Mr. KERR. Of course, we cannot get money as cheaply as the Government; in fact, the Government does not give us money as cheaply as this. Mr. CROSBY. Assuming that your property is worth 20 billions of dollars, do you know or have any idea of about how much of that is now owned by companies that are insolvent or in bankruptcy proceedings? Mr. KERR. Somewhere among my papers I have the information; but I am afraid it will take a little while to get it. I can supply that. Mr. CROSBY. Make a note of that, please. The CHAIRMAN. Are there any further questions? Mr. MANSFIELD. Is it a larger or a smaller proportion than it was 40 or 50 years ago? Mr. KERR. You are going back too far for me, Mr. Mansfield. Mr. KERR. It is very, very great at this time, of course, as compared with any other recent year. Mr. MANSFIELD. Well, I recall when, as it seemed to me, nearly half of the railroads were in the hands of receivers, in the Southwest, some 50 years ago. Mr. KERR. Mr. Mansfield, it was about 1880, some 50 years ago, and it was not limited to the Southwest. Mr. MANSFIELD. In the days of Mr. Gould and others? Mr. KERR. Yes. I pointed out today that financing in recent years has not been altogether by bonds. It has been partly and mainly by earnings. The railroads found a good many years ago that they could get money cheaper by issuing bonds, that a great part of the investing public wanted long-time bonds. They wanted something they were certain of. That was then an easier way to get money than by issuing stock. The CHAIRMAN. Are there any further questions? All right, you may stand aside. I understood that Mr. Brenckman had a statement of about 5 to 10 minutes. If Mr. Brenckman, of the National Grange, is here, we will be glad to hear him. Before we do that, will you state what your organization is and its membership or the number of units, or you can file a statement covering that? Mr. KERR. I can state right now that it comprises approximately 98 percent of the class 1 railroads in the United States and, also, those Canadian roads that operate iu the United States. There are a great many short lines that are associate members. I will give you the detail if you want it. The CHAIRMAN. Yes; if you will just put that in the statement, so as to get a fair picture of the interests represented by the different witnesses. Mr. KERR. Yes, sir. The CHAIRMAN. I will be glad to have that go in with your other statements, or in any brief that you may care to file. (The memoranda submitted for the record by Mr. Kerr are as follows:) ASSOCIATION OF AMERICAN RAILROADS, Chairman Merchant Marine and Fisheries, Hon. SCHUYLER OTIS BLAND, Washington, D. C.. DEAR MR. CHAIRMAN: During the course of the hearing before your committee today in connection with H. R. 5379, a bill to regulate water carriers, I was granted permission to later file a brief relating to land grants. I do not believe that I can do better than present a statement by Dr. C. S. Duncan, economist of the Association of American Railroads, which he presented to the Interstate Commerce Commission on March 17, 1931, in connection with Interstate Commerce Commission Docket No. 23400 "Coordination of Motor Transportation." I respectfully request that this be made a part of the record in connection with my testimony. As relating to the general subject, I would like to quote the following from Interstate Commerce Commission Decision of March 26, 1935, on Ex Parte No. 115, 208 I. C. C.-4: "Between January 1 and August 4, 1934, the western lines moved more than 72,000 carloads of livestock, feed, water, and other commodities under emergency rates established on account of the drought or under land-grant rates applicable because the shipments were made by the Federal Government. The charges on this traffic were as much as $4,100,000 below what they would have been under normal rates. Yours very truly, LAND GRANTS, RATES, AND FARES J. G. KERR. 1. On several occasions the question of grants of land in aid of railway construction has been introduced into this hearing. While we are aware that this subject is not really pertinent to the hearing and while we are aware that the essential facts with respect to it are not unknown to the Commission, we feel a decided responsibility in meeting the statements and charges which have been made in connection with it. 2. We have made an examination of the reports and records filed in the Government General Land Office and have compiled certain figures therefrom. These figures show as of June 30, 1930, an area patented or certified totaling 132,173,224 acres. From this acreage deductions are to be made to the extent of 1,919,956 acres contained in grants for Muscle Shoals river improvement, the Des Moines River grant, the Osage Reservation, and the Des Moines Valley river improvement grant. A further deduction of not less than 2,000,000 acres is to be made, representing the acreage reconveyed to the Government. The railways have received, therefore, up to June 30, 1930, title to approximately 128,000,000 acres of land. 3. Public lands were granted in aid of railway construction in 26 States, over a period extending from September 20, 1850, to March 3, 1871. Sales of public land for cash in these States for the period beginning July 1, 1850, and ending July 30, 1871, show receipts of about 94 cents per acre. 4. In order that there may be a clear understanding of the reasons for the adoption of a so-called "land-grant policy" as well as of the object in view, I desire to quote briefly from statements made by Members of Congress in connection with bills for land grants. 5. Speaking in the United States Senate on behalf of the grant of land to the Illinois Central Railroad, Senator Stephen A. Douglas said: "It is simply carrying out a principle which has been acted upon for 30 years, by which you cede each alternate section of land and double the price of the alternate sections not ceded, so that the same price is received for the whole. These lands have been in the market for 15 to 30 years; the average time is about 23 years; but they will not sell at the usual price of $1.25 per acre, because they are distant from any navigable stream or a market for produce. A railroad will make the lands salable at double the usual price, because the improvement will make them valuable." 