THE MAIL PAY ON THE
BURLINGTON RAILROAD

Statements of Car Space and all Facilities Furnished
for the Government Mails and for Express and
Passengers in all Passenger Trains on
the Chicago, Burlington and
Quincy Railroad

Prepared in accordance with requests of the Post-Office Dept.

THE MAIL PAY

ON THE

Chicago, Burlington & Quincy Railroad

The present system under which the Government employs railroads to carry the mails was established in 1873, thirty-seven years ago. Under this system, the Post Office Department designates between what named towns upon each railroad in the country a so-called "mail route" shall be established. Congress prescribes a scale of rates for payment per mile of such mail route per year, based upon the average weight of mails transported over the route daily, "with due frequency and speed," and under "regulations" promulgated from time to time by the Post Office Department. To this is added a certain allowance for the haulage and use of post office cars built and run exclusively for the mails, based upon their length. The annual rate of expenditure to all railroads for mail service on all routes in operation June 30, 1909, was $44,885,395.29 for weight of mail, and for post office cars $4,721,044.87, the "car pay," so-called, being nine and five-tenths per cent of the total pay. The payment by weight is, therefore, the real basis of the compensation to railroads. The rate itself, however, varies upon different mail routes to a degree that is neither scientific nor entirely reasonable. The rate per ton or per hundred pounds upon a route carrying a small weight is twenty times greater than is paid over a route carrying the heaviest weight. The Government thus appropriates to its own advantage an extreme application of the wholesale principle and demands a low rate for large shipments, which principle it denounces as unjust discrimination if practiced in favor of private shippers by wholesale. The effect of the application of this principle has been to greatly reduce the average mail rate year by year as the business increases. This constant rate reduction was described by Hon. Wm. H. Moody (now Mr. Justice Moody of the United States Supreme Court) in his separate report as a member of the Wolcott Commission in the following language:

Note.—Since 1907 the railroads have been paid at much reduced rates. On the heavy routes the pay is now 5.54 cents per ton per mile.

Post Office Department officials have announced, as their conclusion from the results of the special weighing in 1907, that the average length of haul of all mail is 620 miles.

The bulk of the mail is now carried on the heavy routes at 5.54 cents per ton per mile, or $34.34 per ton for the average haul, that is, for one and seven-tenths cents per pound.

The railroads, therefore, receive less than one and three-fourths cents per pound for carrying the greater part of the mails.

But the rate reduction for wholesale quantities has not had the effect of reducing the actual remuneration of the railroads for carrying the mails to nearly so great an extent as the increasing requirements for excessive space for distributing mails en route. This feature was likewise discussed by Judge Moody in his report in the following language:

An illustration of the extent to which the reductions have been carried, as shown upon one railroad system, is set forth in the letter of January 21, 1909, addressed to the Committee on Post Offices and Post Roads of the House of Representatives by Mr. Ralph Peters, President of the Long Island Railroad, who states that the actual cost to his company of carrying the United States mail for the year was $122,169, while the total compensation for that service paid by the Government was $41,196. Mr. Peters says:

The Long Island Company notified the Government that it would decline to carry the mails by the present expensive methods, unless Congress makes some provision for a more adequate compensation. A notification of similar import has been given by The New York, New Haven & Hartford Railroad Company, the principal carrier in New England. Their position in this matter will undoubtedly be taken by other roads, because the same condition of inadequate compensation prevails upon hundreds of small railroads and mail routes, especially in the Southern and Western States.

Notwithstanding these facts, a powerful interest, which commands the public ear and derives great profit from the one-cent-per-pound rate of postage, has, in order to divert public attention from itself, for years industriously and systematically circulated false statistics and false statements among the people regarding the railroad mail pay, and is now circulating them.

