Minority Report of the Committee on Railways in Relation to the Hoosac Tunnel and the Railroads Part 1

Minority Report of the Committee on Railways in Relation to the Hoosac Tunnel and the Railroads.

by Erastus Payson Carpenter and Ma.s.sachusetts General Court.

Commonwealth of Ma.s.sachusetts.

HOUSE OF REPRESENTATIVES, April 23, 1873.

The undersigned, members of the Committee on Railways, to whom was referred "An Act to provide for the Consolidation of the Hoosac Tunnel line of Railroads from Boston to Troy," and the pet.i.tion of the Boston and Lowell Railroad Company for amendment of the charter of the Great Northern Railroad, and many pet.i.tions and remonstrances relative to the disposal of the Troy and Greenfield Railroad and Hoosac Tunnel, respectfully submit a

MINORITY REPORT:

The Committee, after public notice to all parties in interest, commenced its hearings upon the subject-matter of these pet.i.tions on the twenty-ninth day of January, and finally closed them on the twenty-first day of March. Under the authority granted by the legislature, a reporter was employed by the Committee, by whom It verbatim report was made of all the testimony and arguments submitted to the Committee. This has been printed for the use of the Committee and of the legislature, and is now accessible to members.

Many parties were represented by counsel, and various plans were presented.

The first proposal was that of the Troy and Boston, and Vermont and Ma.s.sachusetts Railroad Companies, for a consolidation under one corporation of the direct line between Boston and Troy.

The second, for a consolidation of the Boston and Lowell and Fitchburg Railroad Companies, with authority to lease or purchase the lines to the tunnel and to Ogdensburg, placing under the control of one corporation about fifteen hundred miles of railroad.

Third, the proposition was urged upon the Committee to provide for the acquisition by the State of the Tunnel Line.

The attendance before the Committee was not limited to the representatives of corporations directly or indirectly interested in the result. Committees of the Board of Trade and other commercial a.s.sociations, and many private citizens to some extent represented the public interests; while the larger audiences in attendance upon the sessions of the Committee attested the deep interest of the business community in the subject-matter under discussion.

The problem before the Committee was to determine how the people of this Commonwealth could derive the greatest benefit from the construction of the tunnel which has involved so large a public expenditure.

The relations of the State to this enterprise have greatly changed since its commencement. The tunnel was projected as a private enterprise, which was first aided by the State by a loan of its credit.

It was doubtless then intended that the tunnel when completed should form a part of the through line over the Fitchburg, Vermont and Ma.s.sachusetts, Troy and Greenfield, and Troy anti Boston Railroads, to be owned and controlled by these corporations like the rest of the line. This project failed. The Troy and Greenfield Railroad Company was unable with the state loan to complete the tunnel, and after great delays and difficulties, surrendered its railroad and the incomplete tunnel to the Commonwealth, which has since carried on the work at the public charge. Its completion within the current year may be expected, and the total expenditure from the treasury of the State will amount, including interest, to about $12,000,000. This expenditure is a charge upon the people and the property of the whole State.

It seems improbable that any disposition can be made of the tunnel which can return to the treasury the whole sum expended, and it is for the legislature to determine how far a return can be made to the people of the State from this great public expenditure, in increased means of transportation and a reduction of rates which are now a burden upon the whole community. Since the tunnel was projected, new lines of railroad have been built which give to nearly every portion of the State direct access to the tunnel and through it to the great West.

In the progress of the hearing certain points were made tolerably clear.

_First_, That the tunnel itself should be so far held and controlled by the State as to insure its use on equal terms by all parties.

_Second_, That some consolidation of the line or lines working through the tunnel was essential to secure efficiency of action, and to provide for the great business awaiting the completion of the tunnel.

_Third_, That to provide equipment and terminal facilities for such a business, the weak and disjointed separate corporations were inadequate, and that it was particularly desirable that some action should be taken at the present session of the legislature.

The policy of direct state ownership was strongly pressed upon the Committee by the railroad commissioners and other parties. The address of Mr. Adams, in behalf of the commissioners, upon this subject, is contained in the printed report, and is a clear and able statement in behalf of this policy. While the experiment has been tried in other States, and under other circ.u.mstances has failed, we do not think it is to be condemned for this reason. These experiments were tried before the development of the railroad system, and generally in thinly-peopled States, where state construction of railroads was a political necessity to supplement private capital that could see no inducement for investment.

In the days when state management failed, corporation management failed to quite as great an extent.

The statement of Mr. Adams, in regard to the results of the system in Belgium, are very striking, and in England the current seems to be settling in favor of the a.s.sumption of the railroads by the government.

To any careful observer of the railroad development of the past twenty-five years, there can be little doubt of a like progressive increase in this business in the future.

If the benefit of this increase in business can be secured to the people who furnish the traffic, instead of to the corporations who provide the capital, an immense public benefit will follow. The most valuable experiment to be tried at the present day is to ascertain how cheaply railroad transportation can be afforded. Corporations formed to make money for their stockholders, can hardly be expected to fairly try this experiment. The greatest need of this Commonwealth is cheap transportation. To secure this the Hoosac Tunnel has been constructed at a cost of $12,000,000 of public money.

We are fully convinced that to secure to the people the full advantages to be derived from the construction of this new avenue to the West, and to secure equal lights to all parties desiring to use it, the State must not part with the control of the tunnel. We are equally convinced that to secure efficiency in the lines working through the tunnel, consolidation is necessary, and that the tunnel itself must be worked and managed for all parties using it, by one head.

It would follow that the State, retaining the tunnel, should operate it, and should also own or control one line of road between Boston and the West, at the same time giving to all parties, without discrimination, equal advantages to the tunnel. The state management cannot afford to be unjust or to discriminate.

No private corporation can be trusted when its own interests may conflict with the interests of other and perhaps rival corporations, to establish or to enforce rules for the transaction of such business.

We therefore report and recommend the pa.s.sage of the accompanying Bill: "To incorporate the State Board of Trustees of the Hoosac Tunnel Railroad."

Its purpose is to form a corporation for the management of the Troy and Greenfield Railroad and Hoosac Tunnel, with all the powers of a railroad corporation. It is to be composed of five trustees, to be appointed by the governor and council, each to hold office for five years, and one of whom shall be appointed annually. To these five state trustees are to be added not exceeding three, one by each of the railroad corporations whose property may be acquired or managed under the terms of the Act.

Instead of directly purchasing the railroads const.i.tuting the direct line, provision is made for leasing these railroads by the new corporation upon terms which are fair and equitable for all parties.

The returns to the railroad commissioners show that the average expense of operating the railroads of this State is seventy-five per cent. of the gross income. We therefore propose to set apart for the benefit of each of these corporations twenty-five per cent. of the gross income of its railroad, out of which shall be paid a yearly rental; and that they may not in any event be losers by the experiment, it is proposed to guarantee to them an amount sufficient to pay to their stockholders the dividends they are now paying, with liberty to increase to the maximum which law or custom permits our railroad corporations to pay.

That such a lease would receive the a.s.sent of the companies interested, we have strong reasons to believe.

It secures to the stockholders the dividends they are now receiving.

It secures also to them the benefit of any increase of business likely to accrue from the completion of the tunnel, to as full an extent as they can hope to benefit by it. No railroad corporation ought ever to pay more than ten per cent. dividends, and the legislature would undoubtedly, under its power to regulate tolls, interfere to prevent greater dividends.

While these corporations are thus interested in the earnings of the roads, the bill provides that they should be represented in their management. We shall thus secure the services of persons familiar with the local business and history of the separate roads, and although forming only a minority of the board of management, they must have an important influence in the direction of its affairs.

The benefits to be gained by the State by this arrangement are obvious and manifold.

It retains state ownership and management of the tunnel.

It secures to all corporations desiring to use the tunnel equal rights.

It secures to the Commonwealth the full value of its investment, whatever future developments of business shall prove that value to be.

It a.s.sumes the establishment of a strong corporation, able to provide all equipment and terminal facilities which any future increase of business may render necessary or advisable.

It meets all the presumed advantages of state acquisition of the railroads, without that disturbance and removal of capital which must follow the purchase of the railroads by the State.

It can furnish capital for the improvement of the line at a cheaper rate than any consolidated company can procure it; and cheap capital in disinterested hands secures cheap transportation.

It enables the State to try fairly and fully the experiment of cheap transportation.

It creates a corporation which cannot combine with other corporations, nor can its stock be purchased or in any way controlled by outside parties, and is strong enough to compete successfully with the powerful corporations of neighboring States.

Such a management we believe would be efficient and reliable beyond that of ordinary railroad corporations. It would combine to a great degree the advantages of state and corporate management. The governor and council could be depended upon to appoint suitable persons as trustees. The railroad corporations would naturally appoint their most efficient agents as trustees. Such a board could find no difficulty in securing the services of the ablest railroad officers to direct and aid in the management.

It remains to refer briefly to the other propositions before the Committee.

First, to that of the Boston and Lowell Railroad Company to unite with the Fitchburg. This is a proposal to unite two lines in some degree rival and competing. They are rival lines to some extent for local business. They form parts of rival lines for distant business with the North and West. It is a new proposition in this Commonwealth to unite rival and competing lines. This compet.i.tion will be increased with the opening of the tunnel line. The Lowell is the natural terminus of the Northern line, and the Fitchburg is the natural terminus of the tunnel line. Whatever advantages may accrue to the corporations themselves from such a consolidation, the public results will be unmitigated evil. Not one witness unconnected with the interested corporations appeared before the Committee to testify in favor of such a consolidation. The evidence against it was strong and conclusive. The Northern line by way of the Lowell and Vermont Central was shown to be of great value to Boston and to Ma.s.sachusetts. It is now in a measure consolidated under contracts having twenty years to run, and it is surely bad policy for the Commonwealth, having expended $12,000,000 to create a new line, to commence its operations with the destruction of one in full and vigorous existence. Moreover, such a consolidation threatens more than anything else state control of the tunnel itself.

A powerful corporation, owning the whole line except the tunnel, would soon compel the transfer of that, and until such transfer, would throw upon the State as the owner of the tunnel the responsibility for all the sins and omissions of the line.