

It is safe to estimate that there is 300,000 tons of freight from points west of the Mississippi River which moves east by rail, and which does not pass over any of the bridges, making a total tonnage of 2,644,354 tons of east-bound freight from west of the river, of which at least 2,000,000 tons consisted of grain and flour.

The most important and valuable business on the river is the lumber business. The total amount of manufactured lumber, shingles, laths, and logs coming into the Mississippi River from Minneapolis to the mouth of the Wisconsin River is fully 1,000,000,000 feet. About 550,000,000 feet pass the Dubuque bridge, about 500,000,000 feet pass the Clinton bridge, about 400,000,000 feet pass the Davenport bridge. All the

*The boat-ton is 100 cubic feet of space, and the merchandise-ton is 2,000 pounds weight. The two expressions are, thrrefore, entirely different.

logs are landed at and above Saint Louis and are manufactured into lumber. The product is sent east and west over the various lines of railroad. Some of the manufactured lumber, shingles, and lath are run farther down the river, but the greater part of it is consumed at the towns along the river below the mouth of the Wisconsin River from whence it is shipped east and west on the various lines of road crossing the river. The total amount of lumber, shingles, laths, and logs would equal 2,500,000 tons of freight, nearly all of which is towed by steamboats in rafts containing usually from 200,000 to 1,000,000 feet in each raft. The aggregate value of the logs and lumber sent down the Mississippi River and consumed every year is over $10,000,000, and is increasing year by year.

This is a business which cannot be done by rail. While the traffic in merchandise and farm-products is gradually seeking the railroad as a means of transport, the lumber business must always remain a river business.

Question 2. The proportion of first, second, third, and fourth class and special-class tonnage, both east and west bound, which crossed the Mississippi River during the present year?

Answer. None of the roads running west from Chicago keep a record of the different kinds of freight passing over their lines east or west.

From the best approximate estimate obtainable, it would appear that the proportion of first-class freights carried west would be less than 5 per cent., and of all classified freights less than 15 per cent. All classified freights east-bound embrace but from 3 to 5 per cent. of the total movement.

Question 3. A statement in regard to the discriminations with respect to rates on the railroads of Iowa.

Answer. The accusations made against the railroads of Iowa are numerous. Many of them are true, and many are not true; but the charge of discrimination in all of its various forms has been used to create prejudice against the roads, and to induce the passage of the law of 1874. The friends of restrictive legislation assume that all discrimination is unjust, and should therefore be declared illegal. It will be conceded that much of the discrimination practiced by the roads is unjust, and in the end unprofitable to the roads, as it prevents the development of the country from which their business comes, and creates a feeling of hostility among the people. By such acts on the part of the railroad companies a strong public sentiment in favor of restrictive legislation was awakened. The practice prevailed on nearly or quite all the trunk roads of Iowa of printing and posting up a tariff of charges for the public, to be used for transient and small shippers, and at the same time special contracts were made with large and regular shippers at very much reduced rates. The railroads were accused of practicing this to such an extent as practically to drive small shippers out of the business, and to make the business along their line a monopoly in the hands of a few large operators.

They were also accused of shipping grain from interior points to Chicago for 15 cents per 100 pounds, and of charging 22 cents from the Mississippi River towns, 40 miles nearer Chicago, the former being competing points and the latter not. The Chicago and Northwestern Railroad charged $84 per car for lumber from Clinton to Dunlap, and only $45 per car to Council Bluffs, 48 miles farther, the latter point being a competing and the former a non-competing point. Another road was accused of carrying merchandise to Des Moines at a rate so much less than to the towns east of that point, that the merchants doing business in the smaller towns shipped their goods to Des Moines, and then back at the local rates, in order to save expense.

Such accusations were very numerous. The published rates of some of the trunklines of the State appear to indicate that the practice of charging the public more for shipping between interior towns of the State and the Mississippi River towns than between the same interior towns and Chicago was adopted as the rule of the roads. This practice prevailed to a greater or less extent on all the roads of the State. By an examination of the tariffs, herewith inclosed, marked "C" and "D," in force prior to the law of 1874, it will be seen that the local rates between certain interior points and the river exceeded the rates between Chicago and the same points. This, however, is only a discrimination against the local business, and in favor of the through or interstate business.

