of any law that seeks to classify roads and the business done by them. In Europe, a constant struggle to legislate for the public interest in respect to transportation companies has been going on for about forty years. The English Parliament has brought into requisition the services of her first statesmen, in the endeavor to solve the railroad problems. Charles Francis Adams, in the March number of the Atlantic Monthly, after reference to the positions occupied by the Duke of Wellington and Sir Robert Peel, says that a committee was appointed in eighteen hundred and seventy-two, including among its numbers, the Marquis of Salisbury, and the Earl of Derby, "which gave to the whole subject an intelligent consideration. Unlike its predecessors, that committee did not leave the railroad problem where it found it. On the contrary, they advanced it by one entire stage on the road to its solution. In the first place, after taking a vast amount of evidence, they proceeded to review the forty years of experience. The result of that review may be stated in a few words. They show with grim precisión how, during that period, the English railroad legislation had never accomplished any thing which it sought to bring about, nor prevented any thing which it sought to hinder." Further along Mr. Adams says: "Finally, the committee examined all those various panaceas for railroad abuses which are so regularly each year brought forward as novelties in the Legislatures of this country. To one familiar with the subject, the simple faith in which each law-maker brings forward as a new and hitherto unthought of solution of the whole trouble, some old familiar expedient which has been tried and has broken down time and again, would have in it something quite touching were it not so very tedious. All these the English committee now passed in merciless review. Equal mileage rates they found inexpedient as well as impossible; the favorite idea of a revision of rates and fares with a view to establishing a legal tariff sufficient to afford a fair return, and no more, on the actual cost of the railroads, they pronounced utterly impracticable."

of Commissioners, clothed with certain supervisory authority, and especially in respect to extortion and unjust discrimination.

The Archer bill classifies roads according to their length, and then fixes a different tariff of rates, intended to be applied to each class respectively. To ascertain how far such a radical change would be beneficial to the public; how it would affect the growth of the State; how far the experience of other States would serve as a guide to the committee in considering the question, became at once the duty of the committee to examine and determine as wisely as possible.

The bill, as presented to us, evinced such a detailed consideration of the minutia of railroad business, that before undertaking an examination and decision, the representatives of the various railroads in this State, and others not connected therewith, were accorded a full and patient hearing before the committee.. Arguments pro and con were presented, and carefully prepared sworn statements, comparing the charges to be allowed under the Archer bill with those now charged in this State, and also by various prominent Eastern roads, for like services, were submitted. Statements illustrating the effect in the decrease of earnings of various roads and portions of roads in this State, together with the relative amount of business now done on different portions of the Central Pacific road, were also made. A tabulated comparison of the rates to be allowed under this bill, and those which would have been allowed in the socalled "Freeman bill," were laid before us. Comparisons were also presented of the rates to be allowed on the staple products of the ' country, with the same classes of articles and for the same distances which were allowed under the "Potter law" of Wisconsin, lately repealed, on account of its unjust and objectionable character. All these statements of facts and tables of comparisons are to be found in the appendix to this report.

The line of inquiry, investigation, and argument, taken before the committee, together with the examination of the question itself, has convinced us that there are certain elements affecting the cost of 'railroad carriage and operations, that cannot properly be ignored in any attempt to fix a scale of rates to be charged for services performed. For illustration: the increase in the cost of grades as compared with level lines, an increase measured by the steepness of grade to be overcome, also to the element of curvature; these two elements necessarily demand increased motive power and extra weight of rails, which are subjected to greater wear and tear. This bill almost entirely ignores these two elements of cost, which, of necessity, enter largely into any tariff of rates to govern transportation on wheels, whether by rail or by the common roads of the country. One might as well ask and expect a teamster to haul his goods into the almost inaccessible cañons of our mountains for the same price as he would haul and deliver an equal load for a like distance on the plains.