6. In dealing with this same subject, Senator Henry Clay said: "With respect to the State of Illinois-and I believe the same is true to a considerable extent with reference to Mississippi and Alabama, but I happen to know something personally of the interior of the State of Illinois-that portion of the State through which this road will run is a succession of prairies, the principal of which is denominated the 'Grand Prairie.' I do not recollect its exact length; it is, I believe, about 300 miles in length and but 100 in breadth. Now, this road will pass directly through that Grand Prairie lengthwise, and there is nobody who knows anything of that Grand Prairie who does not know that the land is utterly worthless for any present purpose-not because it is not fertile but for want of wood and water and from the fact that it is inaccessible, wanting all facilities for reaching a market or for transporting timber, so that nobody will go there and settle while it is so destitute of all the advantages of society and the conveniences which arise from a social state. And now, by constructing this road through the prairie, through the center of the State of Illinois, you bring millions of acres of land immediately into the market, which will otherwise remain for years and years entirely unsalable." 7. In discussing the general policy of Federal land grants in aid of railway construction, Thomas H. Benton, said: "From the consideration which I gave to that subject at that early day, it appeared to me that it was a beneficial disposition for the United States to make of her refuse lands, to cede them to the States in which they lay. Lands which had been 20 or 25 years in the market at the minimum price, and had never found a purchaser up to that time, were classed as refuse, and it was deemed that the State, as a local authority, might be able to make some disposition of them, which the general government, without the machinery of land offices, could not. principle of the bill before the Senate is to take the refuse lands and appropriate them to a great object of internal improvement, which, although it has its locality in a particular State, produces advantages which we all know spread far and wide, for a good road cannot be made anywhere without being beneficial to the whole United States. The "But, Mr. President, with respect to the general proposition, this application rests upon a principle that young States are made desolate, in a great degree, by having lands in their midst that pay no taxes, undergo no cultivation, that are held at a price that nobody will pay, and which, in fact, in some parts of the country become jungles for the protection of wild beasts that prey upon the flocks and herds of the farmers." 8. In 1856 the Select Committee of the House on Pacific Railroad and Telegraph made the following statement: "No better example can be given of the benefits resulting from the construction of railroads, to both public and private property, than that of the Illinois Central. On the line of that road the public lands have been offered for sale for many years without finding a purchaser, and were at last reduced to the lowest minimum price, 121⁄2 cents per acre. Even this reduction was not sufficient to induce their sale; but after the Government had given away one-half to assist in building the road, the other half was very readily sold for $2.50 per acre. Similar results have followed the building of nearly every other railroad in the country, although in many instances the roads came in direct competition with river and canal transportation. A railroad across the continent would open up a vast extent of country to settlement, and much of what is now believed to be sterile and barren will, no doubt (as in California), be found to yield bountifully to the agriculturist. These lands are now totally without value, no matter how fertile they may be, and to the Government, worthless. By giving away one-half for the construction of the proposed roads the Government will thereby attach a value to the remainder; and whatever that value may be will be the amount the Government is gainer by the transaction." 9. While these lands are generally referred to as land grants, it is, of course, to be recognized that they are not gifts. In almost all cases they are bargains in which there was a quid pro quo. In almost all cases the bargain driven was a hard one, with the advantage to the Government. I refer to the conditions attached requiring a reduced rate by these railroads which received grants of land on Government mail, Government materials, and Government troops. 10. We have undertaken a study of the amount representing the savings to the Government year by year from reduced rates and fares on account of land grants, for the purpose of developing a more definite idea as to what the Government has received and is receiving in return for these grants of land. It is to be regretted that the information available to us is not sufficiently complete to enable us to present an approximately full statement of the benefits and returns received by the Government for these land grants. The information which we have is, however, sufficient to show that these benefits and returns are very large, and to indicate that they are far in excess of the value of these lands. 11. Reduced rates due to land grants apply to mail, to Government materials, and to troops. In 1876, Congressman Holman of Indiana, caused to be inserted in an appropriation bill a clause declaring that railroad companies which had been given land grants by Congress shall receive only 80 percent of the compensation otherwise authorized. From that date to this the 80-percent rate has applied to some 14,410 miles of road. 12. More than 50 years ago a decision of the Supreme Court declared that the clause, which commonly appears in the act granting land for the construction of railroads, should be interpreted as meaning that Government materials and troops should be carried at 50 percent of the commercial rate. Railroads with grants differently worded have had to transport materials and troops 100-percent free. Certain contracts between carriers and the Government growing directly or indirectly out of these land grants have also given the Government reduced rates. 