USA > Massachusetts > Suffolk County > Boston > Fifty years of Boston; a memorial volume issued in commemoration of the tercentenary of 1930; 1880-1930, Pt. 1 > Part 33
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Part 1 | Part 2 | Part 3 | Part 4 | Part 5 | Part 6 | Part 7 | Part 8 | Part 9 | Part 10 | Part 11 | Part 12 | Part 13 | Part 14 | Part 15 | Part 16 | Part 17 | Part 18 | Part 19 | Part 20 | Part 21 | Part 22 | Part 23 | Part 24 | Part 25 | Part 26 | Part 27 | Part 28 | Part 29 | Part 30 | Part 31 | Part 32 | Part 33 | Part 34 | Part 35 | Part 36 | Part 37 | Part 38 | Part 39 | Part 40 | Part 41 | Part 42 | Part 43 | Part 44 | Part 45 | Part 46 | Part 47 | Part 48 | Part 49 | Part 50
The nature of the transformation of the company, from one perilously near bankruptcy to one with reasonably adequate earning power and re-estab- lished credit, and the improvement in operation is indicated by a few figures. In the years 1921-23, the average yearly deficit after payment of interest charges was $7,300,000. In 1924 there was a surplus of nearly $3,000,000. Since then the surplus has grown steadily. In 1928 it was nearly $17,000,000 and in 1929 it was over $22,000,000. During 1921-23 the percentage of revenues taken by expenses was well over eighty; in 1928 it was sixty-eight per cent and in 1929 it was sixty-six per cent. In 1923 the efficiency of freight train service, indicated by the unit, "gross ton miles per train hour," was 12,160. In 1929 the comparable unit was 22,211. In 1923 the daily mileage of freight cars was 13.25; in 1929 it had grown to 25.81. The gross ton miles per ton of coal were increased from 10,869 in 1923 to 18,018 in 1929.
The remarkable improvement in operating results may be credited in large part to the efforts of Edward J. Pearson, who wore himself out in the task. Ill health forced him to tender his resignation on November 26, 1928, and he died a few days later. Pearson personally worked out the general plans for revision of yards and terminals. The Cedar Hill classification yard and transfer station and the new terminal layout in Providence are monuments to his constructive skill. The spectacular gain in operating efficiency was due in large part to C'edar Hill and the rearrangement of train runs.
The financial affairs of the company during this period of recovery were largely in the hands of Edward G. Buckland, vice-president until January 3, 1929, and since then chairman of the Board of Directors. The refunding of the maturing European loan in the critical period of 1925 by the enlisted co-operation of the industrial and financial leaders of New England was a major achievement reflecting high credit on Buckland's adıninistrative ability.
The New Haven in 1930 was again in possession of a substantial part of the Boston and Maine stock. After granting several extensions of time in which to dispose of the stock through the trustees appointed in 1914, the court in June, 1923, had dissolved the trust and instructed the trustees to return the Boston Railroad Holding Company stock to the New Haven road. The reorganization of the Boston and Maine in 1919, following a period of receivership, had increased the total stock of the company, as the principal leased lines had taken preferred stock in the new company in lieu of guaranteed rentals. The stock held by the Boston Railroad Holding Company thereby became a smaller part of the total - twenty-eight per cent instead of fifty-two per cent - and ceased to be controlling. Similar action was taken by the court in 1925 when the trustees, appointed in 1914 to hold the New Haven owned stock of the Connecticut Company, were discharged and the stock restored to the New Haven.
Since March 1, 1929, the operation of the New Haven Railroad has been in charge of President John J. Pelley, who came to the New Haven after a suc-
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cessful experience on the Illinois Central and the Central of Georgia and who has maintained the rate of improvement he inherited from the Pearson administration.
