USA > Massachusetts > Commonwealth history of Massachusetts, colony, province and state, volume 5 > Part 37
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NEW YORK, NEW HAVEN & HARTFORD (1890-1900)
The New York, New Haven & Hartford Railroad was in- corporated both in Connecticut and Massachusetts, but its directly owned mileage in Massachusetts is but six miles. from Springfield southward to the Connecticut line. By lease, how- ever, it controls all the lines in southeastern Massachusetts.
The nucleus of the New Haven system was formed in 1872 by a series of mergers beginning with the Hartford & New
msTON & MAINE.
BAY STATE.
Courtesy of the Boston and Maine Railroad
LOCOMOTIVE OF THE 1890 TYPE
:
2
Courtesy of the Boston and Maine Railroad
FREIGHT TRAIN ON THE HOOSAC TUNNEL LINE, 1930
403
N. Y., N. H. & H.
Haven Railroad (incorporated in 1833) and the New York & New Haven Railroad (incorporated in 1844). The period of 1890-1900 was one of wholesale acquisition of other rail- roads. The system was rapidly expanded so that by 1900 all rail lines in New England south of the Boston & Albany, as well as the entire network in the southeastern section of Massachusetts, were unified under New Haven control. At the conclusion of an unsuccessful struggle with the Boston & Maine in 1893 to get control of the Connecticut River Rail- road, an unwritten agreement was made between the two managements that New England would, for purposes of rail- road system building, be divided into two territories. That south of the Boston & Albany was alloted to the New Haven road, and that north of the Boston & Albany was left to the Boston & Maine.
The main objective of the New Haven road, when it began unification proceedings on a large scale in the decade of 1890- 1900, was to control the entire traffic between New York and Boston. Following its first step (1892) of taking in and unifying its lines from New London to Providence, the next move was to get control of the Old Colony, which had leased the Boston & Providence Railroad. By 1893 the New Haven had acquired that system by lease.
A further important acquisition dates from 1898, when the New Haven leased the New England Railroad with its through line from Boston to the Hudson River at Fishkill, N. Y. The New England Railroad was incorporated in 1895 to take over the defunct New York & New England, which in turn was formed in 1873 out of the wreck of the old Boston, Hartford & Erie Railroad.
The New Haven Railroad, with its principal line between New York and Boston parallel to the coast was peculiarly affected by water competition. A furtherance of the objective of transportation monopoly in southern New England re- quired control of boats on the Sound. With the lease of the Old Colony came control of the boat lines from Fall River and Providence. By 1900 practically every boat line on the Sound was under New Haven domination. Effective corporate uni- fication followed in 1904, when the New England Navigation
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MASSACHUSETTS TRANSPORTATION
Company was formed as a subsidiary of the New Haven Railroad.
RAILROAD MANAGEMENT (1901 to 1917)
The second subdivision of the 40-year period began with 1900 and ended with 1917, the year in which the United States entered the World War. Early in that period began the ambitious attempt of the New Haven road to obtain con- trol of all transportation agencies in New England. The at- tempt failed and the after effects were disastrous not only to the New Haven but to the Boston & Maine as well. Huge sums of money were profligately expended; notable reputa- tions were besmirched; innocent investors sustained large losses. The quality of public service was inferior; public opinion against railroads was inflamed; the regulating authori- ties worked overtime in investigation after investigation, and issued blast after blast of denunciation. The major misdeeds of management, actual and alleged, reached their dramatic climax in the indictment, trial and acquittal of men of national prominence for alleged fraud and mismanagement. All this reacted on the physical condition of the railroad properties, the morale of officials and workers in the ranks, and the character of public service. After an official house-cleaning in 1913, an improvement was apparent at once ; but the process of rehabilitation was so slow and the damage to be repaired was so great that the New England carriers were far from having gained their normal condition when the storm of the World War overtook them and temporarily stopped the work of rehabilitation.
