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the public generally have to pay the interest on such bonds and dividends, assessed upon their transportation, upon the par value of the stock, although the road and its equipment in fact cost very much less than such par value.

The bonds are usually sold at a discount, and a part of the money realized and put into construction is often the only security which the bondholders havc. These practices place railroad securities on a speculative basis, demoralize the market for them, and oftentimes lead innocent outsiders into heavy losses, besides subjecting legitimate enterprises to the payment of large discounts. The watering of railroad stock and excessive issues of bonds have been the great bane of our railroad system. The assumption that whatever stock is issued by a board of directors is, in the eyes of the law, so much “capital actually expended," upon which the State has solemnly guaranteed a ten per cent dividend, is a fallacy. Were there no watered stock in our railroad system, fares and freights would be lower, New York city and the other commercial cities of the State would benefit thereby and increase their population and manufacturing. Were the system of book-keeping and of annual and quarterly reports now required by this Board, supplemented by legislation better regulating the issue of stock and bonds, railway securities wonld have a better standing and credit, and the evils pointed out would be largely remedied.

On the other hand, governmental interference with the finances of railroads, beyond requiring stock and bonds to be honestly issued and beyond requiring books to be well kept and reports to be frequently made, is not generally believed to be 'wise. It is claimed that too much interference is apt to induce the investing public to believe that the securities bear the government stamp and approval, investors being thereby lulled into a sense of false security.

The amendments and legislation heretofore proposed are fully discussed in the Third Annual Report and are briefly these :

First To require railroads, before being constructed and exercising the right of eminent domain to demonstrate their public necessity. On the one hand it is urged that such legislation would deprive the people of the benefits of competition and would place all transportation in the hands of existing railroads. On the other hand parallel and competing lines generally consolidate through leases or “ pools” and thus become greater monopolies, forcing transportation to pay for operating and maintaining unnecessary trackage and equipment, and also to pay dividends upon capital invested.

Second To prevent reorganized companies from watering" their stock.

Third To require that where stock is increased it shall not be disposed of for less than par value, unless by permission of the courts.

Fourth To require that where railroads abandon award proceedings, they shall in all cases deposit in court the amount of the first award before renewing their proceedings.

Fifth To require railroads hereafter constructed, to pass over or under streets, highways and other railroads onless grade crossings are permitted by the courts under proper regulations.

Sixth — To authorize the courts, upon the application of either railroad or highway comınissioners, to make such changes as are needed to secure safety at existing highway crossings, and to assess the expense justly.

Seventh To forbid railroad bonding without the stockholders' consent.

Eighth To forbid parallel and competing lines from leasing each other, and to forbid leases at all, unless the stockholders approve of the same.

Ninth - To forbid discrimination by railroads against shippers by canal.

Tenth To make it the duty of railroads to comply with such recommendations of the Board as the courts shall determine to be just and reasonable, and to make the findings of fact by the Board prima facie evidence before the courts, as suggested by the AttorneyGeneral of the State in bis communication of February 11, 1885, to this Board.

Eleventh - To make railroads liable for damages by fires communicated from their engines, and to give them an insurable interest in property thus destroyed.

Twelfth To regulate the packing and transportation of dynamite and other explosives, as public safety requires.

All of the above measures the Board deems to be important; some of them absolutely necessary to cure the evils from time to time arising from the present imperfection of the laws. The Board was created to stand between the people and the railroads, not only as an umpire, but also in an important sense as a representative of the people, charged with the duty of protecting their rights. Acting under this conception of its duties as required by the Commission Law, the Board has repeatedly called the attention of the Legislature to serious defects in the general railroad laws of the State, as well as in the act creating the Board, and has carefully prepared bills to remedy these defects. That some of those bills, so prepared, were of great and immediate importance, subsequent events have fully demonstrated.

BROADWAY RAILROAD. One illustration alone is presented out of a number at hand. Among the first bills recommended by the Board to the Legislature of 1884 and subsequent Legislatures, and which has not yet become a law, was an amendment to the act of 1839, relating to the leasing of railroads. The proposed amendment read: “ Provided that such leases or contracts for operation shall not be made between railroad companies or corporations whose railroads or branches owned in whole or in part run on parallel or competing lines.” The amend. ment further provided for the approval of stockholders before such lease could be made.

Had these acts, with the recommendations carefully prepared by the Board, together with the act forbidding the issue of bonds without the approval of stockholders been passed, they probably would have presented insurmountable obstacles to the consummation of the corrupt and fraudulent scheme of the Broadway railroad. The prompt action of the Legislature saved the honor of the State, and the courts have and are meting out just punishment to these corrapt schemers. The Board again recommends the foregoing measures to the Legislature with the hope of their receiving favorable consideration.

JOHN D. KERNAN,
WILLIAM E. ROGERS,
JOHN O'DONNELL,

Commissioners.

APPENDIX.

Decisions and recommendations :

Executive and legislative references.
Complaints of cities, towns, associations, individuals, etc.
Applications for increase of capital stock.
Accidents.
Accident inquiries.
Crossings at grade.

Report upon tests of automatic car-couplers.
Length of railroads.
Inspections.
Report to Board, on heating and ventilation of cars..
Minutes of the Board.
New companies formed in 1886.
Companies reorganized in 1886.
Companies consolidated in 1886.
Extension of routes during 1886.
Enactments of the year 1886.
Alphabetical list of all companies formed under laws of this State.

General Railroad Law, and all laws (classified) relating to the rail

roads of this State.

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