BOSTON AND MAINE RAILROAD SYSTEM
The origin of the Boston and Maine system was in the charter granted by Massachusetts in 1833 to the Andover and Wilmington Railroad to con- struct a railroad from a connection with the Boston and Lowell Railroad in Wilmington to Andover. Three years later the road was extended to Haver- hill and by 1837 it had reached the New Hampshire state line. From there, under a charter from New Hampshire, the Boston and Maine Railroad extended the line through Exeter and Dover to South Berwick, Maine (under a Maine charter), where, in 1843, it connected with the rails of the Portland, Saco and Portsmouth Railroad, forming a through route to Portland. The Portland, Saco and Portsmouth, from 1847, was under joint control of the Eastern Rail- road and the Boston and Maine and was used by both on equal terms for their entrance into Portland. The Eastern Railroad (chartered in 1836) had a line from Boston through Lynn and Newburyport to Portsmouth and competed for through traffic with the Boston and Maine. The Eastern's independent entrance into Boston gave it an advantage over the Boston and Maine, as the latter had to depend upon the Boston and Lowell for through service between Boston and Wilmington. In 1845 the Boston and Maine built its own line from Wilmington to Boston and secured an advantageous location for its station in Haymarket square. The company chartered to build the Boston extension, and those owning the lines east of Wilmington, were then merged into the Boston and Maine Railroad, the name already used in New Hampshire and Maine.
For over twenty-three years the Boston and Maine and the Eastern, although intensively competitive, used the Portland, Saco and Portsmouth in common. The arrangement could hardly continue between two such bitter rivals. In 1870 the Eastern succeeded in buying stock control of the Portland road and proceeded to freeze out the Boston and Maine in 1871 by canceling the contract for joint use. The Boston and Maine thereupon built its own line from South Berwick to Portland and by February 15, 1873, it had its own rails and through service all the way from Boston to Portland.
The Boston and Maine Railroad in 1880 had 177 miles in operation, of which 91 were in Massachusetts. Then began the program of acquiring other railroad properties in its territory. In 1883 the long fight between the two companies was ended when the Boston and Maine leased the Eastern Rail- road, with its subsidiaries, including the Maine Central. The next step, in 1886, was to lease the Worcester, Nashua and Rochester Railroad and thereby to acquire a third route to Portland. Then came the lease of the Boston and Lowell Railroad in 1887 and with it the control of the line from Lowell to Nashua and the lines from Concord northward through New Hampshire and Vermont to Canada. From Nashua to Concord the Concord Railroad operated independently until 1890, when it was consolidated with the Boston, Concord and Montreal Railroad. The latter company was leased to the Boston and Maine in 1895.
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For a short time in the early 90's the Boston and Maine was controlled by the Philadelphia and Reading Railroad, which came to grief by its far- flung extensions and acquisitions, including the New York and New England Railroad. During that time A. A. McLeod, president of the Reading, acted also as president of the Boston and Maine, and it was he who won the fight of the Boston and Maine with the New Haven road for control of the Connecticut River Railroad, running northward from Springfield. The Connecticut River Railroad was leased by the Boston and Maine in 1893 and with that lease went control also of several subsidiary lines in Vermont. The earlier lease of the Boston and Lowell carried with it the control of the Massachusetts Central Railroad from Boston to Northampton and in 1900 the last important step in system building was the lease of the Fitchburg Railroad with its lines from Boston through Fitchburg, Greenfield and the Hoosac Tunnel to the Hudson River, as well as the Cheshire Railroad from South Ashburnham through Keene, N. H., to Bellows Falls, Vt. These acquisitions brought the total miles operated by the Boston and Maine to 2,264 and gave the system a fairly complete monopoly of rail transportation in northern Massachusetts and New Hampshire. Since 1900 there have been no important changes in mileage, although certain leased lines have been relinquished and there have been a few abandoninents of branch lines. As constituted in 1930, the Boston and Maine operates 2,066 miles of line.
During the expansion period of 1880-1900 and for a few years thereafter the company was prosperous and earned good dividends on its stock. Its securities were regarded as sound investments and the railroad served the public satisfactorily. The common stock in 1899 sold as high as 210. The financial structure, however, was top-heavy with leases that called for fixed rentals and the equity of the Boston and Maine stockholders in the system of operated mileage was conspicuously low. Roughly speaking, the Boston and Maine stock was but twenty per cent of the total capitalization of the system, a financial organization that entailed a relatively heavy burden of fixed charges. The sinall margin of safety for dividends became apparent during the depression of 1907-08 and for several years thereafter the financial condition of the company grew progressively more serious.
