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PERCENTAGE OF COST OF PROVIDING THE SERVICE TO OPERATING REVENUES AND TO INVESTMENT

PERCENTAGE RETURN ON INVESTMENT (EXCLUSIVE OF AMORTIZATION)
Based on an investment of $6.00 per dollar of annual operating revenues

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FLAT RATE OF FARE WITH FREE TRANSFERS, NECESSARY TO PRODUCE 8% RETURN ON INVESTMENT (EXCLUSIVE OF AMORTIZATION)

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Investment based on 4, 5, and 6 times the annual operating revenues

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Cents

Investment based on four times annual operating revenues. Investment based on five times annual operating revenues. Investment based on six times annual operating revenues.

APPENDIX B

ACTUAL FIGURES OF EXISTING STREET RAILWAYS

(MEMORANDUM)

By H. G. BRADLEE, President

Stone & Webster Management Association, Boston, Mass.

MR. FRANK R. FORD, Chairman:

MY DEAR MR. FORD.- In the 1911 report of our Committee on Rates and Fares, we indicated that it is possible to figure accurately the distance which overhead trolley surface street railway cars may be operated with profit for a five cent fare provided four factors with reference to a company's business are known, and we included in our report certain curves by which such calculations can be readily made. The four items which we mentioned are as follows:

I The total cost per car mile of operating expenses, taxes, depreciation and obsolescence.

2 — The average number of five cent fare passengers carried per 1⁄2 round trip.

3

4

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The investment made in the company's property for each $1 of gross business.

The percentage return on the company's investment which must be earned to attract capital freely to the business.

Since our last year's report was completed, I have endeavored to secure information from street railway systems covering the above items. In securing this information, I have modified the items somewhat by transferring taxes, depreciation and obsolescence from the first item to the fourth. The first item, therefore, covers the total cost per car mile of operating expenses exclusive of taxes, depreciation and obsolescence. The fourth item covers the percentage return on the company's investment, which must be earned to provide for taxes, depreciation and obsolescence and to attract capital freely to the business.

In presenting the information which I have collected it, perhaps, will be somewhat clearer if I consider each one of these four items separately.

I. THE TOTAL COST PER CAR MILE OF OPERATING EXPENSES Operating expenses per car mile for companies from which the other data could also be secured are as follows:

Companies having annual gross receipts over one million dollars.

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Companies having annual gross receipts over one million dollars-Con.

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Annual gross receipts over 34 and less than one million dollars.

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Annual gross receipts over 1⁄2 and less than 4 million dollars.

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Annual gross receipts over 4 and less than 1⁄2 million dollars.

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The above figures indicate that operating expenses per car mile are not materially affected by the mere size of the road. In general the small companies may be said to have slightly lower operating expenses per car mile than the large companies, but some of the large companies operate on a very low basis and some of the small companies operate on a high basis. If these companies were retabulated with reference to their geographical location, it would appear that the companies in the southeastern section of the country in general operate at a lower cost per car mile than those in the north section or those in the extreme west section.

2. THE AVERAGE NUMBER OF FIVE-CENT FARE PASSENGERS PER HALF ROUND TRIP

Companies having annual gross receipts over one million dollars.

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Annual gross receipts over 34 and less than one million dollars.

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Annual gross receipts over 1⁄2 and less than 34 million dollars.

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Annual gross receipts over 4 and less than 2 million dollars.

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From the above figures it appears that the larger companies carry a greater number of passengers per half round trip than the smaller companies. The reason for this is evident. In the larger cities it is possible to a certain extent to vary the number of cars operated on each line from hour to hour so that the number of cars operating at any one time is approximately proportioned to the amount of traffic. In smaller cities this is usually impractical because a line which can handle its rush hour business on a ten or fifteen minute headway cannot ordinarily reduce this headway during hours of light travel without strong objections from the traveling public. As a result, the cars traveling with very light loads during a large part of the day necessarily reduce the average number of passengers carried per half trip. As shown by the above figures this reduction is very marked in some of the smaller cities.

If we consider the larger cities only, it appears that 25 five-cent fare passengers per half trip is about as high as any road can hope to average. That we are not likely to exceed this number of passengers with the present type of car is quite evident when we consider that this figure is the average number of paying passengers per half trip covering the entire day's operation including hours of light travel, as well as those of heavy travel, and that it does not include transfer passengers who must also be accommodated on the cars. Assuming that 25 five-cent fare passengers is the maximum which we can hope to carry on an average per half trip, it is evident that our maximum receipts per half trip will be $1.25 and that this is the limiting factor in determining the distance which the car may be profitably operated.

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