in connection with the property of steam railroads and telephone companies, and our investigations of this complex subject were accordingly reopened for further hearings during the year. In order that full opportunity might be given for hearing the matters which the petitioners desired to present and to enable others interested to submit evidence, the effective dates of our orders prescribing the rules to govern such accounting have been indefinitely postponed. The further hearings are nearing completion and have been the occasion for the presentation of most comprehensive and valuable data as to all aspects of the very important and difficult questions involved. As the rules applicable to depreciation accounting in the case of other classes of carriers subject to our jurisdiction will be affected if not governed by the general principles which are established in connection with the steam railroads and telephone companies, we have deferred consideration of the subject so far as these other classes of carriers are concerned until decision has been rendered in the steam railroad and telephone investigations. The revision of our accounting classifications for steam railroads, on which much work has already been done, has been carried forward to the point where further progress depends upon the conclusions to be reached with respect to depreciation accounting and upon the results of heatings which have been held during the year upon the general plan which the classifications should follow. At these hearings, to which reference was made in our last report, representatives of shippers' organizations have urged that a system of cost accounting be adopted and have presented detailed evidence in support of this recommendation. Elaborate evidence has been presented in this connection with reference to the cost-accounting systems now in use by many private industries. Somewhat similar suggestions have been made by representatives of State commissions. All of these proposals are receiving consideration. During the year, as part of our general plan of revising the accounting classifications for all classes of carriers subject to our jurisdiction, work has been undertaken on the revision of the accounting classifications for telephone companies. The completion of these revisions, as well as of those for sleeping-car companies and carriers by water, which have been tentatively prepared, necessarily awaits the final conclusions to be reached with respect to depreciation accounting for these classes of carriers. The revision of our accounting classifications for electric railways, express companies, telegraph and cable companies and pipe lines will be reached next year. We must repeat the statement made in previous annual reports that no general examinations of carriers' accounts were made during the year. We regard this omission as seriously impairing the effective ness of our regulation of carriers' accounts under section 20 of the act, an important feature of which is the policing of carriers' accounts. Experience has demonstrated that our general examinations afford the only satisfactory means for performing this duty. BUREAU OF FINANCE CERTIFICATES OF PUBLIC CONVENIENCE AND NECESSITY The following is a statement of applications filed during the year for certificates of public convenience and necessity under the provisions of paragraphs (18) to (22) of section 1 of the act, and of the disposition made of applications: A number of applications disposed of during the year were pending on October 31, 1927. In our last report it was stated that of the railway mileage for which we issued certificates authorizing new construction since the effective date of this provision of the act, we had information that approximately 3,112.85 miles of road had been constructed. We have been advised by carriers that during the year covered by this report the construction of approximately 311.25 additional miles of road has been completed. We have continued the practice of enlisting the cooperation of the State commissions in these cases. In 38 of them hearings have been held for us by State commissions, and in most of such cases in which a decision has been reached we have followed their recommendations. A list of certificates issued will be found in Appendix F. ACQUISITION OF CONTROL OF ONE CARRIER BY ANOTHER CARRIER Under the provisions of paragraph (2) of section 5 of the act we are authorized to approve, by order, the acquisition by one carrier of control of one or more other carriers, whether by lease, purchase of stock, or in any other manner not involving the consolidation of such carriers into a single system for ownership and operation, whenever we are of opinion, after hearing, that such control will be in the public interest, the acquisition to be under such rules and regulations, for such consideration, and on such terms and conditions as shall be found by us to be just and reasonable. Under this paragraph 45 applications have been filed, 31 authorizations have been issued, 3 applications have been denied, and 2 withdrawn. A list of authorizations issued will be found in Appendix F. We granted the application of the Chesapeake & Ohio Railway Co. to acquire control of the Pere Marquette Railway Co., by purchase of capital stock, but denied that part of its application which sought to acquire control of the Erie Railroad Co. by purchase of capital stock. We also denied the application of the