The extent to which the public is being deceived regarding the railroad mail pay is disclosed daily. In a recent hearing before the Senate Committee on Post offices and Post-Roads, Senator Carter of Montana said:

This state of things was a sufficient reason for the Post Office Department to institute the present series of inquiries tending to show the space in passenger trains upon the railroads demanded and used by the Government for the mails in comparison with the space devoted to express and passenger service, and the relative rates of compensation in each class of service and the extent to which the roads are receiving for carrying the mails the cost to them of performing the service. In order to give these facts fair consideration, it is not necessary to admit that "space" is, or is not, a better and more workable basis for determining what is reasonable mail pay than "weight," nor to admit that the companies are only entitled to be paid by the Government for the service rendered to it the bare cost of rendering that service, that is, to receive back the train operating cost. Questions of speed and facilities furnished, and the preference character of the traffic and the exceptional value of the service, and other elements, must be considered as well as space and cost, but that is no reason why the relative proportion of space used and the relation of compensation to cost should not be ascertained and given due weight, in the consideration of the important question of what is adequate mail pay to the railroads.

The following pages are based upon answers to the interrogatories of the Post Office Department and contain a statement of the mail service performed by the Chicago, Burlington and Quincy Railroad Company, a system extending westward from Chicago into eleven different States and embracing approximately ten thousand miles of main and branch lines.

The two principal tables of interrogatories were sent out under date of September 28, 1909, by the Post Office Department as the basis for this investigation.

These tables indicate the minute and thorough manner which the Department employed in making this inquiry.

Some questions having arisen regarding the meaning and scope of the word "authorized" in connection with the returns of space occupied and used for the mails in Post Office cars and apartment cars, and in certain other features, the Department, under date October 23, 1909, issued an important supplementary letter of instructions.

Pursuant to these interrogatories, instructions and requests the Burlington Company has filed with the Department the exact and detailed statements, train by train and car by car, of the mail service upon each of the one hundred and two mail routes on its system, large and small, for the month of November, 1909, which were thus called for. These answers state the facts and state them in the manner prescribed wherever possible. Every inch of space on passenger trains and cars which in these tables is shown to be occupied or used for mail or express or for passengers is set down from actual measurements made, car by car, and not upon any "estimate" or "consist" basis.

In the appendix will be found four tables prepared under the direction and supervision of Mr. DeWitt which contain the results of this investigation into the mail service upon the Burlington, as disclosed in these statements.

Exhibit A is a statement of the car facilities or space used in every car in service on the road during the month of November for mail, and for express or occupied by passengers based upon replies to questions prescribed in Form 2601.

Exhibit B is a statement of the station facilities, furnished for the mail, prepared on Form 2602.

Exhibit C is a statement of Revenues and Expenses and of train and car mileage, prepared on Form 2603.

Exhibit D is a statement of the number, and cost, and present value of Post Office cars and Apartment cars, prepared on Form 2605.

THE INTEGRITY OF THE RETURNS.

In November, 1909, all the service rendered in all passenger trains and cars of the Burlington system, reduced to a common basis of car foot miles (that is, each foot of linear space that was carried one mile), amounted to 529,936,590 car foot miles, divided as follows:

The original circular of the Post Office Department contained certain "notes," to the effect that in reporting the length of postal cars and apartment cars, and the space therein used for mails, the railroad companies should only report the length or space "authorized" by the officials of the Department; also that in reporting space used in cars for what is known as the "Closed Pouch Service," the railroads should make an arbitrary allowance of six linear inches across the car for the first 200 pounds or less of average daily weight of pouch mail and three linear inches for each additional 100 pounds.

These directions were modified by the subsequent circular letter of the Department, dated October 23, 1909.

This letter, among other things, directs the company to take credit for "surplus" space in post office cars and apartment cars, if actually used for the storage of mails.

The practical difficulties attending the measurement and proper allotment of the space used for the mails in postal and other cars run on a passenger train will be better understood when it is known that such space is or may be described in at least eight different ways, and is actually used on the Burlington road as follows, namely:

1. Space in post office cars specially "authorized" (43.03%).

2. Space in apartment cars specifically "ordered" (20.69%).

3. Space ordered in post office cars operated in lieu of apartment cars (4.3%).

4. Additional space actually used for storage of mails when the railroad company operates larger post office or apartment cars than the authorization calls for (1.5%).

5. Space in storage cars actually used for mails (12.87%).

6. Space in baggage cars used for closed pouch mails (4.06%).

7. The return deadhead movement of space ordered and required in one direction only (8.35%).

(Ninety-five per cent of all the "space" shown in these returns for the Burlington, as used for the mails, comes within the foregoing seven classes, as properly authorized space about which no question can arise.)

