REPORT.

OFFICE OF THE RAILROAD COMMISSION,
ATLANTA, GA., July 6, 1885.

His Excellency, Henry D. McDaniel, Governor, Etc.:

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SIR: We have the honor of presenting the following report of the work of the Railroad Commissioners, since the date of our last semi-annual report. We do not deem it necessary or proper to burden the text of the report with a minute and detailed statement of all the labors of the Board during the period mentioned. The office of the Commission has always been open to the railroad companies, and to the general public, and our records and correspondence show, in minute detail, all the work which our official duties have required us to perform.

We attach hereto, in the form of an appendix, official copies of circulars issued to railroad companies since our last report. These orders are in themselves sufficiently explicit to show the objects which the Commissioners had in view in issuing them. The appendix also contains other matter, to which we respectfully invite your Excellency's attention.

Much dissatisfaction has been expressed by the railroad companies of the State in reference to the powers conferred upon the Commissioners by the Act of 1879. An attempt will be made at the approaching session of the General Assembly, we learn, to have the law so amended as to make it more consistent with the views and wishes of the railway corporations. In view of this, we deem it not improper to give expression to our opinions upon this very important subject, through the medium of this report.

The constitutionality of the law of 1879, under which the Railroad Commissioners were appointed, has been settled by the highest Judicial authority of the State.

The Supreme Court of the State, in the case of the Georgia Railroad et al., vs. Smith et al., Commissioners, after referring to the provisions of the Constitution of 1877, which confers power and authority to regulate rates on the various railroads of the State, upon the General Assembly, and to the legislation intended to carry that provision into effect, used the following language:

"Thus it appears that the Constitution provided that the Legislature should have power to regulate railroad freight and passenger tariffs, and to require reasonable and just rates for both; that it also made it the duty of the Legislature to pass laws necessary for its execution, and that in pursuance of that duty, the law complained of was passed."

"It was not expected that the Legislature should do more than pass laws to accomplish the end in view. When this was done, its duty had been discharged."

The Circuit Court of the United States used the following language in the Tilley case: "Under the Constitution of Georgia, power and authority is conferred upon the Legis

lature to pass laws to regulate freight and passenger tariffs on railroads, and require just and reasonable rates; and it is its duty to pass such laws, that it may prescribe such rates, either directly or through the intervention of a Commission, and the question whether the rates prescribed by the Legislature, either directly or indirectly, are just and reasonable, is a question which, under the Constitution, the Legislature may determine for itself." Again, in the same case, the Circuit Court says:

"The railroad company, after testing the results of the schedule of rates fixed by the Commissioners, and finding it to be unjust and unreasonable, can apply to the Commissioners for redress. If redress is denied them there, they can appeal to the Legislature for relief. Believing the law under which the Commissioners are appointed to be within the Constitutional power of the Legislature, the redress must come either from the Commissioners or the General Assembly; it is not in the power of this Court to give relief."

Keeping in view the construction above given by the Courts, as to the nature and extent of the duties imposed by the General Assembly, and to the manner in which such duties may be performed, we respectfully invite your Excellency's attention to the following suggestions:

Power and authority are especially given by the Constitution to the General Assembly to regulate rates of freight and passenger tariffs, and to prohibit unjust discriminations, on the various railroads of the State. The Constitution declares that, "the Legislative, Judicial and Executive powers shall forever remain separate and distinct, and no person discharging the duties of one shall, at the same time, exercise the functions of either of the others, except as herein provided." Code, 50: 15.

It is no where provided in the Constitution that the power and authority of regulating rates of freight and passenger tariffs, and of preventing unjust discriminations, on the various railroads of the State, may be exercised by any but the Legislative department. The powers mentioned, and the duty of executing the same, are both alike conferred and imposed upon the Legislature. Hence such powers and duties are made entirely legislative in their character, by the organic law. It would seem to follow, that a law providing that the duty of exercising such powers might be discharged by the Judiciary, would be unconstitutional and void. It would clearly be violative of the provision of the Constitution, which requires that the Legislative, Judicial and Executive power shall forever remain separate and distinct from each other.

A Judge who might take jurisdiction under such a law, would be exercising functions which, by express provisions of the Constitution, are conferred upon the Legislature alone. Any person discharging the duties of a Judge is prohibited, while discharging such duties, from exercising any functions, which are legislative in their character.