But discriminations were chiefly made under special contracts. Before the passage of the railroad-tariff law of 1874, so large a proportion of the business was done by special contracts that published tariffs on many of the roads afforded no guide as to the rates actually charged except to transient shippers. Since the passage of that law, the local rates in the State of Iowa have been more strictly adhered to. Inclosed herewith will be found joint and local tariffs of the various east and west and north and south trunk-lines, showing the present rates under the law and the rates prior to its passage. The real difference in these rates is not as much as appears upon the face of the tariffs, as prior to the passage of the law so much was done on special contract that no computation can be made as to the amount actually received by the roads. It was often the case that a radical defect in the published rates was cured by a special contract, and perhaps as often very great injustice was done to rival shippers or towns,

since it has been the universal practice of all the roads to make special rates for competing points, and to pay but little attention to published rates.

During the season of navigation, the Mississippi River is a competitor for certain kinds of freight. Then the roads so adjust their rates as to prevent the business stopping at the river, and make special contracts for freights accumulated at river points. Question 4. A general statement of the railroad question of Iowa, in so far as it relates to State regulation of freight and passenger charges, and the nature and scope of the laws under which such regulations have been enforced.

Answer. All the railroads of Iowa are organized under a general incorporation act. The constitution of the State prohibits the granting of special charters, and consequently all the roads are subject to the same law, except such roads as have received land-grants.

It is held that in these cases there are special provisions which control the question of rates. The Chicago, Rock Island and Pacific Railroad, when asking for special legislation some years ago, entered into an agreement to abide by any regulations the State might make in regard to rates.

The four main trunk lines running east and west across the State of Iowa are landgrant roads, except eighty-two miles at the eastern end of the Chicago and Northwestern Railroad, from Clinton to Cedar Rapids.

These roads, directly or indirectly, control the entire railroad business of the State, and any rate of freight fixed for them, either voluntarily or by law, fixes the rate for all the others, both east and west, north and south.

In 1856, Congress conveyed to the State of Iowa a large grant of land for four lines of road across the State from the Mississippi to the Missouri River; one from Dubuque to Sioux City, (1,226,558.32 acres ;) one from Sabula and Lyons (forfeited) to Council Bluffs; one from Davenport to Council Bluffs, (774,674.36 acres ;) and one from Burlington to a point on the Missouri River near the mouth of the Platte River, (339,108.45 acres.) Three of these lines built according to the grant and saved their lands. The fourth (from Sabula and Lyons) forfeited theirs, and their portion was regranted to the Cedar Rapids and Missouri River Railroad, extending from Cedar Rapids to Council Bluffs, now a part of the Chicago and Northwestern Railroad. This grant covered 1,226,163 acres.

The act of the legislature accepting the trust and granting the land to the various lines was passed July 14, 1856, and took effect July 16, 1856, and in making the grant to these lines the legislature made the following provision, (section 1311 of the code and section 14 of the act, page 218 of the revision of 1860 :) "Said railroad companies accepting the provisions of this act shall at all times be subject to such rules and regulations as may from time to time be enacted and provided for by the general assembly of Iowa, not inconsistent with the provisions of this act and the act of Congress making the grant."

It is understood that Judge Dillon, United States circuit judge, has decided, at the last term of his court, held in Des Moines, in May, 1875, in a case against the Chicago, Burlington and Quincy Railroad, now owning and operating the line from Burlington to the Missouri River, that this section compels all the land-grant roads to submit to any regulation made by the legislature for the government of such roads, and that the State has the inherent right to regulate the rates on all the roads of the State. An appeal has been taken to the United States Supreme Court, and the question is to be argued during the present month.

The legislature, in 1874, passed a railroad-tariff law, fixing maxima rates, (a copy of which I herewith inclose,) and also providing against discrimination. This law reduces the rates on local business (that is, business within the limits of the State) in some cases fully one-half, making the rates uniform for like distances on any part of the road, without reference to grades and curves. The rates are fixed at so much per hundred pounds, without reference to quantity. The effect of the law is to compel the roads to receive, way-bill, send, and deliver very many packages for one cent, two cents, &c., practically making them carry all small packages for nothing, the rate allowed not being sufficient to pay for the blanks.

The friends of the measure declare that they will correct this defect at the next session of the legislature by allowing the roads to charge twenty-five cents for any package, however small.