8. "Surplus" space; that is, space furnished to the Government in post office and apartment cars in excess of actual requirements (5.2%).

This five per cent is the only portion of the space claimed as used for mails regarding which any question can be raised, affecting the integrity of these returns.

What is the correct view as to this five per cent?

It is manifestly against the interest of the railroad company to furnish space for mails that is not required, and it will never furnish such space if it can be avoided. But the "requirements" of the Post Office Department are not fixed and certain quantities, by any means. It is entirely impracticable for any railroad company to keep on hand at all times a supply of cars of all lengths in order to meet exactly the requirements of the Department officials.

These statistics have been called for by the Post Office Department to enable it to make accurate comparisons between the space used and the facilities furnished on passenger trains for the three classes of service performed, that is, for express companies, for the Government in mail carriage, and for passengers. The point of the whole inquiry is this:

Does the Government contribute to the cost of the passenger train service upon the railroads of the country its fair share, that is, in proportion to the space and facilities it demands and requires the companies to furnish for the mails?

In making the comparison all the car space in all passenger trains must be measured and tabulated and has been measured and tabulated in the tables here submitted.

A passenger car may have seats to accommodate eighty persons; the average load it carries may be fifteen persons. But in making up these returns of "space," all the empty space in that car is credited as passenger space. That car may likewise be loaded only one way and returned "dead head," but these returns have credited such return movement as passenger space.

The same is true of the express service in these returns. All space in all baggage and express cars set aside for the express company's use is, in these tables of statistics, credited to express, whether in fact loaded or "surplus," or "dead head" space.

How is a comparison possible, unless the space credited to the mails is recorded in the same way? As stated above, only five per cent of the whole space is involved in the question of "surplus" space, and if that five per cent should be entirely thrown out, the percentage results would not be materially changed.

RESULTS UPON THE BURLINGTON ROAD.

The Government cannot justly ask a railroad company to carry the mails without profit.

The passenger business on the Burlington road is conducted without profit if it is charged with the expenses assignable to passenger traffic, and a proper proportion of the expenses not thus specifically assignable, and a fair share of the taxes and the charges for capital in the form of interest on bonds and dividends on stock. The profit in the business comes from the freight.

This fact gives force to the present inquiry of the Post Office Department to determine whether the Government, in proportion to the service and facilities it requires from the roads on passenger trains, is contributing a fair proportion of the passenger train earnings. If the passenger train business, as a whole, is carried on at a loss, the Government ought, in fairness, to stand at least its share of the loss.

The earnings of the Burlington Company from all passenger train service in November were $2,242,099.

The following table shows the earnings from passengers, from mail and express, and the space used in passenger trains by the three classes of traffic and the proportion of earnings contributed for facilities so used:

This table shows that for each one thousand feet of space used in passenger trains the three classes of passenger traffic contributed in earnings as follows:

In proportion to the space occupied and facilities used on passenger trains, the Burlington road receives from passengers 39 per cent more than the Government pays for mail transportation, and from the Adams Express Company 52 per cent more; that is, the express business pays the railroad company better than the Government pays for carrying the mails by 52 per cent.

If the Government had paid to the railroad company as much as the express company for each foot of space required and used on passenger trains, it would, for November, have paid $101,233 more than it did pay, or an increase in annual mail pay of more than a million dollars.

It may be of interest to note that the returns for the Pennsylvania System just being filed show the following:

For each 1,000 feet of passenger train space used on the Pennsylvania the traffic contributed in earnings as follows:

On the Pennsylvania the passenger business is worth to that company 39 per cent more than the Government mail business, and the express business is worth 22 per cent more than the mails, indicating that express rates are relatively higher in the West than the East, but that neither in the East nor in the West is it a paying business to carry the mails at present rates.

IS THE GOVERNMENT PAYING THE RAILROADS FOR CARRYING
THE MAILS THE COST OF DOING THE WORK?

No. The Government paid the C. B. & Q. for carrying the mails in November $194,435, or at the rate of $2,333,220 annually.

The total operating expenses of the road for that month were $5,452,830.