The physical organization of railroads changed but little between 1900 and 1917. The rail lines in operation in 1900, with some additions in multiple running tracks and sidings and enlargements in yards and terminals, were sufficient to take care of the growing demands of freight traffic and the smaller increase in the number of passengers. Between 1895 and 1900 the effect of interurban trolley lines began to be felt, especially in southern New England, and led the New Haven Railroad to undertake a determined and comprehensive effort to control the electric railways in its territory.
405
BOSTON & ALBANY IN TROUBLE
During the latter. part of the decade of 1900-1910 the effect of rising prices began to bear unfavorably upon railroad net income. In 1910 the first of a series of demands from em- ployees for higher wages were made simultaneously upon all railroads in the East. The railroad brotherhoods adopted an aggressive policy of standardizing to the highest scale of wage rates and conditions of employment. The New England wage scales had been slightly lower than elsewhere in eastern terri- tory, and the process of standardization therefore bore upon New England railroads with extra weight. They also felt the higher prices of fuel and materials for maintenance. In 1910 they joined with all other railroads in an appeal to the Inter- state Commerce Commission for an advance in freight rates ; but as the Commission was not impressed by their arguments, the petition was denied. The result of lower net earnings was, first, to curtail expenditures for enlargements and im- provements in facilities and equipment and, later, to defer normal maintenance. It was necessary as well to reduce or suspend dividends on railroad stocks. In 1915 more than one-sixth of the railroad mileage of the country was operated by receivers.
Partly because of these conditions and partly because of mismanagement, the New Haven Railroad was hard hit and failed to earn dividends after 1913. The Boston & Maine fared even worse, as it not only had to pass its dividends but failed to meet its fixed charges. The result was receivership in 1916. The Boston & Albany stockholders were protected by their lease to the New York Central, but the lessee com- pany failed to earn the guaranteed dividend and had to as- sume substantial deficits.
BOSTON & ALBANY IN TROUBLE (1901-1917)
The lease of the Boston & Albany Railroad to the New York Central in 1900 gave the Central an outlet to Boston and a grasp upon a substantial part of the valuable west- bound traffic which the Boston & Albany controlled. During the first year under the lease the property was operated by the former president, William Bliss, as agent for the New York Central, and then it was placed in charge of Edgar Van
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MASSACHUSETTS TRANSPORTATION
Etten, a vice president of the New York Central, with office in Boston.
For a time the road was operated with reasonable satisfac- tion to the public; but by 1905 the service began to deterior- ate, and mild criticism soon grew into bitter complaint. The management lost its grip, employee morale suffered, and trains were chronically irregular. The inferior service brought vehement protests to the State Railroad Commission. These protests had echoes on Beacon Hill, and were finally crystal- lized into a definite demand for legislation to bring about the cancellation of the lease, with recourse to state ownership and operation.
The New York Central was placed on the defensive. The report of the Railroad Commission was one of severe con- demnation. The New York Central sent its senior vice presi- dent, W. C. Brown, to Boston in the summer of 1907 with promises of reform. Van Etten was removed, and the Boston & Albany was placed in charge of James H. Hustis, who had made a good record as a general superintendent of the New York Central. Hustis was able quickly to knit together the operating organization, to restore discipline in the ranks, to make up deferred maintenance of locomotives, to revise and enlarge the terminals and engine houses, construct additional running tracks, extend sidings, and otherwise increase capac- ity. With these improvements came also the reconstruction of the water terminal facilities and a new grain elevator at East Boston. The regularity of service steadily increased, and on May 2, 1908, the simple statement that every passenger train on the Boston & Albany on the previous day had reached its destination on time had sufficient news value to justify headlines on the first page of the daily press.
