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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:

    "The existing law prescribing railway mail pay automatically
    lowers the rate on any given route as the volume of traffic
    increases. Mr. Adams shows that by the normal effect of this law
    the rate per ton mile is $1.17, when the average daily weight of
    mail is 200 pounds, and, decreasing with the increase of volume,
    it becomes 6.073 cents when the average daily weight is 300,000
    pounds."

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:

    "The rule of transportation invoked is based upon the assumption
    that the increase of traffic permits the introduction of
    increased economy, notably, the economy which results in so
    loading cars that the ratio of dead weight to paying freight is
    decreased. Yet this economy is precisely what our method of
    transporting mail denies to the railroads. Instead of permitting
    the mail cars, whether apartment or full postal cars, to be
    loaded to their full capacity, the Government demands that the
    cars shall be lightly loaded so that there may be ample space
    for the sorting and distribution of mail en route. In other
    words, instead of a freight car, a traveling post office."

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 received from the Government for mail
    service performed in expensive passenger trains one-half the
    rate received by it per car mile for average class freight in
    slow-moving freight trains."

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:

    "We are all getting letters on this subject. I received the
    other day a letter from a very intelligent lady in Montana
    claiming that the Government is paying to the Northern Pacific
    Railway on that branch line for carrying the mail $97,000 per
    year. On inquiring at the Post Office Department, I find that
    the total compensation of the Northern Pacific Company for mail
    service on that line is $3,070 per year."

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:

   In Passenger
     Service.        Mails.       Express.
   428,164,920     62,246,130    39,525,540
     (80.8%)        (11.75%)      (7.45%)

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:

                   _Earnings._         _Car Foot Miles._
  Passengers   $1,859,839 (82.95%)    428,164,920 (80.80%)
  Express         187,825 ( 8.38%)     39,525,540 ( 7.45%)
  Mails           194,435 ( 8.67%)     62,246,130 (11.75%)
               ----------             -----------
    Total      $2,242,099             529,936,590

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:

  Passengers         $4.34      139.1%
  Express            $4.75      152.2%
  Mails              $3.12      100%

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:

                 _Earnings._   _Car Foot Miles._
  Passengers       79.8%            76.2%
  Express          12.6%            13.7%
  Mails             7.6%            10.1%

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

  Passengers     $4.45    139%
  Express         3.91    122%
  Mails           3.20    100%

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:

  Transportation Expense                            $454,208
      Fuel passenger engines              $132,709
      Salaries passenger engineers         100,511
      Salaries passenger trainmen           87,557
      Train supplies, etc.                  55,664
      Injuries to persons                   19,904
      Station employees                     17,160
      Joint yards and terminals             15,610
      Miscellaneous                         25,093
                                          --------
  Maintenance of Equipment                          $107,626
      Repairs, passenger cars              $67,650
      Depreciation, passenger cars          39,639
      Miscellaneous                            337
                                           -------
  Traffic Expense                                    $48,971
      Advertising                          $17,249
      Outside agencies                      16,673
      Superintendence                       10,272
      Miscellaneous                          4,777
                                           -------
  Maintenance of Way, etc.                           $12,970
      Buildings and grounds                 $7,053
      Joint tracks, etc.                     4,440
      Miscellaneous                          1,477
                                            ------
  General Expense                                    $13,580
      Salaries, clerks, etc.                $8,994
      Insurance                              2,478
      Legal expense                          1,153
      Miscellaneous                            955
                                            ------   --------
              Total                                  $637,355

  Proportion operating expense not assignable      $1,278,016
                                                   ----------
          Total                                    $1,915,371

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.

  Cost of carrying the mails         $2,700,675
  Earnings from carrying the mails    2,333,220
                                     ----------
      Loss                             $367,455

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:

  Loss, operating expenses over revenue        $367,455
  11.75% of taxes and interest                  634,713
                                             ----------
      Annual loss on mails                   $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