the $1,000,000. Of course, at that time there were still some of the June charges coming in, but as nearly as we could figure the June charges we had the budget worked out. I have not a copy of the instructions here, but they were issued to all department heads. Mr. BYRNS. Do you expect, Colonel, that the road is eventually going to maintain itself?

OPERATING BOAT SERVICE.

Colonel STEESE. We can eventually make it safe, yes; and our revenues have been increasing at a rate of $150,000 to $200,000 a year for the last four years. This is our first full year of operation, and during the next year we will be able to get a better line-up on the future. Heretofore our estimates have always been complicated by construction charges and by handling so much of our stuff over the line, for which we take credit on the Interstate Commerce Commission accounts, but do not take credit on this appropriation. Mr. BYRNS. You will be able to determine, you think, during the next year as to whether or not it will be self-sustaining, and when? Colonel STEESE. Yes, sir; during the next year our studies should develop much better information on that point than we have now. Of course it is all tied up with the whole development of the territory and the changing conditions. We put on our river boat service. just last summer. That has changed the interior aspect of the problem considerably. We lost $32,000 on the river boat service, but we gained an extra $135,000 worth of business for the main line, so that there was a net increase. The railroad gained $135,000 in revenues, and the river boats lost $32,000 on operating expenses; so that there was a net gain for the railroad property.

Mr. BYRNS. You stated awhile ago, as I remember it, that the rail rates were 20 per cent less than the water rates?

Colonel STEESE. No, sir; I stated that we laid commodities down in Fairbanks-that is, laid them down in the interior-over the railroad at around an average of 20 per cent less than they formerly got their stuff up the river by the White Pass route.

Major GOTWALS. You understand, Mr. Byrns, that this is a complete change of traffic. While at Fairbanks we have lower rates than the river boats; when we get down the river we soon come to a place where their rates are equal to ours. You see, their service is via St. Michael and White Pass; ours comes from Seward. Naturally our rates must be lower to Fairbanks; otherwise we could not take any of the river traffic.

Mr. BYRNS. Then, if you should raise your rates equal to those of the water lines you would lose commerce?

Major GOTWALS. Of course, their highest rates are at Fairbanks. Our lowest rates would be at Fairbanks, considering the rail and river system as a unit. So, naturally, we are lower at Fairbanks, but we come to a point down the river where we get an equality. It is due to an absolute change of traffic conditions.

Mr. BYRNS. And you think that is necessary in order to get your share of the freight?

Colonel STEESE. Yes, sir. On the lower river the business is still in the hands of a commercial company, and we take the business down the river as far as we can under this adjustment rates.

DAMAGES CAUSED BY FLOODS.

The CHAIRMAN. Are these floods and other troubles ordinary or extraordinary this year?

Colonel STEESE. This flood was an extraordinary flood. That bridge that you walked across, Mr. Cramton, was just after the crest of the flood; it had gone down about a foot, I believe, I told you, when you walked across it. A day later the flood went up about 6 feet higher than it had ever been before, so far as our records show, and took out that bridge and the big main-line bridge farther down the stream.

sir.

Mr. CRAMTON. That must have brought it up to the tracks.

Colonel STEESE. That practically brought it up to the tracks; yes,

Major GOTWALS. With reference to the October flood, the tide was an exceptional tide, and the wind got behind it and the waves actually broke over our track. The profile there was set 5 feet above extreme high water, which seems rather low to me. It is a 45-tide at Turnagain Arm. It never was endangered before, but with this tide the waves broke over the track.

Mr. BYRNS. Colonel, I understood you to say that you expect next year to get through on a million doors.

Colonel STEESE. No, sir. That estimate was made for our own budget last August-to get through this year on a million dollars' operating deficit; but with all these floods piling up on us we can not do it. We will eventually spend a great deal more than this $245,000 to repair that flood damage, but the increased cost over the original structures will go into another account.