CHANGES IN BOSTON & MAINE (1901-1917)
The Boston & Maine Railroad from 1900 to 1917 under- went profound changes. The weakness of the system was in the large part of its mileage operated under leases. Each acquired line had its value to the Boston & Maine, but as the system expanded the value of some properties in their strategic and traffic importance was seriously diminished. Nearly all
407
CHANGES IN BOSTON & MAINE
of the leases were made on a basis of guaranteed dividends on the stock, plus interest charges on funded debt, and varying sums to cover the expense of maintaining the corporate or- ganization of the lessor companies. In most cases the rate of dividend was from 6 per cent to 81/2 per cent, sometimes 10 per cent. The aggregate rentals for leased lines was an exceedingly heavy and constant charge on net income, and left the Boston & Maine stockholders with dangerously low equity in their operated properties. Of the aggregate capital- ization of the Boston & Maine system, including leased lines, about 80 per cent was in funded debt and fixed rentals, upon which fixed charges had to be met before dividends could be paid on the 20 per cent stock held by the owners of the operat- ing company. After the general financial depression of 1907- 1908 it was evident that the dividends were not earned. All dividends were passed in 1913; and in August, 1916, the property was placed in a receivership which lasted until the latter part of 1919.
This bare recital of Boston & Maine events from 1900 to 1917 should be supplemented by greater detail, but space per- mits no more than a meager outline. The first event of out- standing importance was the purchase by the New Haven road from the American Express Company in 1907 of a large block of Boston & Maine stock. The rumors that the express company was anxious to dispose of the stock were accom- panied by other rumors concerning possible purchasers. Alarmed at the possibility of an outside railroad company in- vading New England, the New Haven Railroad acted quickly and purchased the stock through a subsidiary, thus gaining practical control.
This action aroused intense public opposition and, when proceedings were instituted, the Supreme Court of Massa- chusetts decided that under the existing laws the New Haven could not legally hold the stock. Thereupon the New Haven sold the stock to John L. Billard, a Connecticut coal merchant, who retained it as an unofficial agent of the New Haven until June, 1909, when he sold it back to the New Haven Railroad to be transferred by it to the Boston Holding Company, a corporation then created under authority of the Massachu- setts legislature to acquire and hold a majority of Boston &
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MASSACHUSETTS TRANSPORTATION
Maine stock with the proviso that it could not be sold without legislative approval. The Boston Holding Company was not a railroad corporation and could legally do what the New Haven Railroad could not legally do.
The New Haven soon proceeded to exercise control. Lu- cius Tuttle, who had been president of the Boston & Maine since 1893, was continued in that position until September, 1910, when he was displaced by C. S. Mellen, president of the New Haven. The Boston & Maine, always conservatively managed, was probably somewhat old-fashioned in its methods and equipment, and there were many opportunities for im- provements. Instead of proceeding diplomatically in institut- ing changes, the New Haven officials were tactless in their dealings with the public and with minor officials of the Boston & Maine, and arbitrary in reducing the number of employees. As a result the employee morale was lowered and the quality of public service suffered. The general attitude of the public was distinctly antagonistic to New Haven management.
In the meantime the federal Department of Justice had begun criminal proceedings against the New Haven board of directors. While the suit was pending Mellen was forced by the directors to resign from the presidencies of both the New Haven and Boston & Maine; and later the new management of the New Haven Railroad, under Howard Elliott as chairman, came to an agreement with the Attorney General of the United States. In that agreement of November, 1914, the New Haven Railroad acquiesced in the plan under which its Boston & Maine stock, controlled through the Boston Holding Com- pany, should be placed in the hands of trustees independent of New Haven control.
In August, 1914, James H. Hustis became president of the Boston & Maine and undertook the huge task of restoring employee morale, cultivating favorable public opinion, and re- habilitating the property and its public service. The job was much harder than that of putting the Boston & Albany on its feet in 1907-1908. It was plain at that time that the Boston & Maine could not continue as a solvent company under a financial organization so top-heavy with rentals and fixed charges, when there was such urgent necessity for large ex- penditures for deferred maintenance and betterments. There
REORGANIZATION OF THE NEW HAVEN 409
was, however, a marked improvement in morale and physical condition by 1915, but further progress was blocked by the effects of the World War. In August, 1916, the road was petitioned into receivership. Relieved temporarily by receiver- ship and federal operation (1918-1920) from pressing prob- lems of finance, the Boston & Maine operating organization did a fairly good job in meeting war-time transportation needs.