The clause in the bill authorizing an advance of rates after reaching an elevation of fifteen hundred feet, does not affect the objection, for the reason that the most excessive grades and curves may have to be overcome before attaining that elevation.

For instance, the North Pacific Coast Railroad, as to which its President, Mr. Moore testified, presents a constant succession of maximum curves and grades; yet nowhere reaching such an elevation as to entitle it to charge the advance rates contemplated in this

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bill. This road would be prohibited from charging any greater rates than would be allowed to it, if the country through which it passes was a dead level, instead of the mountainous, undulated and difficult one as described by the President. Again, the rates prescribed in the bill, for freight or passage, ignore an equally important consideration of justice, in being the same for a length of road lying on and receiving support from a rich and populous country, as for a similar length of road in a sparsely and scantily producing district. Such inequalities cannot fail to arrest the attention of the Senate. It is true that the short roads classed as A and B have rates allowed high enough probably to compensate for any such contingency; but in the roads in Class C the rates are applied to similar distances, alike regardless of locality, or amount of business done over them.

In illustration, it was shown to the committee that the business on all the stations of the Visalia division of the Central Pacific Railroad was but one-twenty-first of the business done on the western division of the same road, and but one-fifth of the business done on the Oregon division.

This inequality in the volume of business would seem to explain, and in some measure justify, the difference in local rates existing at present. A road doing one-twentieth or one-fifth the business of another road ought not to be subjected to the same uniform and unyielding maxima of rates.

There were many other reasons assigned before the committee which were claimed to influence the cost of carriage between different stations, and urged in justification of the inequalities of rates charged; but the committee has not sufficient technical knowledge of the subject to present them to the Senate, nor to successfully combat the effect claimed for them. The bill contains an extended and detailed classification of all the articles that are usually carried on railroads, prescribing for each class so enumerated a distinct rate per ton per mile for all railroads over fifty miles in length. Your committee cannot see how the interests of the public are to be subserved by the enactment of a law fixing distinct rates on specified articles on all railroads of fifty miles in length, without regard to the local circumstances which surround their operation; therefore, to enumerate in detail over one thousand different articles, and to prescribe that all railroads oyer fifty miles in length, without regard to the amount of those articles which they may be called upon to carry during the year, shall be limited to precisely the same rates per ton per mile for their carriage, does not seem to this committee to be either wise or expedient legislation. Your committee are ́ unable to see why the North Pacific Coast Railroad, for instance, from Saucelito to Tomales, operated through a broken, rugged country, sparsely settled, and with scant production, and with but a limited business from which to derive income, shall not be allowed to charge higher rates per ton per mile than the San Francisco and North Pacific Railroad, operating between Donahue and Cloverdale, in one of the large valleys of the State, capable of sustaining a large population from which to derive income.

The unequal operation of the bill under examination is rendered prominent by the illustration just given; and the principle will apply with equal force to other roads.

Again; the classification of railroads for the purpose of regulating a tariff of charges for service, by the length of the road in miles, is,

in our judgment, unsound in principle, unwise and unstatesmanlike, vicious in its tendencies and operation, and, as far as we know and believe, is sought now, for the first time, to be tried as an experiment in legislation.

The operation of such classification in discriminating, by law, between the carrying power of a road owned by one association of citizens, and that owned by another, if not unconstitutional, is at least unequal and unjust. For the sake of illustration: the earning power of a road twenty-five miles in length, owned by A. B. and his associates, is made by this bill to be equal to the earning power of another road two hundred and fifty miles in length, owned by C. D. and his associates. In other words, A. B. hauls one ton of grain over his road for the distance of twenty-five miles, and is entitled to demand and receive for such service the sum of five dollars. C. D., on the other hand, before he can earn and receive the sum of five dollars, is obliged by this bill to haul a ton of grain through the distance of two hundred and fifty miles; and if C. D. happened to be called upon to haul the ton of grain only twenty-five miles, he can demand and receive the sum of eighty-five cents; and this is true likewise of the thousand different articles enumerated in the classifications of the Archer bill.