Mr. BYRNS. But if it had not been for these floods you would have expected to get through on $1,000,000?

Colonel STEESE. Colonel Gotwals and I prepared our budget last summer and issued orders to the department heads that they were to get by.

TOTAL INVESTMENT OF ALASKA RAILROAD.

Mr. BYRNS. In estimating that $1,000,000, did you take into consideration interest on the investment?

Colonel STEESE. Oh, no, sir. That is merely maintenance and operation of the property itself.

Mr. BYRNS. What was the total cost of it?

Colonel STEESE. Our book account now for investment is around $55,000,000. That includes the track, structures, rolling stock, investment in mines, and so on.

TWO SEPARATE ACCOUNTS AND BOOKS KEPT BY RAILROAD.

Mr. BYRNS. Does your estimate of a $1,000,000 loss also include losses by depreciation and all those things that railroads usually take into consideration in figuring their earnings?

Colonel STEESE. Those things are carried in our I. C. C. accounts but not in our appropriation.

Mr. BYRNS. But my question was as to whether or not, in estimating that if it had not been for these floods you would have come through with a $1,000,000 loss, you took into consideration the

depreciation and other items of charge that are always taken into consideration by railroads in figuring their earnings?

Colonel STEESE. No, sir. We have no sinking fund. We are not creating a sinking fund or taking care of any amortization of the plant at all. This represents actual cash outlay. We do show on these I. C. C. accounts, as a matter of fact, the permanent investment, and we show a depreciation charge there, which is purely a paper transaction. You see, we keep two sets of accounts-the appropriation account, or the account required by the Budget, by the Treasury, and then we keep our own accounts under the I. C. C. classification, which is an entirely different thing. We may pay a bill out of construction money. If we pay ourselves for hauling our own stuff out of the construction account, we put that into our profit and loss account under the capitalization. That is, that service in hauling that lumber to the place where it is to go into a bridge is just as much a part of the cost of the railroad, so far as the capitalization is concerned, as though it had been paid to somebody else for freight or for the original cost of the lumber itself. But that does not show on our appropriation at all.

Mr. BYRNS. Now, suppose you were to take into consideration the interest on your investment and also your depreciation account and these other charges that are always made by railroads which you do not take into consideration; what would be your loss?

Colonel STEESE. Well, that is costing the Government five or six million dollars. That is, taking your $60,000.000, at 41 per cent, and an amortization of about the same amount, you would have 10 per cent at least.

The CHAIRMAN. That is $5,500,000.

Colonel STEESE. That is nearly $6,000,000, right there.

Mr. BYRNS. To which a million dollars would have to be added? Colonel STEESE. Oh, yes.

The CHAIRMAN. Of course, that is what you would have to do if it was private property?

Colonel STEESE. Yes, sir. Now, that cost of around $6,000,000, is just to own the property, without doing any business at all. To do the business costs something over $2,000,000, of which we have $900,000 estimated revenue, so that the operating deficit is this $1.245,000.

Mr. BYRNS. In addition to the cost of the railroad, which is about $6,000,000?

Colonel STEESE. Fifty-six million.

Mr. BYRNS. I mean the cost to the Government. You said it was costing the Government about $6,000,000, just to maintain the road, without doing any business.

Colonel STEESE. Just to own it; not even to maintain it.

Mr. BYRNS. Now, of course you would have to add to that the depreciation?

The CHAIRMAN. That is included in the amortization.

Colonel STEESE. That is included.

Mr. BYRNS. In other words, to own it and keep it in shape?

The CHAIRMAN. That is in the amortization.

Colonel STEESE. The interest on your money plus amortization is five or six million dollars a year, whether we run trains at all or not. Now, if we run trains at all, we have got to spend over

$2,000,000. Our revenues are estimated at a little over three-quarters of a million, leaving an operating deficit of about a million and a quarter, in addition to the cost of owning the road itself.