REORGANIZATION OF THE NEW HAVEN (1901-1917)
The New Haven Railroad has several peculiar charac- teristics. These characteristics are shared in some degree by the Boston & Maine and Boston & Albany but they are more striking on the New Haven: (1) an unusually large propor- tion of passenger traffic; (2) an exceptional degree of inter- lacing of main lines and multiplicity of branch lines, junction points, and crisscrossing of alternate routes; (3) an unusual diffusion of traffic as a result of the many manufacturing cities and towns; (4) a very short average haul for freight and passengers. There is truth as well as poetic license in the statement that industrial New England, and especially the ter- ritory served by the New Haven Railroad, is "one big termi- nal." These peculiarities in traffic and operation demand a special type of ability in management.
From the time of its organization as a system in 1872 until about 1907 the operating skill was of high order, the public was well served, and the stockholders received substantial divi- dends. Yet within six years there was an almost tragic fall from that high estate. The mind of President Mellen, from 1905 or thereabouts, was more concerned with policies of ex- pansion than with the current problems of operation. Depart- mental heads were left without adequate leadership and the official organization began to disintegrate. The disintegration at the top was followed by disorganization in the ranks, loss of discipline, and a series of disastrous train wrecks. Prior to 1910 New Haven stock was considered the safest of in- vestments and commanded high premiums. By 1913 it had ceased to earn any dividend at all and the stock was rated far below par.
While the policy of expansion aimed at complete monopoly
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MASSACHUSETTS TRANSPORTATION
was the main cause of the New Haven's troubles, that policy was in itself not necessarily objectionable nor against public interest. As a matter of fact the Transportation Act of 1920 committed the nation to a policy of wholesale railroad con- solidation. Acting under that law the Interstate Commerce Commission in 1921 proposed for New England a regional consolidation of railroads substantially the same as that for which Mellen worked so hard. The sin was not in the thing that was striven for; it was in the methods which were used and in the prices that were paid to stifle competition.
INVESTIGATION BY THE UNITED STATES GOVERNMENT (1914)
The whole of the transactions which brought disaster directly to the New Haven Railroad and indirectly to the Boston and Maine were twice investigated by the Interstate Commerce Commission, were twice reported upon by special committees created by the Massachusetts Legislature, had been reviewed in several suits before the courts, and after careful inquiry were made the basis of two suits by the Department of Justice. The record is voluminous. The In- terstate Commerce Commission, in its report of July 11, 1914, found that the financial deeds of the former management of the New Haven system were "one of the most glaring instances of maladministration in all the history of American railroad- ing." It found further that in ten years from June 30, 1903, the capitalization, both stocks and bonds, had grown from $93,000,000 to $417,000,000, an increase of $324,000,000. Of that increase approximately $120,000,000 was expended for betterments and additions to its railroad property, leaving $204,000,000 as the sum expended for operations outside of its railroad sphere.
Specifically, what the New Haven management did was to acquire control of practically every important electric rail- way in Connecticut, Rhode Island, and in parts of Massa- chusetts; to buy up or "kill off" competing boat lines, in- cluding the "outside" line between New York and Boston; to pay excessively high prices for the New York, Westchester and Boston electric railway; to obtain control of the Boston and Maine and Maine Central Railroads in defiance of Massa- chusetts laws; to purchase the New York, Ontario & Western
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DURING THE WORLD WAR
in order to gain an entrance into the anthracite region; to obtain a half interest with the New York Central in control of the Rutland Railroad; to enter into a contract with the New York Central under which the New Haven would assume one-half the deficit under the rental of the Boston and Albany, in return for a voice in Boston and Albany management; and to come to an understanding with the Grand Trunk Rail- way which modified the former active competition and brought about suspension of construction work on the Southern New England Railway from the Central Vermont Railway con- nection at Palmer, Massachusetts, to Providence, Rhode Island.
Before the Commission had made its investigation and before the whole affair was aired in the courts it appeared in 1913 as if the New Haven System as a practical transporta- tion monopoly in New England, was a fait accompli. The investigations, however, revealed so large an amount of ques- tionable practice that the continuation of the Mellen structure was uncertain from the moment the Attorney General of the United States began his efforts to break up the combination. The investigation and trial extended over the greater part of 1914 and 1915. The result was an agreement upon the part of the New Haven Railroad, as the price for dismissal of the suit, to divest itself of control of the Boston & Maine, the Connecticut and Rhode Island trolleys, certain boat lines out- side of those controlled by the New Haven at the beginning of the last period of expansion, and cancellation of the operat- ing agreement that gave the New Haven a half-interest in the Boston & Albany. On the charge of criminal conspiracy the New Haven directors were acquitted.