In the meantime the Boston and Maine passed through a trying period when the control passed temporarily to the New Haven road. The circum- stances under which that control was acquired in 1907 and the subsequent developments have already been sketched. In 1910 Lucius Tuttle, who had been president of the Boston and Maine since 1893, was displaced by Charles S. Mellen, who acted as president of the New Haven, the Boston and Maine and the Maine Central.
The active control of the Boston and Maine by the New Haven lasted from September, 1910, until July, 1913, when Mr. Mellen resigned. The new management of the company, under the direction of Howard Elliott, adopted policies intended to restore public confidence and good will. While continuing to hold control of the Boston and Maine through the holding company, the property was managed locally under Morris McDonald, who succeeded Mellen in the Boston and Maine presidency. McDonald acted also as president
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of the Maine Central Railroad, at that time under Boston and Maine control through stoek ownership, but after one year of service in the two positions he resigned from the Boston and Maine and devoted himself entirely to the Maine Central. The Boston and Maine sold its Maine Central stock in April, 1914, to obtain funds to apply toward the partial payment of the large floating debt ineurred during the Mellen régime.
In the presidency of the Boston and Maine MeDonald was suceeeded in August, 1914, by James H. Hustis, who had made an exeellent reeord in reha- bilitating the Boston and Albany between 1907 and 1913. Hustis had left the Boston and Albany to become president of the New Haven but when the federal suit brought about the dissolution of the New Haven's unified New England system Hustis was asked to take the Boston and Maine.
The problems confronting Hustis in 1914 were many and difficult. The effeet of the three years of New Haven direet control had been harmful in its effeet upon employee inorale. Public relationships had been strained, espe- eially in New Hampshire, by absentee control. In the effort to maintain dividends the standards of maintenance had suffered and the normal program of additions and betterments had lagged behind requirements. Under New Haven management a good start had been made in physical improvements, notably in revision of the Mechanicville elassification yard and the eonstrue- tion of general shops at Billerica, but there was urgent need for many other extensive improvements. The net earnings had fallen so low as to require the suspension of dividends and were insufficient to eover all rentals and interest charges. Besides, there was the embarrassment of a substantial floating debt.
In 1915 an earnest effort was made to eateh up on deferred maintenance and to do the most urgently needed work in additions and betterments. While sueeessful in the former, the company, because of its weak finaneial condition, could not raise funds for physical improvements and the efforts of the manage- inent were diverted to the problem of taking eare of the floating debt in one- year notes, many times extended. The conditions eaused by the World War inereased the difficulties and they became so great that, after the failure of efforts to induee the leased lines to agree to a plan for voluntary reorganization, the only alternative appeared to be receivership. In August, 1916, Hustis was appointed temporary receiver and the railroad was operated under orders of the Court until January 1, 1918, when all railroads were taken over by the government. Federal operation continued until Mareh 1, 1920, but in the meantime the Board of Directors of the Boston and Maine, in collaboration with the committees of the leased lines and with the assistance of the Director General of Railroads, had worked out and agreed upon a plan for financial reorganization. The receivership was terminated in Deeember, 1919. Hustis was re-elected president and took charge of operation on March 1, 1920, at the conclusion of federal operation.
Under the terins of the reoganization plan the principal leased lines gave up their guaranteed rentals and merged their properties with the Boston and Maine. In lieu of rentals they accepted preferred stoeks of the reorganized company. That action brought about an improvement in the financial strue- ture, as the fixed charges were substantially redueed, yet the net ineome of
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1920, 1921 and 1923 was not sufficient to pay all of the charges, to say nothing of preferred dividends. That the 1919 reorganization had not gone far enough was quickly apparent. The paramount need lay in physical improvements which would increase capacity to handle traffic expeditiously, bring down operating costs, and increase net income, but inasmuch as the reorganization- had failed to restore the company's credit, new funds could not be raised. A further reorganization was imperative.
To assist the directors in the task, Homer Loring of Boston was invited to take the chairmanship of the Board and largely through his efforts and those of the Readjustment Committee, assisted by banking interests in Boston, the object was accomplished in 1926 without recourse to a second receivership. The stockholders agreed to purchase an issue of $13,000,000 of prior preference stock or to surrender a proportionate part of their holdings in stock then out- standing. The requirements as to the amount of new stock to be purchased were graded according to the priority of the stock then held, ranging from twelve to twenty per cent, and for those who elected to surrender a part of their holdings instead of subscribing to new stock, the sacrifice ranged from six and one half to thirty-two per cent, the largest amounts in each case applying to the holders of common stock.