The items of passenger train operating expense strictly assignable were as follows:

A large part of the operating expenses of every railroad, such as maintenance of roadway, station expense, general office expense and the like, are common to both the freight and passenger service, and it seems impossible to assign all of them specifically. The Post Office Department, in the circular under which the roads are reporting, recognizes this condition and calls for the "proportion" of the expense "not directly assignable and the basis of such apportionment."

The apportionment of non-assignable expense on the Burlington has been made on the basis of train mileage.

In the month of November the mileage of passenger trains was forty-five and four-tenths per cent of the total train mileage, and the foregoing sum ($1,278,016) of non-assignable expense is forty-five and four-tenths per cent of the operating expenses for that month, common to both kinds of traffic, and therefore incapable of specific assignment to either.

These two classes of passenger expense (assignable and non-assignable) aggregate $1,915,371 monthly, or at the rate of $22,984,452 per year, and 11.75 per cent of this sum, or $2,700,675, is the annual operating cost to the Burlington Company of transporting the Government mails.

These figures show that, in proportion to the service rendered, the Government paid to that company $367,455 less than the actual cost of doing the work, not including anything for taxes, nor for interest paid by the company upon its funded debt, which was necessary to be paid, in order to preserve the property, to say nothing of a return upon the capital represented by the capital stock.

The correct mail's proportion of taxes and interest for the year is $634,713, which added to the $367,455 loss above operating expenses, shows a loss of $1,002,168:

This takes no account of the annual value at two cents per mile of the transportation of inspectors and postal employees, other than clerks in charge of the mails ($74,352), nor of clerks in charge of the mails ($746,340).

These two items of service rendered to the Government by the C. B. & Q. road are of the admitted value of $820,692 annually.

The railroad company has the same duty and legal responsibility towards these clerks as towards passengers.

Is there another fair way of testing this question?

In a letter dated March 2, 1910, from Hon. Frank H. Hitchcock, Postmaster-General, to Hon. John W. Weeks, Chairman of the Post Office Committee of the House, printed in full herewith, he states it is estimated that the average annual cost to the railroads of operating a post office car for the Government is $19,710, including $2,049 for lighting, heating, repairs, etc., and that the total average pay received for the car and its contents including post office car pay, is $16,638 per annum, showing a loss in this branch of the service of $3,073 per car. There are 1,111 full postal cars in actual service in the country, and the loss thereon, therefore, aggregates $3,414,103, to say nothing of the 231 postal cars in reserve.

But that is the smaller part of the loss. There were 3,116 apartment cars in actual use in 1909, averaging twenty feet in length, and the cost of operating each of these, according to Mr. Hitchcock's figures, would be one-third of $19,710, or $6,570.

The average haul of apartment cars is 48 miles, and the average load in a twenty-foot apartment car is officially stated as 607 pounds, making the rate per mile on routes carrying an average daily weight of only 607 pounds, $68.40 per annum, and the average earnings, therefore, $3,283 per year, an average loss of $3,287 per car and an actual loss per year from operating the 3,116 apartment cars of $10,642,292, to say nothing of the 639 apartment cars in reserve.

The C. B. & Q. has 76 full post office cars and 104 apartment cars, and applying to them the foregoing figures given in Mr. Hitchcock's letter, the loss from operating them in 1909 was $575,396, adding to which $634,713, the mail's proportion of taxes and interest, that must be included in estimating "cost," in which the Government's business should share, the estimated loss on the business was $1,210,109, compared with $1,002,168, arrived at by charging the Government business with 11.75 per cent of the passenger expense, that being its proportion of the space used in passenger trains.

The Government should be willing to pay fairly for what it exacts from the railroads, and it exacts from the C. B. & Q. 11.75 per cent of its passenger train facilities. If it had paid 11.75 per cent of the passenger train expenses of the road in 1909, it would have paid approximately a million dollars more than it did pay.

The Government which demands from the railroads that they build and transport daily over their roads for its benefit 5,100 traveling post offices as full postal cars and apartment cars should be willing to pay what the Postmaster-General estimates to be the actual cost of operating those cars, and a fair proportion of the taxes and interest.

If it had paid such cost in 1909, it would have paid to the C. B. & Q. approximately a million dollars more than it did pay.