Nor would it, in our opinion, make any difference, even if a court were created by the Legislature, for the specia. purpose of hearing and determining cases of alleged wrongful over-charges and unjust discriminations by the roads. Such a court, although it might be styled a Railroad Commission, would be no more than an inferior court, under the Constitution, and could not be given any powers not judicial in their character. Such a court would simply be a part of the Judiciary department of the State government. It could not discharge the legislative function of regulating freight and passenger tariffs, and prohibiting unjust discriminations, on the roads of the State. Powers might be conferred upon such a court, to adjudge that wrong had been done by a railroad company in the past, but no power could be given to it to regulate, by judicial proceedings, the rate business of the railroads, so as to prevent wrong and injury from being done in the future. This power we repeat, can be exercised, under the Constitution, by the Legislature only.

Complaint has been made by the railroad companies that the right of appeal from the

action of the Commissioners is not allowed by law. Desiring that the roads should be given every possible right, we have, on more than one occasion, suggested that this privilege be allowed, but so guardedly as to prevent the legal powers of the Commission from being impaired by the exercise of such privilege. These suggestions upon our part seem to have met with little or no favor from the railroad companies. They claim that the privilege of appeal should be granted to them free from any restrictions whatever, save such as are applicable by law, to all litigants alike. Argument is not needed to show that the privilege, if thus granted, might be so exercised as to destroy, in effect, all the legal powers of the Commission. If it is deemed essential to the public interest that the Commission should be vested with the rate-making power at all, then its action, in the exercise of such powers, ought to remain of force until set aside, either by itself or by some other competent authority.

But would not a law giving the privilege of appeal from the action of the Commissioners to the courts, be itself obnoxious to objection on constitutional grounds? In all such cases the question tried would be: Is the action of the Commissioners complained of reasonable and just? To settle this question, the court trying the same would have to determine what would have been just and reasonable action on the part of the Commissioners, and then adjudge accordingly. If the appealing party should prevail, the judgment of the court would be to the effect that the action of the Commissioners appealed from was unreasonable and unjust. If, for example, that action involved a schedule of rates, the court would first decide whether the tariff fixed by the schedule was just and reasonable.

Thus the Court would be performing the office of regulating the tariff of rates, in the ease tried. Would not this, in effect, be an exercise by the Court, of power conferred by the Constitution upon the Legislature exclusively? It seems to us that it would.

But would it be practicable for the Courts to discharge efficiently the rate-making powers and duties specified in the Constitution? This question can be learly answered by supposing a case, as an illustration. If a court should attempt to ascertain whether a given rate on cotton from Atlanta to Savannah, for instance, was just and reasonable, it would first have to inform itself by evidence, as to the value of the service rendered by the railroad company. It is hardly necessary to suggest that this inquiry would involve the solution by evidence, of an untold number of minor questions. Indeed, what is the value of the services rendered by a railroad company in any given case, is the most difficult of the many complicated questions which railway managers are required to solve. This difficulty can only be met and overcome by making frequent adjustments of rates, as experience may show that necessity exists requiring changes to be made. The judgments of courts could never make such adjustments. Necessarily, the effect of such judgments would be confined to the subject matter involved in the suits in which the judgments were rendered. Such judgments could not affect the interest or business of any road not a party to the suit or suits. It needs no argument to show that such proceedings could never be made to discharge the office of "regulating rates on the various railroads of the State, and of prohibiting unjust discriminations thereon."

Would any law having the effect of leaving the railroads to exercise the privilege of fixing their own rates be constitutional? The Supreme Court, in the case from which we have already quoted, says:

"The Constitution of 1877 confers upon the Legislature the power and authority of regulating freight and passenger tariffs, preventing unjust discriminations, and requiring reasonable and just rates of freight and passenger tariffs."

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"For this purpose the Act of 1879 was passed. The object of the Constitutional provision and the legislative enactment was, to give proper protection to the citizen against unjust rates for the transportation of freight and passengers, over the railroads of the State, and to prevent unjust discriminations, although the rates might be just."

Would not the objects here stated be defeated by any legislation allowing the railroad companies to fix their own rates? It seems to us that such a law would, in effect, be an attempt to perpetuate, and even legalize, the very evil against which the framers of the Constitution found it necessary to provide a remedy in the fundamental law of the State.

Before the adoption of the Constitution of 1877, the railroad companies exercised the privilege of fixing rates on their respective roads. The Courts were then in the possession of all the powers which could now be given to them by statute, to enable them to correct the abuse of this privilege. "For every right there exists remedy," is, and always has been, axiomatic in the law. Our courts have ever been open to complaining parties; but, notwithstanding all this, the framers of the Constitution, finding that the remedy through the Courts was entirely inadequate, and that the evil growing out of allowing the roads to regulate their own rates had become intolerable, devested the companies of this privilege, and imposed the same as a special duty upon the General Assembly.