Another objection, in the minds of the committee, to this experimental classification of railroads according to their lengths, is to be found in the fact that such legislation must inevitably retard, if it does not absolutely prohibit and prevent the completion of roads already in course of construction. This objection was aptly illustrated to your committee by the testimony of Colonel Peter Donahue, President of the San Francisco and North Pacific Railroad, and by that of A. D. Moore, Esq., President of the North Pacific Coast Railroad.

Each of these gentlemen represents a road in Class C, each is now constructing a present extension to his road, and each is desirous of carrying out the original purpose of his company's incorporation, by building many more miles than is now being operated by their roads respectively.

Both of these gentlemen stated emphatically, and without hesitation, to your committee, that the enactment of the Archer bill must necessarily stop all future road-building by their companies. When the distinguished author of the bill under consideration, himself present during the examination, suggested to Mr. Moore that his bill would probably be amended so that the provisions of Class B would be extended, in a great measure, to roads not exceeding a hundred miles in length, and asked what effect it would have upon his road, it was answered: "We could build to the Russian River, but we could not carry out the purposes of our charter, which takes us beyond and gradually up the coast for a longer distance." It was also stated to the committee, by this gentleman, that this company was seeking to borrow money in foreign markets for the purpose of the continuous construction of their road, and that it would be absolutely impossible to make any loans for such purpose should this bill become a law. It is within the recollection of several of your committee, and of many Senators upon this floor, that the Legislature of this State was called upon at its session, two years ago, to pass a special law extending the maximum of rates of fares and freights, in order that a company desiring to build a railroad from Colfax to

Grass Valley and Nevada, might be enabled, under a more liberal tariff of charges, to borrow money for the prosecution of their enterprise, which they could not borrow under the limitations of the general law. It will be recollected that such a bill, including in its beneficial provisions the road referred to, and perhaps one other on the southern coast, in San Luis Obispo or Santa Barbara Counties, did pass both houses of the Legislature, and became law by executive sanction

It may not be amiss, in illustration of the character of the North Pacific Coast Railroad, and the nature of the country traversed by it, to further state, that Mr. Moore said: "That the road as far as constructed had cost thirty thousand dollars per mile; that it is a narrowgauge; and that he believed such a road could be built over a level surface for not exceeding ten thousand dollars per mile."

Your committee is therefore strongly fortified in the opinion that the North Pacific Coast Railroad could not reasonably look for money to prosecute its work, under the Archer bill, either at home or abroad. Your committee is not insensible to that general public opinion, which asserts the constitutional right to regulate fares and freights. We are also well aware that the several political parties in this State, have given expression to such public opinion, in the most emphatic and unmistakable terms. In that public judgment your committee is entirely in accord. We cannot subscribe to the position that corporations, of any class or kind, are beyond and above the reach of legislative control. They are the creation of the law, in pursuance with the fundemental law of the State which empowers us to bring them into existence, and which most wisely reserves the right to alter, amend, or repeal their charters. Any other construction would be most dangerous to the public interest. A generous people, in the infancy of the commonwealth, impressed with the importance of inaugurating a railroad system, enact conditions which the march of events, the increase of population, the interest of trade and commerce, the general good, may demonstrate to be pregnant with possible dangers to the very life of the community. It would be a dangerous doctrine to hold that such enactments cannot be remodelled and moulded to meet new and changing public wants and exigencies. The attitude of the railroad companies, which deny this right to revise their relations with the public, and to prescribe new limits to their power, is as unsound as its legal and judicial recognition would be unsafe to the public weal. In our judgment it is a doctrine fraught with mischief, and rests upon an unstable foundation. However, the issue, arising in sister States, is pending in the Court of last resort, whose decision will settle it probably forever.

How shall this desired new relation between the State and the

railroad companies be best brought about? What course can be pursued that will interpose an intelligent barrier between what may be, or what may become, the illegitimate desires and exactions of the companies, and the public, without inflicting irreparable injury to the roads? This is a grave question.

