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illuminate this point. During the three years of the test period (1915-16-17) the Great Northern repair cost per car owned was $57.02, and 85% of their cars were on their own rails. In 1918 the average cost was $154.11, and they had 45% of their own cars at home. In 1919 the average cost per car was $165.15, with 37% of their own cars at home. During the following two years, under higher wage rate and the national agreement rules, and with deferred maintenance to make up, the repair cost per car was $223.78 in 1920 and $187.04 in 1921. The percentage of home cars on home rails in 1920 was 42, but in the following year, when conditions had become normal so far as car location was concerned, the percentage of Great Northern cars on Great Northern rails was eighty-three.

CHAPTER XVI

ADDITIONS AND BETTERMENTS DURING

FEDERAL CONTROL

T

HE inability of the railroads in 1917 to finance additions to and improvements in

facilities and equipment was one of the important reasons for federal control. The Federal Control Act appropriated $500,000,000 as a revolving fund to be used to pay the expenses of the Railroad Administration and to finance additional facilities or equipment required for Government operation. The Act provided that these additions and betterments could be ordered when "necessary or desirable for war purposes or in the public interest on or in connection with the property of any carrier.” Advances could be made from the revolving fund for all or any part of the expense of such additions or improvements, such advances to be charged against the carrier, to bear interest, and to be repaid so that the Government would be fully reimbursed in the final settlement. As an offset to the interest charges on such advances, the Director General was required by the contract to pay interest to the company upon the cost of such work from the date of its completion, in addition to the guaranteed rental. A distinction was made between work required solely for war purposes and therefore of no permanent

value to the company, and work which would inure to the permanent benefit of the company. The cost of work required solely for war purposes was to be assumed by the Government. Tracks or other facilities at military camps are examples. As an indication of the extent of such work, it may be noted that Director General Davis, in a statement to the House Committee on Appropriations, May 5, 1921, stated that claims then pending against the Government on that account might aggregate $200,000,000.

There was relatively little of betterment work under way when federal control began. The reasons for the slowing up of such work is discussed ai some length in the introductory chapter. Pending a determination of policy, the Director General continued the improvements and enlargements then in progress. On February 2, 1918, the railroads were directed to prepare and send in budgets of improvements immediately required to increase capacity and efficiency and to promote safety in operation. In the letter of instructions the following policy was prescribed:

In determining what additions and betterments, including equipment, and what road extensions should be treated as necessary, and what work already entered upon should be suspended, please be guided by the following general principles :

(a) From the financial standpoint it is highly important to avoid the necessity for raising any new capital which is not absolutely necessary for the protection and development of the required transportation facilities to meet the present and prospective needs of the country's business under war conditions. From the standpoint of the available supply of labor and material, it is likewise highly important that this supply shall not be absorbed except for the necessary purposes mentioned in the preceding sentence.

(b) Please also bear in mind that it may frequently happen that projects which might be regarded as highly meritorious and necessary when viewed from the separate standpoint of a particular company may not be equally meritorious or necessary under existing conditions, when the Government has possession and control of the railroads generally, and therefore when the facilities heretofore subject to the exclusive control of the separate companies are now available for common use whenever such common use will promote the movement of traffic.

The policy of the Administration was more definitely defined in General Order 12, dated March 12, 1918. Repeating the substance of the instructions contained in the letter just quoted, the order went further in requiring that the construction of new lines or branches or the extension of existing lines should not be undertaken without the approval of the Director General. The same restriction applied to the ordering or construction of new locomotives or cars. Work under way prior to federal control, or new work, if in harmony with the policies outlined in the letter of February 2, could be continued or undertaken when the capital charges for any one project would not exceed $25,000. All projects to cost in excess of $25,000 each were to be referred to the Director General for approval.

The budgets submitted in response to this request called for expenditures chargeable to capital account amounting in the aggregate to $1,329,000,000. The total cost of the proposed work would be substantially greater as a portion of the expenditures would be chargeable to operating expenses under the accounting rules of the Interstate Commerce Commission. These budgets were revised by the divisions of capital expenditure and of operation and, as finally approved by the Director General, were reduced to $975,000,000 chargeable to capital accounts. This amount was subsequently increased as the need of additional improvements or new equipment (particularly new freight cars and locomotives) became apparent so that the total capital expenditures authorized in 1918 amounted to $1,278,814,998. Because of shortages in the supply of labor and materials, however, it was not possible to expend as much as one-half of the authorized amounts. The actual expenditures of the year on capital account were about $592,000,000.

After the signing of the armistice, and when Congress, in February, 1919, showed an inclination to embarrass the Railroad Administration by refusing to approve the appropriation recommended by the Director General for the enlargement of the revolving fund, the program for new work was curtailed. The limit of $25,000 allowable without prior approval was reduced to $1,000, and the individual companies in most cases were obliged to finance the work. While in any event the companies would be obliged finally to pay for additions and betterments (subject to subsequent claim for reimbursement for improvements solely for war purposes) the Administration in 1918 and early 1919 advanced the needed

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