RESULTS ON VARIOUS MAIL ROUTES.

The foregoing are statements of results on the Burlington System as a whole, showing earnings and expenses and facilities furnished to the Government mail service.

It may be of interest, and throw light on the situation, to show results for November upon several separate mail routes in the system, ranging from small routes carrying 200 pounds of mail daily, up, through routes carrying weights, respectively, of 1,300, and 8,000, and 20,000 pounds daily, to the heaviest route carrying 192,000 pounds, covering the fast mail service from Chicago to Omaha.

Weights of express packages are not kept on separate mail routes and statements therefore of express earnings for such separate mail routes are necessarily estimated, but, as given in the following tables, they are approximately correct and corroborate the comparative results for the Burlington system as a whole, which results are based upon exact figures for express as well as for mails and for passengers.

I.

Route 157,030, Kenesaw to Kearney (Nebraska), 24.68 miles. Average Daily Weight 216 Pounds.

The mail earnings on this route are $89 per month, or $3.44 daily. The service for the Government is performed in an apartment car fifteen feet long, and closed pouch service, four trains carrying mail daily, except Sunday, giving an actual return to the railroad of three and a half cents per mile run, or about one passenger fare at three cents per mile although the Government demands the use of a 15-foot car fitted up as a post office in which a postal clerk is carried free, and this car must be lighted, heated and kept in repair, and carried over the route each way daily, except Sunday.

On this branch the actual earnings on passengers per passenger car are 55 cents per car mile.

The post office apartment car equals one-quarter of a passenger car, and the mail should, on this basis, earn at least 14 cents per mile, but it does earn, for all the mail service, at the rate of 3-½ cents per mile, less the expense of delivering mail to and from post offices.

During the weighing period the mails are carried on 90 days and weighed on 90 days, but under the Cortelyou order, these aggregate weights are divided by 105 and the result is called the "average" and forms the basis of pay on this route for four years.

This mail service in a traveling post office on an expensive railroad is paid about one-third the rate per mile that the Government pays to a rural route carrier who carries an average of 25 pounds of mail.

II.

Route 157,028. Odell to Concordia, Kansas. 72 Miles. Average Daily Weight, 282 Pounds.

Mail earnings $288 per month (26 days), or $11 per day.

This service demands a twenty-five-foot apartment car each way for which the pay amounts to 7.64 cents per car mile run, or about the fares of two passengers at three cents per mile who may occupy one seat.

The service is six days per week, but the aggregate weight carried in the six days is divided by seven to obtain the Cortelyou "average" on which the pay is based.

The payment for a twenty-five-foot traveling post office is a little over half the pay per mile for a rural route carrier.

III.

Route 135,012. Streator to Aurora (Ills.). 60 Miles. Average daily weight, 1,303 pounds.

Mail earnings (26 days), $495 per month, or $19 per day.

Four trains on this road carry mail daily, two each way, two in a twenty-five-foot mail apartment and two in a thirty-foot mail apartment, an average earning rate of 7.88 cents per car mile.

The passenger cars on this branch carry an average of 24 passengers each, and earn 48 cents per car mile. The average mail apartment furnished is half a passenger coach.

These four apartment cars, at the same rate as the passenger cars (24 cents per mile), would earn $18,029 per year.

The passenger train earnings on the branch are $79,000 a year. The mails demand 17.38 per cent of the facilities, and on that basis should earn for the company $13,730.

The mail earnings were $5,940, this being the annual compensation after a reduction of nine and one-half per cent through the Cortelyou order, requiring the aggregate of 90 weighings to be divided by 105 to ascertain the "average."

IV.

Route 164,004. Edgemont to Billings (Wyoming). 366 Miles. Average Daily Weight, 8,087 Pounds.

Two 60-foot postal cars are run daily each way.

The mail earnings are $6,156 per month, or $205 per day.

The total earnings of the passenger trains on this road are $1,195,000 a year, and the mails required 10.43 per cent of the passenger train facilities; on this basis they ought to pay $125,000 a year.

These post office cars are hauled 534,000 miles every year. The Postmaster-General estimates that the actual cost to the railroads of operating a sixty-foot postal car is 18 cents per mile. At this rate the Burlington Company should be paid $96,000 a year for the service of the postal cars only.

