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EIGHTH ANNUAL REPORT.

The past year has been one of prosperity to the people of North Dakota, the business interests of the state and for railway property.

The yield of crops, though not as great as desired, has been of fair average, finding prompt outlet and an active market.

Railway equipment has been ample for the transportation of the products of the state, and there has been cause for little if any complaint on account of failure to get cars for shipment when ready for market.

FREIGHT AND PASSENGER RATES.

All through the period of depression freight and passenger rates, especially on local business within the state, have been maintained by the railway companies to the detriment of the shippers of the state.

A general demand existing within the state for a rate adjustment on a more equitable basis for the producers and shippers than that afforded by the railway companies, it was decided by the Commissioners of Railroads to take up the matter for investigation with a view to adjusting such rates on a just and reasonable basis. With this end in view the following notice was served on the Northern Pacific Railway Company, the Great Northern Railway Company, the Minneapolis, St. Paul & Sault Ste. Marie Railway Company, the Chicago, Milwaukee & St. Paul Railway Company, and the Chicago & Northwestern Railway Company, as required by law.

OFFICE COMMISSIONERS OF RAILROADS, I

BISMARCK. GENTLEMEN: It having been made to appear to the satisfaction of the undersigned Commissioners of Railroads of the state of North Dakota that the tariffs of freight rates on grain, merchandise, coal, wood, live stock, wool and

other products of North Dakota, also passenger rates, according to the schedules of such rates now in force and published by said railway company and now on file in the office of said Commissioners of Railroads, are wholly unequal and unreasonable;

Therefore, you are hereby notified that the undersigned Commissioners of Railroads will, on the first day of March, 1897, at the hour of 1 o'clock in the afternoon of said day, at the office of the Commissioners of Railroads in the capitol at Bismarck, North Dakota, proceed to fix and determine such freight and passenger rates, and you are hereby further notified that said Commissioners of Railroads will at said time and place afford to you an opportunity to make any explanation or showing, if you so desire, or to furnish any explanation to said commissioners on the subject of determining and fixing such rates. Dated at Bismarck, N. D., this Sth day of February, 1897

Geo, H. KEYES, Chairman,
L. L. WALTON,

J. R. Gibson,
Attest: J. E. PHELAX, Secretary.

Commissioners.

Representatives of the Northern Pacific Railway Company, the Great Northern Railway Company, and the Minneapolis, St. Paul & Sault Ste. Marie Railway Company responded to this notice and were present at the hearing March 1, 1897, at Bismarck.

This meeting resulted in the railway representatives refusing to consider any reductions in rates. The meeting was adjourned subject to call of chairman.

In the meantime, the matter was deferred pending the effect of legislation under consideration by the legislative assembly then in session. The legislation here referred to, known as House Bill No. 121, culminated in the enactment of the following law, being Chapter 115, Laws of North Dakota for 1897, which is given in full in the Appendix to this report.

In compliance with this law, Section 29, the Commissioners of Railroads proceeded according to law, and on April 15, 1897, served the following notice on railway companies operating within the state of North Dakota:

OFFICE OF COMMISSIONERS OF RAILROADS. GENTLEMEN: It having been made to appear to the satisfaction of the undersigned Commissioners of Railroads of the state of North Dakota, that the tariffs of freight rates on grain, merchandise, coal, live stock, and other products of North Dakota, also passenger rates, according to the schedule of such rates now in force and published by said railway company and now on file in the office of said Commissioners of Railroads, are wholly unequal and unreasonable; therefore, you are hereby notified that the undersigned Commissioners of Railroads will, on the 27th day of April, 1897, at the hour of one o'clock in the afternoon of said day, at the Hotel Northern in the city of Grand Forks, N. D., pro

ceed to fix and determine maximum freight rates and classifications and passenger rates; and you are hereby further notified that said Commissioners of Railroads will at said time and place afford to you an opportunity to make any explanation or showing, if you so desire, or to furnish any explanation to said Commissioners on the subject of determining and fixing such rates and classifications. Dated at Fargo this 15th day of April, 1897.

Geo. H. KEYES, Chairman.
L. L. WALTON,
Join R. Gibson,

Commissioners. Attest: J. E. PHELAX, Secretary.

At Grand Forks on April 27, 1897, Second Vice President Newman and General Counsel Grover for the Great Northern Railway Company and General Traffic Manager Hannaford for the Northern Pacific Railway Company appeared before the Commissioners of Railroads in response to the notice.

The following communication was also received from General Manager Underwood of the Minneapolis, St. Paul & Sault Ste. Marie Railway Company.