The CHAIRMAN. Have you a financial statement showing the receipts and expenditures up to the present time, or is this request for $245,000, based on an estimate of what they will be for the whole year?

Colonel STEESE. Yes, sir. I have that. That statement was printed in the House hearings in connection with our similar ap-. propriation for next year.

Mr. CRAMTON. Is that on page 741?

Colonel STEESE. Page 741; yes, sir; the middle column.

The CHAIRMAN. The estimated expenditures are $1,900,000, for 1924?

Colonel STEESE. Yes, sir; and our revenues, we estimated, will be $900,000.

The CHAIRMAN. You will be $150,000 shy on your revenues, according to this estimate, will you not?

Colonel STEESE. No, sir; we will get the $900,000 revenue at the rate we are going. The revenues are shown in the table on page 746. The CHAIRMAN. This $245,000 is based on the estimate that you made, and not on your knowledge of just what has taken place since that time?

Colonel STEESE. Well, we have the first four months. You see, we are only in the middle of the fiscal year. It is based on this $900,000 revenue for the year. If we do not get the $900,000,, this $245,000 will not be enough. At the rate we have been going for these first six months, we figure that we are going to get that $900,000 all right. The first four months are shown in the table on page 746. For July it was about $129,000; for August, $101,000 for September. $87,000; and for October, $76,000; total, $394,570.04 for first four months. You see it is falling off as we get into the winter.

OPERATION OF RAILROAD IN WINTER.

The CHAIRMAN. How much more does it cost you to operate the road in winter than it does in summer, with the smaller tonnage? Colonel STEESE. Of course in the winter time the actual efficiency is lower than in the summer, but we do not have the heavy maintenance cost of keeping up the track.

The CHAIRMAN. Do you have to keep the tracks clear of snow? Colonel STEESE. We have two snow divisions where we have to keep the rotaries going.

The CHAIRMAN. You have to keep them going constantly?
Colonel STEESE. Constantly: through the two divisions.

The CHAIRMAN. What does that cost you?

Major GOTWALS. That costs about $22,000 during the winter.

Mr. CRAMTON. What divisions are those, Colonel?

Colonel STEESE. The Loop Division and the Curry Division-get

ting over the Chugach Mountains and up into Broad Pass.

That $758,000 revenue that I was speaking about was for the fiscal year 1923. It was estimated at $715,000.

Major GOTWALS. On the other hand, our traffic cnditions are best in the winter time. We maintain the smallest force of section men. The CHAIRMAN. You can not do track work in winter?

Major GOTWALS. No, sir; and there is nothing to do. The track is set in concrete so to speak and frozen in. We have excellent track conditions.

STATEMENT SHOWING EXPENDITURE FOR 1924.

The CHAIRMAN. I think we had better put in the record this table of estimated expenditures for 1924 as it appears in the hearings on the Interior Department bill.

(The table referred to is as follows:)

The following table shows the comparative apportionments for maintenance and operation between the authorized appropriation for the current fiscal year 1924 and the estimates herein for 1925. Corresponding expenditures for 1923

In

Mr. CRAMTON. This bill has two items, Colonel. One is the operation and maintenance deficiency for the current year $245,000. our bill two years ago, in the regular appropriation bill for the fiscal year 1923, an operating deficit of about a million and a half was estimated by Colonel Mears, and the Congress gave a million and a quarter, as I remember.

Colonel STEESE. $1,400,000.

Mr. CRAMTON. Well, then it was $1,660,000; that was the estimate, and we gave $1,400,000; and Colonel Mears got through with the figure that we gave. Then a year ago, for the fiscal year 1924, the estimate, as I recall, was for $1,260,000, approximately.

Colonel STEESE. $1,350,000, sir.

Mr. CRAMTON. I do not mean the figure in the Budget; I mean the figure that came to Congress.

Colonel STEESE. The figure that came to Congress was $1,260,860. Colonel Mears's estimate was cut about $100,000 by the Budget.