It is, in fact, paid for all the mail service on this road $73,872 annually.

V.

Route 135,010. Galesburg to Quincy (Ills.). 99.93 Miles. Average Daily Weight, 19,727 pounds.

Mail earnings from all sources $3,511 per month, or $117 per day.

The service is performed in three 60-foot postal cars, two 16-foot apartments and one 27-foot apartment, each way daily; also one 44-foot postal car and one full storage car, daily except Sunday, in addition to some space furnished for closed pouches in ordinary baggage cars.

The car space provided for the mails on this route is equivalent to ten full sixty-foot cars daily, over the whole length of the route, or 365,000 car miles a year. At 18 cents per mile the pay would be $65,700, whereas the actual pay is only $42,132. If the Government paid for the service in proportion to the facilities it demands and receives, it would pay $98,244.

VI.

Route 135,007. Chicago to Burlington (205 Miles). Average Daily Weight, 192,540 pounds.

On the basis of space used and facilities provided for the mails, the Burlington road is underpaid $119,000 a year on this route.

Two-thirds of the weight of mail is carried in special trains run at great speed and unusual expense, for which no extra allowance is made. The extension of the route to Omaha is across Iowa, where it is "Land Grant," and subject to land grant deductions.

The Government made a "gift" to the company in 1856 of lands amounting to 358,000 acres and then valued at $1.25 per acre, or $447,500.

The mail pay deductions to June 1, 1910, on account of this Iowa land grant aggregate $1,650,000, and still continue at the rate of $62,000 a year.

Neither in the foregoing six statements of results upon separate mail routes, nor in the general statement of results upon the Burlington Road has any allowance been made for the expense to the company of what is called the "Mail Messenger Service."

At all points where the post office is not over one-fourth of a mile from the railroad station the railroad company must have all the mails carried to and from the post office.

What an important item of expense this amounts to appears in the following extract from the Report of the Wolcott Commission, which states:

Investigation has shown that on mail routes, where the average mail pay of the railroad company is $900 a year, the average cost of this mail messenger service is $400, calculating only $100 as the expense for each station where they are required to perform the service. There are instances where the company pays in cash each year, for delivering the mails between station and post office, considerably more than the Government pays for the entire mail service over its line of road. There is no such feature in the express service.

WHY DO RAILROADS CARRY THE MAILS WITHOUT PROFIT?

The question is sometimes asked why the railroads continue to carry the mails if there is no profit in the business. Carrying the mails is not the only traffic which railroads take upon terms that would bankrupt them if applied to all their business.

There is no profit in running passenger trains on most railroads; that is, the receipts from all the traffic carried on passenger trains are not sufficient to pay a train mileage or car mileage share of operating expenses and taxes and charges for the use of capital. But a large part of this cost of conducting the business of a railroad, such as taxes, interest, maintenance of roadway, general office expenses, and many others, would continue substantially the same if the passenger trains were discontinued. Having the railroad, and its taxes, and interest, and maintenance expenses to meet, anyhow, no railroad can afford to refuse any income from passenger trains that amounts to more than their train operating cost. On the same principle they accept low rates per mile as a share of through passenger fares which, if applied to all passenger fares, would show a loss. The road is there, the trains are running, and the cars only partially loaded; the addition of through passengers may not materially increase the expense, and the road is better off to accept the business at less than the average cost, rather than to reject it. But whatever the passenger trains lose must be made up by the freight trains if the road is to continue in business.

The constant aim of the managers of the railroad is to secure from each class of traffic not only the operating cost peculiar to that traffic, but a proportion of the general cost; but business is not necessarily rejected on which it is impossible to secure such proportion.

Many of the reasons which impel them to run passenger trains without profit apply to their acceptance of the Government mails. They facilitate the freight business; it is better to carry them at a loss than not to carry them at all.

But is that any reason why the Government should not pay fair value for what it receives? Is it good policy for the Government to force upon the companies the alternative of carrying the mails at a loss or refusing to carry them at all?

What are the mails?

They are the letters and packets that are conveyed from one post office to another under public authority.

Who conveys them? The railroads convey nine-tenths of them.