The new management, under President Howard Elliott (1913-1916) and Edward J. Pearson (from 1916-1928), made substantial progress in rehabilitating the property. An extensive program of enlargement and betterment of physical facilities was interrupted by war, but the New Haven made a creditable record in handling the exceptionally heavy trans- portation demands of war traffic.
NEW ENGLAND RAILROADS DURING THE WORLD WAR (1917-1919)
When it was evident that the United States would be drawn into the world conflict, the railroad executives in this country
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MASSACHUSETTS TRANSPORTATION
were anxious to prove that the railroads under private owner- ship and operation could meet the emergency without govern- mental intervention. Four days after our declaration of war in April, 1917, a plan previously prepared by the railroad executives was made effective. The presidents of practically every railroad in the United States signed a solemn agree- ment to vest in the Railroads' War Board of the American Railway Association complete and plenary powers to operate all railroads as a single continental system during the emer- gency. This committee accomplished a great deal in unifying operation, in securing complete use of equipment and facilities, and in curtailing nonessential and competitive service; but by September, 1917, it was confronted in Massachusetts, as else- where, with problems it could not meet. Under the law the government traffic received preference ; but the many branches of the government competed with each other in priority orders. Because the congestion interfered with military operations, the government concluded that temporary nationalization of railroads was advisable.
Hence (effective January 1, 1918) the railroads were taken over by President Wilson, under war emergency powers. From that date until March 1, 1920, they were operated as a national system by a Director General of Railroads. The lines were organized into seven regional groups, each admin- istered by a regional director. The Eastern Region was di- vided into three districts: New England, Central, and Ohio- Indiana, each in charge of a district director. The New England railroads, accordingly, were operated as a single unit under J. H. Hustis as district director, with each road in charge of a federal manager. The activities of the regional and district directors were coordinated by the central admin- istration under policies determined by the director general.
During the period of federal control, the railroads were operated without respect to the corporate identity, and with unified use of equipment and facilities. Competition was en- tirely eliminated. Civilian passenger travel and the shipment of nonessential freight were discouraged. The government retained all revenues and paid to each corporation, as rental for the use of the property, a net income equivalent to the average earned per year by each company during the three
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RECONSTRUCTION PERIOD
years ended June 30, 1917. So far as the New England rail- roads were concerned, the returns to the stockholders were no more and no less than in the pre-war period. Inasmuch as the two principal roads, the Boston & Maine and the New Haven, had not paid dividends in 1915-1917, the rental was not sufficient to pay dividends in 1918-1919, but all charges were met and the general financial situation remained in statu quo.
THE POST-WAR RECONSTRUCTION PERIOD (1920-1928)
In the final sub-period, 1920-1930, the processes of rehabili- tion of the New England railroads, interrupted by war, were resumed and successfully prosecuted until on December 31, 1929, the properties had "come back." They were in a healthy state physically, financially, and in employee morale, and were furnishing adequate and dependable service.
The pressing financial problems of the New Haven and the Boston & Maine roads, temporarily laid aside during the first part of the war period, had to be faced anew in 1919 as plans were in preparation for the resumption of private manage- ment. The Boston and Maine was in receivership when the roads were taken over by the government on January 1, 1918. A plan for its reorganization was made effective and the receivership terminated in December, 1919. The New Haven Railroad had escaped receivership, but was in weak financial condition.
In June, 1922, the governors of the New England States, acting together, appointed committees to make a study of New England railroads and to recommend a policy with re- spect to railroad consolidation. In the Transportation Act of 1920, Congress had decreed that the many railroads in the United States should be consolidated into a small number of large systems of fairly equal size and strength, so that a uni- form rate scale in each region used in common by the few large systems in that region would yield approximately the same return to each system.
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