Some of the railroad companies, in order to partially make up the deficiency caused by the reduction of their local rates, have added largely to their through-charges, or charges on inter-State commerce, and in that way have more than made up their losses on the local business. The practical effect of the law is to give the people who do business within the State low rates, and those who ship out of the State higher rates. It has also had the effect of stimulating business within the State by enabling manufacturers of agricultural implements, lumber, &c., jobbers, and wholesale merchants to compete successfully with outside parties. It also enables the pork-packers to ship hogs to their places of business at much lower rates than before, as the roads have always heretofore charged very high rates on this class of business. As the case now stands, it is not so much a question between the roads and the people as between the two

classes of shippers. What the law takes off the local business, the roads add to the through-business.

Iowa having no market-town for her surplus products, the great bulk of it goes to Chicago and to points farther east, and, being inter-state commerce, the roads are enabled to this extent to protect themselves against the law.

The same rule, if applied in Illinois, would work entirely different results, as nearly all the business originating in that State ends at Chicago, and is therefore local business to the State, and is at the same time through-business, it being carried from the place of shipment to the end of the road; and while the local business of Iowa is but a small part of the business of any one of the trunk-lines running through the State, the local business of the roads in Illinois amounts to a very large proportion of their

business.

By reference to copy of law, herewith inclosed, it will be found that maxima rates and prevention of unjust discrimination are both embraced within the scope of the law.

No road in the State is exempt from the operation of the law. They are all classified, but in some cases the rate allowed by the law is more than the rate charged by the roads. The fact that the law fixes the rates of one road from a competing point, is equivalent to fixing it on all roads competing for the same business. The law is designed to prevent unjust discrimination. As will be seen, it makes the rate according to distance.

The regulation of rates applying to all the roads, they are all affected alike. Regulating the local business does not necessarily work unjust discrimination. The roads having the power to raise and lower their rates on inter-State business at pleasure, they may so regulate those rates as to create unjust discrimination. There are various reasons assigned for the legislation of 1874 in reference to railroads, some members of the legislature assigning one reason and some another. Some of the reasons assigned were merely imaginary. Perhaps the strongest argument, and the one producing the greatest effect, was the practice of the roads in discriminating against the local business of the State, or charging as much and in many cases more to and from the interior points in the State to the Mississippi River as from the same points to Chicago, and in making a different classification for all kinds of grain on their local tariff from the one enforced on their joint tariffs.

Another ground of complaint was the charging of a less rate for long distances than for short distances, the former applying to competitive business and the latter to noncompetitive business. This was practiced by all the roads.

Instances of this character were numberless. They characterized the rates on all the roads, and were claimed to be prima-facie evidence of unjust discrimination. Finally they were used with powerful effect against the roads.

The cry of "monopoly," together with the personal differences many of the members had to settle with the roads for real or fancied grievances, contributed to bring about the legislation of 1874. One illustration will serve to show to what extent personal prejudice against an employé of a road will influence legislation.

During the session of 1872, a member living on the line of one of the main roads was found to be strongly in favor of very stringent laws regulating the rates of railroads, and no argument that could be presented produced any effect. He was in favor of the strongest and most stringent measures possible, and nothing short of that would satisfy him. The discussion developed the fact that his reasons for desiring the legislation were that a telegraph operator in the employ of the company had treated him badly; that he had asked that the offending operator be discharged; that the officers of the company had declined compliance with the request, and he proposed to "get even with them" by passing a tariff law.

Again, very much of the contest was purely political. The cry of "anti-monopoly " was seized upon by politicians as a hobby upon which to gain political power.

There is much in the management of the roads that is censurable, much that has a tendency to create ill feeling, and much that does not bring to the roads any benefit to offset the injuries inflicted by them.

The discrimination against their local business shown in the published rates created a very strong feeling against the roads in the minds of local shippers, in connection with the fact that the published rate was disregarded and special contracts were made for the bulk of the business, leaving but a small fraction of the local business to go at published rates. The local business, being only from 15 to 25 per cent. of the whole, made but little difference in the total earnings.

If the local rates had been made to conform more nearly to the through-rates it would have relieved the roads from very much of the odium of unjust discrimination. Another reason for the opposition to the roads is found in the fact that all the main trunk-lines of the State are controlled and managed outside of the State, by parties who have no interest in the State except to make what money they can out of the business. The proprietaries are looked upon as rich and powerful corporations that are making a large amount of money and charging more for doing the carrying-trade of the State than they are entitled to.