The railroads are the mail service of this country. The Post Office Department states that it receives from the people who use the mails eighty-four dollars on every one hundred pounds of letters and post cards. Who makes that money for them? The railroads. The railroads convey those letters and cards from post office to post office—not the Government.

For a service like that the Government can afford to pay.

What does it pay?

On the great bulk of the business the railroad companies which do the work and earn the money receive less than two dollars a hundred. On every pound of first-class mail the Government collects eighty-four dollars a hundred.

The fact that the Congress, for purposes of general education or other reasons, thinks it is good public policy to carry the magazines and other second-class matter at one dollar a hundred is something about which the railroads have nothing to do and nothing to say.

The mail pay of the railroads has been reduced in the past four years more than eight million dollars a year. Part of this was done by act of Congress, but the greater part came from the arbitrary and illegal Cortelyou order.

These reductions were made without any hearing being granted to the railroads. Hearings were refused by the Committee which reduced the pay three and a half millions, and no pretense of a hearing was made by Secretary Cortelyou when his autocratic order was issued reducing the mail pay approximately five million dollars a year. This order was an arbitrary and unwarranted and illegal exercise of executive power.

The last hearing allowed to the railroad companies on this subject was by the Wolcott Commission, 1897 to 1900, composed of eminent Senators and Representatives. They reported, after two years' investigation, that the mail pay was reasonable and should not be reduced. Upon the question whether railroads should be asked to carry the mails at a loss their report expressed the following views:

THE POSTAL CAR PAY.

The wide credence which has been given to the statement that the Government is paying to the railroads an annual rent for postal cars equal to the cost of building them is remarkable.

The Government does not pay a rental for any car. The idea is an erroneous one, and is based upon ignorance regarding the payment of what is called "Post Office Car Pay."

Originally, the mail business on railroads was the transportation of mail bags, and was essentially a freight traffic. But its character has entirely changed.

The business now consists almost wholly in providing moving post offices, expensive to build and expensive to operate, in which the average weight for which pay is received is about two tons in full postal cars and six hundred pounds in apartment cars.

The Post Office Department weighed all the mails carried in all postal cars and apartment cars in the country during October, 1907, and the average weight of mail on the Burlington road loaded in a forty-foot postal car was found to be less than 2,000 pounds; in fifty-foot cars it was 2,500 pounds; and in sixty-foot cars it averaged less than 4,500 pounds; in apartment cars it was 607 pounds.

The average load carried in an ordinary freight car on the Burlington road is from 36,000 to 40,000 pounds. Railroads, as a rule, haul a ton of paying or productive freight for every ton of dead or unproductive load. In the Government mail business they carry nineteen tons of dead weight for each ton of paying weight.

These cars are fitted up as post offices and are used for distribution en route in order to expedite and facilitate the prompt transmission and delivery of mails. They largely take the place of very expensive distribution offices in cities.

The railroads provide cars for freight traffic, but refused to build, and maintain, and haul these moving post offices with their clerks and paraphernalia, without pay. That is the post office car pay of which so much is said.

The truth regarding this feature of the subject is clearly stated in the following recent letter from the Postmaster-General:

(Congressional Record, March 5, 1910, 61st Congress, Second Session, Vol. 45, No. 61, Page 2852.)

The Wolcott Commission carefully investigated the whole subject of Postal Car Pay and their conclusions regarding this form of compensation and its reasonableness are set forth in their report in the following language:

MAIL RATES AND EXPRESS RATES.

No feature of this question has been more persistently misrepresented than the relative value to the railroads of the mail business and the express business.

As elsewhere shown, the express business is 52 per cent more valuable to the Burlington road than the Government mails on the mere basis of space used and facilities furnished in passenger trains. There are many other considerations which increase this disparity of value in favor of the express, but reference to them is omitted in order to direct public attention to the following statements of the Postmaster-General in his recent letter upon the subject:

(Congressional Record, March 4, 1910, 61st Congress, Second Session, Vol. 45, No. 60, Page 2802.)

The Government does not own any railroad, but, under the present system, the Post Office Department dictates to the railroad companies upon what passenger trains and in what kind of cars the mails shall be carried. It insists on such space and facilities as it deems necessary for the mails being furnished on the fastest and most expensive trains and demands that these trains keep their fast schedules; this means that all other trains on the road are side-tracked and delayed whenever that is necessary in order to expedite the mails.