Delaware & Hudson Co. to acquire control of the railroad of the Buffalo, Rochester & Pittsburgh Railway Co., by lease, for the reason that the applicant did not establish that such control would be in the public interest. An additional reason for the present disapproval of the proposed lease was apparent in the general problem of proper disposition of these roads incident to the grouping of lines in trunkline territory under the requirements of section 5 of the act. Authority was granted to the Atchison, Topeka & Santa Fe Railway Co. to acquire control of the Kansas City, Mexico & Orient Railway Co., by purchase of capital stock. The application of the MissouriKansas-Texas Railroad Co. to acquire control of the Kansas City Southern Railway Co. and/or the St. Louis Southwestern Railway Co., by purchase of capital stock, was withdrawn. Some applications are pending under this paragraph which involve proposed acquisitions of major importance. CONSOLIDATION OF TELEPHONE COMPANIES Under paragraph (9) of section 407 of the transportation act, as amended, we have received 41 applications and granted 35, authorizing telephone companies to merge their properties or portions thereof. One application was denied, and 1 withdrawn. A list of authorizations will be found in Appendix F. RECOVERY OF EXCESS NET RAILWAY OPERATING INCOME, GENERAL RAILROAD CONTINGENT FUND To date we have issued eight general orders upon all carriers subject to section 15a of the act. Our last order was dated January 4, 1928, and covered the calendar year 1927. In response to these orders carriers have filed reports showing the following results with respect to excess net railway operating income subject to the recapture clause of the section: Many of the reports filed include groups of carriers claimed by respondents to have been under common control and management and operated as single systems within the provisions of paragraph (6) of section 15a. The question of grouping into systems is under consideration and it is anticipated that definite principles will be established when a decision has been reached in cases now submitted on the formal docket. We again call attention to the fact that the excess income reported has not been computed upon values fixed by us. Under our orders carriers have been permitted to compute their claimed values upon such basis as they deem proper. Under this procedure many different bases have been used. When values shall have been fixed by us the number of carriers found to have earned excess income and the amount thereof may differ from the results shown in carriers' reports. In our last report we stated that 198 electric railways claimed exemption from the provisions of section 15a. There has been no material change in this status, and further proceedings will be instituted as may be necessary in individual cases supplementing or applying the principles announced in Application of Section 15a to Electric Rys., 86 I. C. C. 751. During the year 9 carriers paid to us the total sum of $866,277.44 as one-half of their excess income preliminarily computed by them for the several recapture periods. Added to the $7,140,930.95 paid prior to November 1, 1927, this sum makes the total of such payments $8,007,208.39. As stated in our previous reports, the bulk of these payments has been made under formal protests and reservations. Consequently the general railroad contingent fund, created by paragraphs (6) and (10) of the section, which is composed in part of such payments, has not been available for the purposes contemplated by the statute. Contingent fund moneys continue to be held in the Treasury of the United States as a trust fund for investment in obligations of the United States. The present status of the fund is as follows: Payments by carriers of excess income_--_. $8,007, 208. 39 20, 559. 09 1, 157, 210. 62 9, 184, 978. 10 Total credits to the general railroad contingent fund_____ In addition to the foregoing payments, there have been pledged under funding agreements, $1,200,000 of railroad securities, and $29,300 in cash, held by the Treasurer of the United States and other authorized depositories for safekeeping subject to our order, as part security for estimated excess earnings. The following obligations of the United States are held for account of the fund: United States Treasury 4 per cent bonds of 1944–1954_. United States 44 per cent fourth Liberty loan bonds of 1933-1938- Total face amount.. $3,630,000 5, 350, 800 8, 980, 800 Of the formal hearings assigned under this section for the determination of excess net railway operating income 32 have been concluded, 13 are in progress, and 5 have not as yet been opened. A list of carriers which made payments to us during the year on account of excess net railway operating income, showing the amounts paid by each, will be found in Appendix F. ISSUANCE OF SECURITIES AND ASSUMPTION OF OBLIGATIONS We have received 183 applications and 46 supplements thereto, and 4 petitions for rehearing under section 20a of the act, and have authorized the issue of securities and the assumption of obligations and liabilities in respect of securities of others in the following aggregate amounts and for the following purposes: Preferred stock: For acquisition of property, including including equipment--- For exchange for income-mortgage bonds and for common stock__- For exchange for preferred stock---- $1,650, 000. 00 7,009, 863. 93 185, 500.00 |