The character of the evidence, and the arguments presented to the committee while examining the bills, whether for or against, tended strongly to demonstrate the intricacies and perplexities involved in any effort to regulate, in detail, freights and fares. The showing of the friends as well as of the enemies of the bill has satisfied us that it would be impossible for any legislation, in the limited duration of ́

a session, to construct a classified, detailed measure, that would either meet the public expectation or that would not be liable to cripple the railroad service and development in this State. The Archer bill was evidently prepared with an apparent attention to minutiæ; yet the examination before the committee clearly disclosed incongruities in detail which could, in effect, as law, operate against those we are sworn as legislators to protect. We do not possess the knowledge of the subject requisite to correct such errors, nor to decide the effect that amendments suggested might have, even if the principles on which the bill was drawn were sound, which we do not believe.

The difficulties surrounding the exercise of this class of legislative powers have been made the subject of discussion and examination throughout the entire civilized world where railroads exist. The establishment of fixed tariffs, to be enforced by legal enactment, have found favor for a time, to result in almost universal condemnation. The committee, therefore, seek a plan of action to recommend to the Senate which will best reach the object sought, viz: an assertion of the right of control over railroads in the interest of the people, which shall reduce the present maximum on the great staples of the country, and yet not unwarrantably encroach upon the interest of the companies. It seems to the committee that this object is best attained by the passage of the bill introduced by Senator O'Connor, amended in accordance with the recommendations of the committee. It has come to be known as the "Commissioner bill," which is a misnomer. This bill enforces the right to regulate; it distinctly enunciates the power to control; it enacts that the companies shall not be permitted to charge or receive for any service any greater sum than is fixed by their tariff of rates in force on the first of January, eighteen hundred and seventy-six. To illustrate the practical effect of this limitation, it was shown to the committee that the average cost per ton per mile, for the volume of business done on the Central Pacific road and its branches, according to their latest completed records, was but three and twenty-six one-hundredths cents, while it is well known that the law allowed the companies to charge fifteen cents. This may not have any apparent effect upon the cost of the transportation of luxuries, but it surely operates as a reduction of the maximum now allowed on grain, wool, lumber, and the principal products of the coast. The bill fixes a new legal departure for the companies, and says to them: "Thus far you may go, and no further. The discretion of the companies is limited to a much more circumscribed boundary.

In addition to the reduction and regulation above described, the bill contains the most stringent provisions against favoritism, extortion, and discrimination-provisions embodied in the amendments offered by the committee to chapter second. It is made the duty of the Commissioners to see to it that these provisions are inforced, and the companies rendered accountable for any violations of the law.

It provides that the State.shall put into commission officers who shall make it their business to become as well acquainted with all of the affairs, methods of working, commercial laws influencing and governing tariffs, and charges thereupon, affecting railroads, as any of the railroad managers themselves. It provides means whereby succeeding Legislatures shall not be dependent, either upon their own

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inexperience in railroad affairs, or such testimony and arguments as may be presented by representatives of the companies, or others in opposition to them.

As it is now, the committee is not prepared, by knowledge, or by the arguments or statistical matter presented, to successfully deny that the immediate effect of the Archer bill would be to cut down the incomes of all local roads to the extent represented by Colonel Donahue and Mr. Moore, and that their roads would be forced into suspension. Such consequences have been urged upon the committee as inevitable, backed by a mass of figures, tables and comparisons that we are unable to controvert. In the face of such an exhibit, and the statements made by these and other experts, we are led, without hesitation, to recommend the appointment of Commissioners detailed specially to this service. With State Commissioners, this condition of ignorance on such an important subject would not exist.

Again; a comparison of rates charged by the Central Pacific road with those of prominent Eastern roads, as sworn to and presented, showed that the roads of this State are charging, mile for mile, on most of the articles usually carried, less per ton per mile than is charged on the Eastern roads. The published tariffs have been before us, and seem to sustain the comparisons.

