IV. THE MAIL SERVICE SUPPLIED BY THE RAILWAYS COSTS THEM MORE IN OPERATING EXPENSES AND TAXES THAN THEY ARE PAID FOR IT, AND LEAVES NOTHING FOR RETURN ON THE PROPERTY.
It cannot be too strongly emphasized that the railway mail pay at present is insufficient to pay even its proper share of operating cost and taxes and does not produce any return upon the property. This will be demonstrated by any fair inquiry, as will now be shown. Reports submitted to the Postmaster-General by railways operating 2,411 mail routes, with a total length of 178,710 miles, showed that their gross receipts, per car-foot mile[B], from services rendered on passenger trains during November, 1909, were as follows:
| From mail | 3.23 mills |
| From other services | 4.35 mills |
Thus it appears that the space on passenger trains required for the mails is proportionately less than three-quarters as productive as that devoted to passengers, express, milk, excess baggage, etc., etc. As it is the general belief of railway managers, whose conclusion in this respect has rarely if ever been challenged, that the passenger train services, as a whole, do not produce revenues sufficient to meet their fair proportion of the operating costs and the necessary return upon investment, and therefore are not reasonably compensatory, it is evident that the mail service, the pay for which is more than twenty-five per cent. below the average for the other services rendered on the same trains, must bring in much less than reasonable compensation. Certainly railroad revenues as a whole could not be reduced twenty-five per cent. without destroying all return upon the property. If so, it must be true that there can be no compensation in a rate of mail pay that is twenty-five per cent. less than the rate of pay for passenger traffic which, as above shown, is relatively unprofitable.
No merely statistical comparison can, however, reveal the whole story for the railways are required to furnish many incidental facilities and to perform many additional services for the Post Office Department, which render the mail service exceptionally arduous and costly. These extra services include calling for and delivering mails at a large proportion of the post offices located at railway towns; supplying rooms, with light, heat and water, in railway stations for the use of the mail clerks; placing cars, duly lighted and heated, on station tracks for advance distribution, often many hours before the departure of trains; carrying officers and agents of the Post Office Department as passengers but without compensation to the extent of more than 50,000,000 passenger miles annually (this being, of course, in addition to the railway mail clerks on duty), etc., etc. Extracts from the "Postal Laws and Regulations" defining and demanding these services are given in [Appendix A]. No one can examine this appendix and not be convinced that the mail service is the most exacting among all those rendered by American railways.
The fairness of railway mail pay can also be tested by apportioning operating expenses between passenger and freight traffic, and then making a secondary apportionment of the passenger expenses between mail and other kinds of traffic carried on passenger trains. This method involves charging directly to each kind of traffic all expenses pertaining exclusively thereto, and the apportionment, on some fair basis, of those expenses which are common to more than one kind of traffic.
In accordance with the request of the Postmaster-General, the railways estimated the cost of conducting the mail service in the manner just explained and reported the results to the Postmaster-General. After first charging to each service the expenses wholly due to it they apportioned the common expenses between the passenger and freight services, following (with inconsequential exceptions) the method most generally employed for that purpose, namely the apportionment of these expenses in the proportions of the revenue train mileage of each service. Having estimated, in this way, the operating expenses attributable to passenger trains, the railways assigned to the mails the portion of this aggregate indicated by the proportion of the total passenger train space required for the mails. Using this method, 186 railways, operating 2,370 mail routes, with a total length of 176,716 miles, ascertained and reported that for November, 1909, the operating expenses (not including taxes), for conducting the mail service were $4,009,184. The Postmaster-General states (Document No. 105, page 281), that all the railways represented in the foregoing, and enough others to increase the mileage represented to 194,978 miles, were paid for the same month only $3,607,773.13. It thus appears that the pay was far below the operating expenses, without making any allowance for taxes or for a return upon the fair value of the property employed.
While different methods are in use for ascertaining the cost of passenger train service and the results produced by such methods may show considerable variation, yet the mail pay is so far below reasonable compensation, from the standpoint of the cost of the service and a return upon the value of the property, that no method can be reasonably urged which would not demonstrate the non-compensatory character of the present mail pay. This is illustrated by the method which the Postmaster-General himself employed, as the character of that method is such that it necessarily produces the very lowest estimate of cost for the passenger train service.
| The Postmaster-General, by his method of apportionment arrived at a cost of | $2,676,503.75 | |
| But this must be increased (as will be shown below, on account of his erroneous apportionment of car space ([page 10]), by | 800,802.00 | |
| And also on account of his refusal to assign expenses directly incurred in the mail service ([page 12]) | 401,126.00 | [C] |
| Total, according to the Postmaster-General's method of apportioning costs between passenger and freight traffic | $3,878,431.75 |