With funds in hand an extensive program of improvement work was undertaken and vigorously prosecuted. The terminal situation in Boston calling for first attention, the directors sought the expert counsel of George Hannauer, who had had extensive and successful experience in terminal work in St. Louis and Chicago, and plans for the complete revision and reconstruc- tion of the entire terminal, including the North Station and freight houses as well as the yards, were worked out under his direction.
In April, 1926, Hustis decided to retire from active railroad management and he was succeeded by George Hannauer as president in January, 1927. During his administration, which was tragically terminated by his sudden death in November, 1929, the work of rehabilitation was carried on with speed and effectiveness. Space will not permit reference in detail to the many major projects which were completed, but in general the improved facilities, the new locomotives and the thoroughgoing supervision of operating detail accom- plished spectacular results, from the viewpoints of operating efficiency and expedition of freight movement.
The extent of the improvement in operating efficiency is seen in the two units of greatest significance. The first, "gross ton miles per train hour," was 10,581 in 1923 and 21,015 in 1929, a gain of over 100 per cent. The second, "car miles per freight car day," was increased from 16.7 in 1923 to 28.9 in 1929, a gain of seventy-three per cent. These units reflect the efficiency of equipment utilization. A third unit, "gross ton miles per ton of coal," reflects the improvement in that important item of expensc. The figures for 1923 and 1929 were 10,990 and 17,700 respectively, a gain of sixty-one per cent. If these figures are too technical for the reader who is unfamiliar with railroad operating statistics, he will have no difficulty in comprehending the significance of the statement that in 1922 the average time of a freight car front the Hudson
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river gateways to Boston was eighty-three hours. In 1930 the railroad was advertising and maintaining schedules under which cars were moved between the same points in eighteen hours.
These improvements in service and in operating efficiency could not fail to influence net earnings. Dividends have been paid on certain of the pre- ferred stocks since 1926, and in April, 1930, dividends at the rate of four per cent were resumed on the common stock. In the dark days following the war period the common stock sold on the Stock Exchange as low as 72. In 1929 before the break in the stock market it was selling above 140.
For several months after Hannauer's death Thomas Nelson Perkins, chairman of the executive committee, served also as acting president of the company and on April 9, 1930, Edward S. French was elected to the presidency, Perkins becoming chairman of the board. French is a New Englander, gained his railroad experience in the service of the Boston and Maine, and was con- spicuously successful in managing the Vermont lines in which the Boston and Maine has a financial interest.
BOSTON AND ALBANY RAILROAD
The Boston and Albany Railroad was organized in 1867 and grew out of the merger of the Boston and Worcester Railroad (incorporated in 1831) and the Western Railroad (incorporated in 1833). The two railroads, in connec- tion with the Albany and West Stockbridge Railroad from the New York state line to East Albany, formed a direct and through route from Boston to Albany. In 1870 the Albany and West Stockbridge road was merged with the Boston and Albany.
During the entire period from 1880 to 1900 the Boston and Albany was administered by William Bliss as president. Unlike the New Haven and Boston and Maine, the system did not expand. Outside of the purchase of the branch from East Springfield to Athol in 1881, the purchase of that part of the New York and New England Railroad between Newton Highlands and Brookline Junction in 1882, the extension from Newton Highlands to River- side to form the south side of the Newton Circuit in 1886, and the purchase of the Spencer Branch in 1889, there were no important changes in corporate organization or in mileage operated. The road was managed with marked conservatismn, was exceptionally well maintained and unusually prosperous.
The relations between the Boston and Albany and the New York Central had always been friendly and the New York Central was represented on the Boston and Albany board. It was natural, therefore, that when the New York Central, about the close of the century, decided to extend its operations in New England, the control of the Boston and Albany should be sought. A lease was consummated in 1900 on terins distinctly favorable to Boston and Albany stockholders.