Again; there are frequent complaints in respect to the dealings of the companies with the public, whether well-founded or not we do not undertake to determine. But they exist; and it is the province of wise legislation to furnish a remedy for abuses, if any there are, to the humblest citizen. The great body of complaints emanate from those having infrequent dealings with the companies, and who are least able to assert and enforce their rights in the legal tribunals. Perhaps many of these complaints reach the public ear through the press without first being called to the attention of the principal officers of the roads. It will become the duty of the Commissioners to make themselves familiar with the wants of railroad patrons, to listen to their remonstrances, to call attention to their objections, and to stand between them and extortion and discrimination. Railroad corporations are sensitive to public opinion, which is the best correction of abuses that exists in any government. Commissioners will give that public opinion a healthy tone and direction, and teach corporations that they are subject to its power, even though they claim to be out of reach of the law.

Again; experience is our greatest and wisest instructor and guide. If we will but avail ourselves of its teachings, we will avoid many errors committed by other States, which have cost them much in damaged credit, erippled enterprise, and retarded development. The examples of other States furnish the strongest arguments that can be presented in favor of the Commissioner plan. In no instance has it been a failure, and where longest tried it finds most favor. On the other hand, wherever the rigid rule of the law has laid down the inflexible tariff, there seems to have been trouble and expensive complications. In Europe and America it is the same. Wisconsin presents the case of the Potter law, recently repealed with a unanimity that may well make us pause before repeating an experiment which that State has pronounced against. Illinois and Iowa are now defending their legislation in the Supreme Court of the United States, and probably their enactments will be reversed and repudiated by the great voice of their citizens before the Court acts upon a statute

that will have become obsolete. Massachusetts presents the example of six years of experience under a Board of Commissioners. One of her most enlightened citizens-Charles Francis Adams-has acted as one of the Board from the first. We will quote, at some length, from an address delivered by him in Wisconsin, in September, eighteen hundred and seventy-five, as it presents a stronger argument in favor of the O'Connor bill than any we can offer. He says:

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"Six years ago, in the height of the railroad discussion, a Board of Commissioners was established in Massachusetts, and I became a member of it. The principle upon which the Board was established I at the time thought wholly unsatisfactory; I have since concluded that it was a wonderfully happy legislative guess. The Board had no power, or next to none. It was simply an agency through which publicity could be secured; it was to be a lens through which the scattered, diverging, individually powerless rays of public opinion could be concentrated into a focus and brought to bear on any given point of railroad management. In those days I had not the faith in public opinion which I have now, and it seemed to me that the law which organized our Board and then placed us face to face with those great corporations, powerless to do more than investigate and discuss-it seemed to me that this law was framed in a total misapprehension of the necessities of the case; that it left us in a position which challenged contempt. The fact is, like most officials, I yearned for more power. I wished to be able to compel, as well as to recommend. I wanted a little force bill of my own. This, I am now rejoiced to say, the Legislature of Massachusetts was too wise, perhaps too wisely distrustful, to give me. The law was badly, clumsily framed, but it was based on a very simple idea. A Board of Arbitration was to be created, with supervisory powers. It then became the duty of its members to investigate every complaint brought against any railroad corporation, and this, too, without cost to the party bringing it. If necessary they were to give public hearings, and, as the result thereof, they were to address such recommendations to the railroad companies as in their judgment circumstances might require. Finally, once each year, the recommendations thus made, with the action of the corporations thereon, were to be reported to the Legislature, which in this way reserved the power of dealing with the obdurate or unreasonable exclusively in its own hands. Thus the Commissioners were thrown back to a reliance on publicity and the support of public opinion, with the legislative power very much in the

reserve.