There are no such features in the express business.

Demanding a preference traffic, the Government ought to be willing to pay for it more than express rates. In fact, it pays much less than express rates.

The ablest and most competent witness who appeared before the Wolcott Commission on this subject was Henry S. Julier, Vice-President and General Manager of the American Express Company, who said: "Without question, the Government has the cheaper service by far."

Mr. Julier further stated that seven pounds is the average weight of packages sent by express, and the seven pound package is the typical express package, and therefore the earnings from carrying such packages are the true index of the rates actually received. Some railroads receive as their compensation fifty per cent of the express company's earnings; the C. B. & Q. receives fifty-seven and a half per cent.

Mr. Julier was asked by the Commission to file statements showing from the rates in force exactly the revenue received per hundred-weight by the railroad company from the express in comparison with the mail rates. He filed the following:

Table Showing Rates Received by Railways Per Hundred-weight for Mails and Rates Received for Express Between Points Named.

APPENDIX.

Exhibit A.

[Form 2601.]

There are on file in the Post Office Department one hundred and two separate statements showing, for the month of November as to each mail route on the Burlington system, the space occupied and used for mail and for express and for passengers.

In order to make a comparison it was, of course, necessary to reduce each item of space used in each car to a common basis of feet, and the following table shows what are the actual facilities furnished in passenger trains for the three classes of traffic reduced to linear car-foot space:

Car Foot Mileage.

Exhibit B.

[Form 2602.]

Station Facilities Furnished for the Mails and Express and the Value of Other Items of Service Rendered.

Mail Expense.

The foregoing does not include the rental value of space furnished by the railroad company to the Government for handling mails and mail trucks on station platforms, and for storing the mails on platforms at large terminals. This is a large item, but statistics of such space used were not called for. At Chicago Station platform space to the amount of over 6,500 square feet is devoted exclusively to mails handled by the Burlington and Pennsylvania.

In addition to the foregoing, the Burlington Company transported on its trains during November postal clerks in charge of mail for the Government a distance of 3,109,747 miles in the aggregate.

If the Government had paid their fare at two cents per mile the amount paid would have been $62,174.94.

These items of station facilities and other service rendered to the Government for the mails amounted to $86,689 for November, or at the rate of more than one million dollars annually.

Express Expense.

In addition to the foregoing, the agents and employees of the railroad company in the month of November rendered service at stations in handling express and in other ways for the Express Company to the amount of $10,274, but the Express Company paid to the same persons $14,538 in commissions.

The Express Company also shared in the salaries paid to certain baggage men and other joint train employees in November to the amount of $7,480, in addition to the payment of commissions, as aforesaid.

All the items of expense to the railroad company on account of the express in the way of space furnished and free transportation to employees, and services of station agents, amount to $11,840, while the cash payments by the Express Company to the railroad Company indirectly, through payments in commissions to station agents and the salaries of baggage men amounts to $22,018, a pecuniary gain or income from express of $10,178 per month, or at the rate of $124,136 annually, compared with a large outgo annually on account of the mails as shown in the foregoing items.

Exhibit C.

[Form 2603.]

Revenues and Expenses and Train and Car Mileage.

Revenues.

Expenses.

The passenger operating expenses are distributed as follows:

Assignable Expenses.

Proportion of Non-Assignable Expenses.

Exhibit A shows that the entire space in all cars run on passenger trains on the Burlington in November was divided as follows:

If each of these three classes of traffic had contributed earnings and paid expenses in proportion to the space occupied by it, the result in comparative profit or loss to the company would have been as follows:

Comparative Profit and Loss.

If the Government had paid to the Burlington Company for carrying the mails 11.75% of the actual cost of doing the work, and a proportion of the taxes and interest on the funded debt, it would, for November, have paid $83,514 more than was paid, indicating that for the year the Government is paying $1,002,168 less than the actual fair cost of the service it is receiving.

Exhibit D.

[Form 2605.]

Statement of Mail Cars and Apartment Cars.

Postal Cars.

Apartment Cars.