But finally, upon this particular subject, we respectfully suggest that the remittal of the rate-making power either directly to the railroads themselves, or indirectly to the Courts, would be an abdication by the General Assembly of powers which the Constitution expressly enjoins upon the Legislative department. It would, in effect, be a refusal by the Legislature to discharge the duties imposed upon it by the organic law of the State.

We would next invite your Excellency's attention to the reasons given by the railroad companies for desiring a modification of the powers of the Commission. These reasons are too numerous to be here discussed, or even mentioned in detail; but they may all be summed up in two propositions, viz:

1st. That the exercise of the powers given to the Commissioners greatly injures and damages the railroad interests of the State.

2nd. That the very existence of the Commission, clothed with the powers given to it by existing laws, is injurious to the public interest.

We will, with as much brevity as we may find consistent with the importance of the subject, now proceed to discuss these propositions, but in inverted order from that in which they are above stated.

It is contended that the very fact that the Commission exists with its present powers prevents capital, for the building and equipping of railroads, from being brought into the State, thus causing injury to the Commonwealth. It is urged that capitalists abroad will not invest their money in railroad building here, because the Commissioners may possibly so exercise their powers as to render such investments unproductive and valueless.

In reference to this particular subject, the Commissioners used the following language in their last semi-annual report:

"It has been assumed that the policy of the State in establishing a Railroad Commission for the purpose of regulating railroad traffic within this State, has been detrimental to the interests of the railroads as well as injurious to the general welfare of the people; and, in its operations, has had a tendency to retard the building of railroads in the State. In response to this assumption we desire to call your Excellency's attention to the following facts, showing the same to be without any foundation:

"1st. The records of this office show that for the five years previous to the establishment of the Commission (in 1879) there were built within this State less than one hundred miles of railroads, and that during the five years since the establishment of the Railroad Commission more than six hundred miles of railroads have been constructed within the limits of the State.

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Again, it is an undeniable fact that more of the stock of the railroads within the State of Georgia have been taken by foreign capital and at higher rates since the establishment of the Commission than at any like period of time previous to its existence.

"Further, neither the policy of the State in enacting laws for the regulation of railroad traffic nor the action of the Commission has deterred non-resident capitalists from purchasing the following roads already built, namely:

"The Macon and Brunswick Railroad, one hundred and ninety-eight miles in length; the Brunswick and Western Railroad, one hundred and seventy-one miles in length; the majority of the stock of the Western and Atlantic Railroad Company; nor from taking one-half of the lease of the Georgia Railroad for a period of ninety-nine years, at six hundred thousand dollars per annum, which is equal to a fraction over fourteen per cent. annual dividend on the capital stock of $4,200,000.00 of said road.

"Not only has foreign capital flowed into the State and been invested in the trunk lines which have been constructed since the establishment of the Commission, and those in existence before its establishment, but, from the records in this office, showing the number of miles of branch roads built and being built by the citizens of Georgia, it would seem that they have been stimulated to a degree in providing themselves with railroad facilities that has not been equaled in any five years in the history of the State preceding the same."

The truth of these statements has never been questioned upon any reliable evidence, and we are warranted in saying that their correctness cannot be successfully assailed.

Speculations as to how many miles of railroad have been built in States where commissions have not existed, or what might have been done in a similar direction here, if no commission had ever been created in Georgia, amounts to nothing, either as evidence or argument. The fact that the spirit of railroad building in this State has not been destroyed or even weakened, still remains in tact.

We take occasion just here to remark that we do not call to mind a single instance, in which New York or other foreign capital, has been subscribed for the building of a railroad in this State, in the inception of the enterprise. Such instances may have existed, but we think that they have been of very rare occurrence. The usual course pursued by foreign capitalists has been to buy up the roads of greatly embarrassed or bankrupt companies at almost nominal prices, capitalize the property, (sometimes using much water in the process,) and then reimburse themselves for all investments they had made by extorting as high rates from the people as business would bear. In this way the public has often been made to repay the capitalists in the form of oppressive rates, the original cost of railroad property, and also for all the improvements placed thereon. This was doubtless a portion of the evil which the constitutional convention found it necessary to correct through the organic law.

Every good citizen ought to encourage the introduction of capital, intended in good faith, to be applied towards developing the resources of the State; but we submit that this end can never be accomplished by legislation, which would only be effective in promoting the schemes of mere speculators in railroad enterprises.

We insert, as pertinent here, a tabular statement taken from THE RAILWAY AGE, of July 2, 1885, the leading railroad organ in the United States, showing the number of miles of railroad track laid during the first six months of the year 1885: