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REPORT.

To the Honorable Legislature of the State of Wisconsin:

The Railroad Commissioners, in submitting their first annual report, deem it proper to make mention of the inherent difficulties of the task assigned them, and the extraordinary embarrassments they have encountered.

In some of its provisions, the law under which they were required to act was found to be technically imperfect, and in other respects obviously impracticable. Construed in the most literal manner, it imposed duties for which neither the time allotted them, nor the means at their command, were found sufficient. In addition to this, it became manifest to the commissioners soon after their appointment, not only that the law was met by the more powerful railway corporations with a determined resistance, the public press teeming meanwhile with declarations of its injustice, impracticability and unconstitutionality, but that, on the other hand, that portion of the public interested in the execution of the law, and even prominent jurists whose opinions had the weight of authority, were looking to the board for the enforcement of all its provisions. Moreover, quite early in the season, as is well known, the vital principle of the law-involving the constitutional relations of the state to corporate power-was vigorously contested before the courts of the state and of the United States. While the progress already made toward a final settlement of the fundamental issue thus created-progress chiefly due to the efforts of the executive department and the consequent acquiescence, for the time being, of the railroad corporations in the settlement of the issue thus created, have relieved the commissioners in a good degree from some of the embarrasments they met at the outset, it should nevertheless be borne in mind, that from first to last, they have found themselves in the midst of circumstances less than favorable to the most satisfactory progress of their labors.

2-R. R.

PART I.

THE WORK OF CLASSIFICATION.

Soon after the organization of the board, early in May, and the determination of a general plan of procedure, your commissioners prepared and issued, for the use of the railroad companies and the public, the classification of roads and of fares and freights herewith submitted, in accordance with the provisions of sections 2, 3 and 13 of the law. [See pp. 1-4, of this report.]

Section 13 likewise empowers the board to make important changes in existing classifications of articles of freight transported on any railroad or parts of railroads, and "to reduce the rates on any of said railroads or parts of railroads, either in general or special classes, when in their judgment, or a majority of them, it can be done without injury to such railroad."

This power to reduce the rates we have not seen fit to exercise. Nor have we made any of the changes in classification which the law authorizes, although there have been some reasons for so doing; deeming the policy of non-interference wise in all cases where there was room for doubt, and believing that further time, and a thorough investigation were essential to just conclusions.

RECEIPTS, COST, Net Earnings and Indebtedness.

The law also prescribes that the commissioners shall, during the month of January in each year, ascertain and make return to the State Treasurer,

"1. THE ACTUAL COST of each railroad in this state, up to and including the 31st day of the next preceding December; and if such railroad shall be partly in and partly out of this state, then the actual cost of so much thereof as is in the state.

2. THE TOTAL GROSS RECEIPTS resulting from the operation of every such railroad during the next preceding year, ending on the 31st day of December, or of that part of the same which is in this state.

3. THE TOTAL NET EARNINGS resulting from the operations of any such railroad during the next preceding year, ending on the 31st day of December, or of that part of the same which is in this state.

4. THE TOTAL INTEREST-BEARING INDEBTEDNESS of the company owning or operating such railroad, and the amount of interest paid by such company during the next preceding year, ending on the 31st day of December; and if

any part of such indebtedness has been incurred in consequence of the construction, maintenance, repair, removal or operation of any part of such rail. road which is not in this state, or for equipment for such part, such railroad commissioners shall ascertain and determine in such manner as they shall think just and equitable, how much of its indebtedness is justly chargeable to that part of said railroad that is in this state, and how much interest shall have been paid by such company during such year ending on the 31st day of the next preceding December, on that part of such indebtedness which is justly chargeable to that part of said railroad that is in this state."

THE QUESTION OF ACTUAL COST.

It would be presumption to assume, under the most favorable circumstances, that an investigation such as that required by the law, involving the complicated history of railroad construction and management in this state for more than twenty years, could be conducted to exact conclusions within a term of six or eight months. The commissioners, in fact, have much reason to doubt whether the question of "actual cost" can ever be determined with precision, from any data at present or heretofore in existence, either by the state or even by the owners and managers of the property. The elements of cost often include exchanges of value under every possible form, and under all conceivable circumstances, with no record preserved, except of the nominal sums paid and received. In orginal railway construction, bonds and stock are exchanged indifferently, for labor or property; sometimes sold for money, hypothecated for loans, donated for contingent purposes, divided as interest on investment, or sacrificed wholly on sale and foreclosure. Oftentimes the record is itself wanting, and even nominal amounts of investment become the subject of speculative estimate. The law, however, has left to the commissioners no alternative as to this branch of investigation; and, accordingly, the commissioners have applied themselves to this task as industriously as possible, presenting as the result

First-Such facts as were to be gathered from the official reports of the several railway companies from the date of their organization to the present time (see pages 78-185 of this report);

Secondly-Estimates made by the companies themselves of the present cash value of their several lines respectively, or statements of actual cost as recorded upon their books, (see pp. 186-226); and, Thirdly - Such calculations as could be made on the basis of the market value of the stock and bonds of the two principal corporations.

Among the results of the first-named method, there will appear from the statistics referred to: (1) that the companies repcrting to this state had, on the 31st of December, 1873, a total mileage of 4,686.70 miles of railway exclusive of sidings, of which total, 2,360.16 miles belonged to Wisconsin; and (2) that the total cost of the 4,686.70 miles, as reported to the state on that date, was $156,862,288.39, or 33,467.31 per mile; the mileage and cost of each road being as follows:

Cost of Railroads reported to this State, Dec. 31, 1873.

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The returns on pages 186 to 226, inclusive, merit special attention. In order to procure them, the commissioners, early in autumn, addressed a circular to the several railroad companies doing business in this state, accompanying the same with a blank form, requiring detailed estimates as to the present cash value of the property invested by such companies within the state. This information, as far as obtained, will be found in the subsequent pages of this report. Though not complete, it is yet valuable with reference to future estimates, and as an example of what may be accomplished by continuous investigation by this method. The estimate made by the Chicago, Milwaukee and St. Paul Company deserves special consideration, because of the completeness of its details and the high character of the engineers by whom the estimate was made. Allowance must be made for the fact, however, that the investiga

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tion was necessarily prosecuted under the immediate direction of the company interested, and that the estimates of value refer more especially to the years 1872-3, when the prices of labor and materials, and particularly the price of iron, ranged higher than during the past year. Possibly the returns made by this company are the only ones received by the commissioners which give the results of actual estimates by engineers. Several of the others are statements of aggregates, merely, unaccompanied by schedules, and hence afford no interested party an opportunity for verification, without himself making a full inventory of the property.

Moreover some of the returns include considerable amounts paid out as interest on indebtedness, as well as the sums sacrificed in the form of discount.

An examination of the valuations returned will show that the total cash valuation of all the roads reported is $68,680,444; in other words, that the valuation of 1,968.74 miles of road aggregates that amount; the average per mile being $34,885.78 and the mileage and cost of each road as follows:

Present Cash Valuation and reported Cost of Railroads in Wisconsin, as returned to the Railroad Commissioners, within the month of January, 1875.

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1 Cash valuation unequipped, as returned by Engineers. Average value of equipment per

mile $6,144.

Reported as actual cost unequipped. Average cost of equipment $6,308 per mile. • Cost equipped.

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