13. We have been able to secure figures on the difference between the commercial rate and the 80 percent Government rate on mail for the 5-year period 1924 to 1928, inclusive, covering 13,255 miles of road out of the total of 14,410 miles. This difference between the commercial rate and the 80 percent Government rate on mail aggregated for the entire 5-year period $10,250,000, or an average of $2,050,000 per year. For the year 1928 the difference between the commercial rate and the 80 percent Government land grant rate amounted to $2,150,000. 14. Certain carriers, representing 4,893 miles of road out of the total of 14,410 miles to which the 80 percent rate applies, have returned to the Government through reduced mail rates from 1876 to 1928, inclusive, the aggregate sum of $16,682,722.54. This is equal to $3,429.53 per mile of road for mail alone. Information covering the entire period is not available from other carriers. 15. We have also been able to secure figures representing the savings to the Government from land grant rates on materials and troops for the 5-year period 1924 to 1928, inclusive, covering 228,830.64 miles of road out of a total of class I roads amounting to 240,429.41 miles. This means that 11,598.77 miles of road have not reported. These figures represent not only the savings from the mileage to which land grants directly apply but also the savings from land grant equalization rates. Data have been compiled by the billing road from rate bills used in annual settlements with the Government and the amounts reported cover all reductions to the Government, whether or not the billing road or some connecting line absorbed the reduction. 16. The figures cover separately the savings to the Government on freight, that is, Government materials, and on troops, that is, passengers. The figures for the 228,830.64 miles of road are as follows: Sum representing difference between commercial rates and Government rates account land grants 17 It will be noted from the above table that the total savings to the Government from land-grant freight rates and fares for troops for the 5-year period were $11,078,940.37, which represents an average per year of $2,215,788.07. For 1928 the figure is $2,200.560.39. 18. When the figures given in the above paragraphs are combined, they show that for this 5-year period the savings to the Government, representing what the Government has been receiving in return for land grants and including mail, Government materials and troops, were $21,328,940.37, or $4,265,788.07 per year. In 1928 the aggregate savings to the Government from these sources were $4.350.560.39. 19. From the best figures obtainable it appears that these land-grant rates represent a reduction to the Government of about 12 percent on materials and troops from the corresponding commercial rates. 20. It will be recognized, of course, that these figures represent the savings to the Government from substantially less mileage than that to which the rates actually apply, both with respect to Government materials and troops and to mail. It will also be recognized that the period covered includes years of peace and not of war, in which latter time the Government activity is most pronounced. Certainly, if the entire mileage were represented, the annual savings to the Government from land-grant rates and representing only the direct monetary savings which it receives from these ancient land grants would be substantially $5,000,000 per year. When it is also remembered that some of these reductions have extended over a period of nearly 75 years, it will be evident that the total savings to the Government during all this period of time when the land-grant rates have been in operation is a most substantial figure. 21. The Government records show that the average amount received by the Government for land disposed of between 1850 and 1870, which is the period during which land grants were made, was about 94 cents per acre. It is certainly true that a considerable part of this land could not have been disposed of at all if the railroads had not been projected and built and that an increased price would obtain for land made available for settlement because of railroad construction. Even if 94 cents per acre be taken as the value of the land received by the carriers for the purpose of railroad construction, an illustration obviously unfavorable to the carriers, the total acreage patented to the carriers up to 1929 would have equaled $120,320,000. At a payment of $5,000,000 per year, this amount of $120,320,000 would have been fully repaid in 24 years and would have been repaid several times during the long period in which the land-grant rates have been operative. 22. Even aside from the consideration that the country could not have been developed without the rail carriers and that the benefit to the Government and to the people of the country from this marvelous development has many times repaid for the value of lands granted, it is obvious that there has always been a direct give and take in these grants. They can affect the transportation cost today and in the future only favorably to the Government, because in this clearcut trade between the United States and the railways the Government no longer gives but continues to take. Under existing law, these benefits from the land grants will continue to accrue to the Government for all the future. Hon. SCHUYLER OTIS BLAND, ASSOCIATION OF AMERICAN RAILROADS, Chairman Committee on Merchant Marine and Fisheries, Washington, D. C. DEAR MR. CHAIRMAN: Supplementing my letter of May 10, regarding hearings before your committee beginning May 7 in connection with H. R. 5379, a bill to regulate water carriers, and during which I was requested to later furnish the committee with certain information. In compliance therewith I am submitting the following: (1) As of December 31, 1934, 9.9 percent of the property investment, and 14.1 percent of the operated mileage of class I railways of the United States were in the hands of receivers or trustees in bankruptcy. There are attached two statements, one showing this information in more detail, and the second showing the mileage of all railroads in the hands of receivers or trustees in bankruptcy for the years 1894 to 1934, inclusive. The latter is submitted because Congressman Mansfield desired to know how the present situation compared with that of previous years. (2) Dividends declared by class I steam railways in the United States during the year 1933 amounted to $95,725,783, and in 1934, $132,793,467, representing rates of 1.2 percent and 1.6 percent, respectively, on total stock outstanding. |