In many cases probably the desire to enact restrictive laws arose from the opinion that the authority of the State should be asserted in order to keep the railroads in check. Perhaps no two men who favor legislation would give the same reasons for their views.

The following facts indicate some of the defects of the present law:

It will be observed by an examination of the local tariff of the Chicago and Northwestern Railroad, which is plainer than any other, that under the law no allowance is made for difference in grades or curves, or for differences in the expenses of doing the business or the amount to be done. All the roads of the same class and all parts of them are placed on the same level. A rate that would be remunerative with full crops and low prices when the grain will not bear a high tariff, would be entirely inadequate for the roads when there is a short crop, and consequently high prices, and when the crop would bear a much higher rate.

The law allows the roads no discretion except as to keeping at or below the rates fixed, and while the rates may be remunerative this year, there is no certainty that they will be remunerative next year. Upon the failure of a crop the receipts of all the roads of the State might fall so far below their absolute requirements as to place them in danger of passing into the hands of receivers.

There is much more uncertainty about the amount of business a road can secure annually in an agricultural country than in any other. The failure of the grain-crop of Iowa would take away fully three-fourths of the freight business of all the railroads of the State. Again, under the law the rate is the same on the west end of the roads, where the country is rough and broken, the grades steep, and the curves sharp, as on the east end, where the country is comparatively level and the road straight.

On one portion of the road an engine will haul twice as many cars as on the other. On the western portions of the roads, there being much less business to be done than at the east, the cost of doing it is far greater.

The fact that under the law rates are made equal is in no respect detrimental to the interests of the people of the State except by giving the roads an excuse for raising their rates on the through or inter-State business, such business not subject to State legislation. Again, by the terms of the law it will be seen that all branch roads belonging to a trunk-line are placed in the same class as the main line without any reference to earnings, thus discriminating against a road merely on account of its ownership.

If a branch road earns less than $3,000 per mile and is operated by a separate company, it belongs to Class C; but if it is leased or operated by a road earning over $4,000 per mile, it is placed in Class A, thus discriminating against the roads which are able to operate these branches. In many cases branch roads have been built by local stockholders and leased to the trunk-lines for a percentage of the gross earnings. As soon as leased, however, the law reduces the rates, in many cases 50 per cent., thus discriminating not only against the lessor, but also against the lessees, i. e., the local stockholders. There are a number of branch roads in the State which cannot, under the most favorable circumstances, pay any interest on the investment in them, and the reduction in rates made under the law, makes them practically worthless, and a burden even to the operators.

Again, the law places all roads earning over $4,000 per mile in the same class, without any reference to the capacity of the road, the cost of doing business over it, or the net earnings the owners are able to obtain from it.

One of the trunk-lines across the State can haul an average of fourteen cars to a train and earns $4,048 per mile; another can haul twenty cars with the same class of engines and earns $8,000 per mile. One loses money on all its Iowa lines, the other makes money, yet both are in the same class and have to do business at the same rate. Another road, owned and operated entirely in this State, all its business being affected by the law and earning $4,300 per mile, is classed with one earning over $11,000 per mile, with only 20 per cent. of its business affected by the law.

The whole theory of the law is based upon gross earnings without any reference to net results. Examples of the kind just stated are numerous and show the danger of legislating without a knowledge of the subject at issue.

It is a fact that the law makes more unjust discriminations than the roads ever did.

Question 5. About what percentage of the total tonnage of the trunk-lines of Iowa is not subject to State regulation owing to the fact that the traffic comes under the designation of inter-State commerce?

Answer. In the absence of reliable statistics a strictly correct statement of percentage cannot be made. From the most reliable estimates furnished by the officers of the roads, the following statement would appear to be practically correct.

Over the Chicago, Burlington and Quincy Railroad, from 15 to 25 per cent. of the business is local and subject to regulation under the law. Over the Chicago, Rock Island and Pacific Railroad, from 20 to 25 per cent. of the business is local and subject to regulation under the law. Over the Chicago and Northwestern Railroad, from 23 to 27 per cent. is local and subject to regulation under the law. Over the Illinois Cen