MINNEAPOLIS, ST. PAUL & SAULT STE. MARIE RAILWAY COMPANY,

OFFICE OF THE GENERAL MANAGER,

MINNEAPOLIS, MINX., April 23, 1897. To the Honorable Railway Commission, Bismarck, N. D.:

GENTLEMEN: Referring to the meeting to be held at Grand Forks on the 27th inst., wherein the question of making what is practically a horizontal reduction in rates in Dakota will come before your honorable body, permit me to call attention to some things which in my opinion should be taken into consideration before a rate is made that will prove disastrous to the railways.

We must take the broad ground that the present railways (and more) are a positive necessity to the development of the state of North Dakota; without lateral extensions and other railways in Dakota that state will retrograde instead of advancing, and the immigration that would ordinarily come to it will be diverted to other parts of the Union.

There are local 'surroundings governing the rate situation in every community which must not be lost sight of, and when they are lost sight of, and precedents that justly govern in other communities are brought to bear upon commodities which exist under wholly different circumstances, the result is a misfit and injustice. A rate that would be eminently fair and lucrative in some states would be the extreme opposite in others, and would, if applied, amount to a practical confiscation of the railway properties involved, and in the end would revert injuriously to the communities traversed by them.

In the opinion of the writer it is quite as essential that a railway should be on a sound financial footing as that any business should be, and we have yet to see a prosperous community served by bankrupt railways.

The states of Michigan, Wisconsin and some others have recognized difference in local surroundings in fixing rates and have allowed a differential rate on branches of the same railway and different rail ways in the same state, the rate fabric being founded on the local conditions.

In the upper peninsula of Michigan railway fares of five cents per mile and freight rates in proportion have been permitted, while in the lower peninsula a passenger rate of two cents and much lesser freight rates per mile have been obtained. I mention this to show you that an action of this character on your part would not be without precedent.

A rate that was fair on some portions of the Great Northern Railway might be unfair on some other portions, and might be wholly unfair to the Northern Pacific Railway; or a rate that was fair and equitable on the Chicago, Milwaukee & St. Paul Railway inight be wholly unfair and without equity on the line of the Soo Railway.

I think tariffs based on the earnings of railway properties per mile should be made, and when the earnings power of the railway warrants, should their owners be unwilling to reduce the rate, there is a way provided for its reduction. The state has undoubted power to make rates, and having that power it should move with caution, being careful to do no injustice.

A horizontal reduction in rates will throttle new railway building and extensions of railways now built in Dakota for an indefinite period. The greatest need in North Dakota at the present time, to my mind, is immigration. The competition in agriculture is perhaps as severe as competition in other branches of industry and in my opinion you will find it an impossibility to develop the state, outside of a certain distance from the railways, when by a reduction in rates you make future railway building an impossibility. The money to make railway extensions must be obiained from the sale of bonds, and capital will not go into a country where rates are such as to preclude a fair interest on it being earned. The distance a farmer can afford to haul his product to a market and live is not an intricate problem. It can be figured very easily and readily by one who is at all conversant with the circumstances. At the extreme of that distance you have practically a dead line, beyond which no development can be made. Therefore, a policy that will force the railroads of North Dakota to relinquish the idea of extensions or lateral feeders, reacts upon the whole state, and as I have said to your honorable body orally and previously in this letter the ultimate result will be a set-back to Dakota. Other states will advance, while Dakota will stand still or retrograde.

The people of Dakota and the railways are to all intents in partnership Each must bear a proportion of the burden. Upon the success of one depends the success of the other, their interests being thoroughly interlocked; and I cannot too strongly urge upon your honorable body to disregard perhaps a sentiment which we think perhaps is not the better sentiment of the community. Do not mistake a superficial sentiment or what might be termed a frothy sentiment the real article. It would appear that you would be justified for the time in setting your face against the reduction, and trust that the wisdom of your course may become apparent to those who are now violently advocating it.

In presenting what seems to me to be the facts in the case I have not endeavored to frame an elaborate argument; but each statement I have made I think will stand the test of time. In common with other interests, railways have been anticipating better times, and to be met at the outset by such a sweeping reduction as is in contemplation is not only discouraging but unjust,

Respectfully yours, (Signed)

F. D. UNDERW001),

General Manager.

GRAND FORKS, N. D., April 27, 1897. At a meeting of the Railroad Commissioners of North Dakota, held at the Hotel Northern in the city and county of Grand Forks, N. D., at 2 p. m. on Tuesday, April 27, 1897, those present besides the Railroad Comunissioners were representatives of the railroads, and Business Men's Union et al. The following proceedings were had:

George H. Keyes, Chairman: As you know, the last legislature of the state of North Dakota imposed on the Railroad Commissioners the duty of making a schedule of the maximum rates for

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