During the first year of New York Central control Bliss operated the Boston and Albany as agent of the New York Central and in 1901 the New York Central assigned one of its vice-presidents, Edgar Van Etten, to Boston
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to take over the management. The lease, when proposed, met with a good deal of public opposition, as absentee landlordism was feared, but the proposal was finally approved by the Massachusetts Legislature. During the first four years of the Van Etten management there was little external evidence of change but by 1905 service began to deteriorate and the employee inorale to suffer. The situation grew progressively worse throughout 1906 and. 1907 and public criticism finally forced the New York Central to make a change. Van Etten was retired and the management was placed in the hands of James H. Hustis, who had made a fine record as general superintendent of the New York Central. Hustis successfully restored the employee morale and with funds advanced by the New York Central made the physical improvements and additions imperatively needed. When Hustis came in October, 1907, passenger trains were chronically late and freight service was deplorably irregular. Within seven months the public service was restored to normal quality and on May 2, 1908, the simple statement that every passenger train of the Boston and Albany on the previous day had reached its destination on time had sufficient news value to get the front page headlines of the morning papers.
Hustis was able to continue the program of rehabilitation during the fol- lowing five years and when he resigned in August, 1913, to become president of the New Haven Railroad, he turned over a well organized and efficiently operated railroad to his successor, Howard M. Biscoe, formerly traffic manager, who since then has managed the Boston and Albany with ability.
When the New York Central leased the Boston and Albany the funded debt of the latter was only about $7,500,000. The physical improvements in additional trackage, revision of terminals, new engine houses, new locomotives and cars, and a new water terminal and grain elevator in East Boston, called for heavy capital expenditures. The money was advanced by the New York Central and later the lessee company was reimbursed from the proceeds of the sale of new issues of Boston and Albany bonds. By 1916 the funded debt had reached $25,000,000, and in 1930 it was $31,700,000. To the wise expenditure of the additional capital is attributable in greater part the maintenance of high grade service since 1908 and, barring the war period and immediately succeeding years, the maintenance of net earning power in excess of interest charges and the guaranteed dividends.
In the recital of events connected with the New Haven Railroad reference was made to an agreement made between the New Haven and the New York Central in 1911 under which the New Haven would share equally in the Boston and Albany management. It was primarily a defensive measure of potential value to the New Haven, but one which was never utilized. Throughout the period when the agreement was in force (it was canceled in 1914) the New Haven did not interfere with the management of the Boston and Albany.
During the war and in the post-war period the Boston and Albany, in common with the New Haven and Boston and Maine, suffered in net income but, unlike the other two systems, it had no serious problems of financial reorgani- zation. During the years 1922-23, when the freight service of the New England carriers was marred by congestions and embargoes, the patrons of the Boston and Albany had the least cause for complaint.
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RAIL CONSOLIDATION in NEW ENGLAND
When Congress decided, after the war-time experience of federal operation of railroads, that private management should be restored, a new national policy toward rail carriers was adopted in the Transportation Act of 1920. For the first time the principle, already recognized in court decisions, that rail- roads are entitled to a fair return on the value of property devoted to public use, was affirmatively written into the statutes. The 1920 Act gave a mandate to the Interstate Cominerce Commission to establish rates so that the carriers as a whole, in the regional groups to be defined, should be able, as nearly as may be, under honest and efficient management, to earn a fair return. That mandate, however, applied to the roads as a whole, not individually, and it was recognized that, if the average return for the entire group in any region were a fair return, it would necessarily happen that the prosperous carriers would earn more than a fair return and the weaker would earn less than a fair return. The problem of rate-inaking is to fix the scale so that, on the one hand, the earnings of the strong will not be excessive and, on the other, the earnings of the weak will be sufficient to allow them to live and satisfactorily serve the communities dependent upon thein for transportation. To meet the problem of the weak carriers, unable to maintain adequate service under rates which might give unduly high return to the strong, Congress adopted the expedient of consolidation and directed the Interstate Commerce Commission to prepare a plan for joining together the weak and the strong, so that, instead of a large number of railroads of varying degrees of financial strength and earning power, there should be created a limited number of systems of fairly equal strength, each of which, under uniform rates on competitive traffic, might earn substantially the same rate of return on value. The Commission was not given power to require consolidation but the law provides that no consolidation may be made unless first approved by the Commission, and the Commission inay not approve any such proposal unless it conforms to the Commission's final plan.
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