"After six years' trial in many ways, I am now prepared to say that such a reliance is far better than any force bill. It has brought about in Massachusetts a condition of good nature, which is the first essential to success. The Railroad Commissioners with us are not mere prosecuting officers-the recognized enemies of the corporations; they are, on the contrary, above all else, arbitrators, and as such bound, first and foremost, and always, to be on amicable terms with the one party as well as the other. The result has been to me as satisfactory as it was unexpected; our action is almost always accepted by the parties before us as final, and I do not now recall any case once brought before us in which subsequent legislative intervention has been sought for. Scarcely a week passes in which causes of complaint are not brought to our notice-for a postal card is suffi

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cient for that purpose--and invariably the same course is pursued with them. In the first place, the head official of the corporation is called upon, and his attention attracted to the subject, and usually the matter ends here, with satisfactory explanations, or a sufficient measure of relief. The officials know that we wish to be fair and reasonable, and we find them disposed to be the same; at least they are always anxious enough to avoid a public issue. Sometimes, however, it comes to that, and formal hearings have to be given, as a result of which we decide sometimes in favor of the corporation, and sometimes of the petitioners, but always in writing, and stating our reasons in full. When we are forced to this extreme, however, we no longer address ourselves to subordinates, whether they call themselves Superintendents, General Managers, Presidents, or what not, but now we go clean over their heads, and bring the subject directly to the notice of the Board of Directors, insisting on a 'yes' or 'no' action on their part. This course of treatment generally produces results, for it means publicity. For instance, a year or two ago we became satisfied that the bridges on one of the main lines of the State were in an unsatisfactory condition. We addressed the President of the company on the subject, and our communication was, I presume, duly pigeon-holed by him; at any rate we heard nothing of it. After waiting a reasonable time we addressed a second and more formal communication to the Board of Directors, with a distinct though polite intimation that, if necessary, we would next call on the public. The effect was instantaneous. We at once received a formal reply, requesting us to cause any examination we deemed proper to be made, and assuring us that everything necessary should be done. Within the next year every bridge on the road was thoroughly overhauled or renewed.

When it comes to a direct issue the corporations do not like to put themselves in public antagonism to the well-considered action of Commissioners. They will, perhaps, resist up to the last point, but when it comes to a clean issue, with the equities against them, they invariably yield; they are stubborn only when they feel that they have a strong case, and not always then. The simple truth is, that with concentration has come the sense of responsibility; and-you may believe it or not, as you like, but so it is our railroad corporations all over the country are peculiarly sensitive to public opinion."

In conclusion, your committee has recognized the fact, and does not wish to disguise it from the Senate, that it has had in constant recollection the recommendation of the Executive of the State, delivered to this body in his inaugural address.

Perhaps no one occupying public position in California has given to the consideration of the general subject of the relations of railroads to the State, so much careful thought and study, within the past four years, as has the present Governor. His words of wisdom After discussing, inmay, therefore, be well pondered by all of us. his inaugural, the general question of the constitutional power over the subject, he concludes in the following language:

"I now venture to suggest the creation of a commission to assist in this work. I am quite aware that no legislative power could be delegated to a commission. A commission, however, could be clothed with power to correct abuses by compelling the corporations to obey

the laws. already on the statute book. It could, also, be charged with the duty of collecting such statistical and other information as must precede and become the basis of intelligent legislation on railroad matters. In addition, it could be given such other powers, and be charged with such other duties, as the experience of other States, which have Boards of Railroad Commissioners, has shown to be desirable or necessary."

In consideration of the foregoing the committee respectfully recommend as follows:

- First That Senate Bill No. 332, introduced by Senator Lindsey, and Assembly Bill No. 182, known as the Archer bill, do not pass. Second-That Senate Bill No. 134, designated in this report as the O'Connor bill, be amended in accordance with the recommendations of the committee herewith submitted, and passed as amended. Third-That Senate bill No. 319 do not pass, for the reason that its main features are incorporated in the O'Connor bill, as amended by the committee.

"All of which is respectfully submitted.

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