1049 
 
 
 
 
CORNELL 
 
 UNIVERSITY 
 
 LIBRARY 
 
Cornell University Library 
 HE 1049 .B95 
 
 The cost of trans 
 
 portation on the Erie C 
 
 olin 
 
 3 1924 030 119 816 
 
BULLETINS OF THE 
 BUREAU OF RAILWAY ECONOMICS 
 
 1 . Summary of Revenues and Expenses of Steam Roads in the 
 
 United States for July, 1910. (Monthly Report Series, 
 Bulletin No. 1.) 
 
 2. Summary of Revenues and Expenses of Steam Roads in the 
 
 United States for August, 1910. (Monthly Report Series, 
 Bulletin No. 2.) 
 
 3. Summary of Revenues and Expenses of Steam Roads in the 
 
 United States for September, 1910. (Monthly Report 
 Series, Bulletin No. 3.) 
 
 4. A Comparative Statement of Physical Valuation and Capitali- 
 
 zation. 
 
 5. Preliminary Bulletin for November, 1910 — Revenues and 
 
 Expenses. 
 
 6. Railway Traffic Statistics. 
 
 7. Summary of Revenues and Expenses of Steam Roads in the 
 
 United States for October, 1910. (Monthly Report Series, 
 Bulletin No. 4.) 
 
 8. Summary of Revenues and Expenses of Steam Roads in the 
 
 United States for November, 1910. (Monthly Report 
 Series, Bulletin No., 5.) 
 
 9. Summary of Revenues and Expenses of Steam Roads in the 
 
 United. States for December, 1910. (Monthly Report 
 Series, Bulletin No. 6.) 
 
 10. Summary of Revenues and Expenses of Steam Roads in the 
 
 United States for January, 1911. 
 
 11. Comment on the Decision in the Western Advanced, Rate Case, 
 
 No- 3500. (Out of Print.) 
 
 12. Summary of Revenues and Expenses of Steam Roads in the 
 
 United States for February, 1911. 
 
 13. Summary of Revenues and Expenses of Steam Roads in the 
 
 United States for March, 191 1. 
 
 {Continued on third page of cover.) 
 
 The numbering of the monthly bulletins as a separate series was abandoned 
 with the December, 1910, issue. Since then allbulletins issued by the Bureau 
 have been given a consecutive number only. 
 
/ ' <f 
 
 The Cost of Transportation on 
 
 the Erie Canal and 
 
 by Rail 
 
 WASHINGTON, D. C. 
 OCTOBER, 1911 
 
 j.Y i ' '- U A ft '»' 
 

 b '9 
 
 5 
 
 /04 3 /# 
 
 THE SOURCES OF INFORMATION utilized in the preparation 
 of this study are the following : 
 
 Annual reports of the New York State Superintendent of 
 Public Works. 
 
 Annual reports of the New York State Comptroller. 
 
 Annual reports of the New York State Engineer. 
 
 Report of the Committee on Canals of New York State 
 (Greene Committee), 1899. 
 
 Reports of the Inland Waterways Commission, the United 
 States Census Bureau, Bureau of Corporations, and Inter- 
 state Commerce Commission. 
 
 A. Barton Hepburn — Artificial Waterways and Commercial 
 Development, (New York, 1909). 
 
 Publications of the Buffalo Historical Society. 
 
 Articles by Secretary John A. Fairlie of the Greene Com- 
 mittee. 
 
 Personal interviews with the statistician to the New York 
 State Superintendent of Public Works, assistants in the 
 offices of the New York State Comptroller and State 
 Engineer, and others. 
 
SUMMARY. 
 
 A comparison of the cost of transportation by canal and by rail 
 should include not only the immediate cost of conveyance, but also 
 the cost of capital, of operation, and of maintenance. 
 
 Since 1882 the canals of the state of New York have been main- 
 tained and operated at the expense of the state for the free passage 
 of boats, the only charges paid by the shipper by canal being those 
 of the boatmen for conveyance. This does not mean that the fixed 
 charges and cost of maintenance are obliterated but that they are 
 borne by the community as a whole instead of by the shipper. 
 
 Official data indicates that up to 1905 the cost of the Erie Canal 
 was about |57,600,000 or $163,600 per mile. 
 
 If only four per cent be allowed for interest charges and extraor- 
 dinary repairs and depreciation on the Erie Canal, and its total 
 cost be taken at only $55,000,000, the annual fixed charge for these 
 purposes is $2,200,000. This may be termed the aggregate cost of 
 capital reduced to an annual basis. 
 
 As nearly as can be computed from ascertainable data the expense 
 of maintaining the Erie Canal borne by the state of New York 
 for the year 1909 was $672,105. 
 
 As nearly as can be computed from ascertainable data the average 
 ton-mile charge made by the boatmen for conveyance of traffic over 
 the Erie Canal is 2 mills. 
 
 A liberal estimate of the traffic on the Erie Canal for the year 
 1909 is 435,000,000 ton miles. 
 
 Apportionment of the aggregate annual cost of capital to this 
 ton mileage gives 5.06 mills per ton mile. The cost of maintenance 
 likewise apportioned gives 1.55 mills per ton mile. These items 
 added to the immediate charge for conveyance of 2 mills make the 
 total cost of transportation of freight on the Erie Canal 8.61 mills 
 per ton mile. 
 
 For the same year of 1909 the average freight receipts were 6.2 
 mills per ton mile by the New York Central, 6.1 mills by the Erie, 
 7.4 mills by the Lackawanna, and 6.4 mills by the Lehigh Valley. 
 
 Whichever one of these various railway average receipts per ton 
 
mile be taken, the cost of transportation on the Erie Canal exceeds 
 it by from sixteen to more than forty per cent. 
 
 These average rail receipts moreover include returns from high- 
 grade merchandise such as is not carried in any quantity on the 
 Erie Ganal. The traffic of the Brie Canal is composed princi- 
 pally of grain, lumber, iron and iron ore, stone, and coal. The 
 receipts of the railways from such traffic are lower than their aver- 
 age receipts, and therefore the ratio of rail receipts to canal receipts 
 on the kind of traffic that is carried by canal is lower than the above 
 percentages indicate. 
 
 The railways moreover are in service all of the time while the 
 canal is idle an average of four and one-half months of each year. 
 
 It is impossible at this time to compute or even estimate what the 
 total cost of transportation will be on the new barge canal into 
 which the Erie Canal is being transformed. The Greene Committee 
 of 1899 estimated the cost of the barge canal at about f 60,000,000. 
 Already more than f 100,000,000 have been appropriated for the pur- 
 pose, and it seems probable that another $19,000,000 will be required 
 for terminals. 
 
The Cost of Transportation on the Erie Canal 
 and by Rail. 
 
 In the wide discussion regarding canals and inland waterways in 
 this country during the past few years, little attention has been 
 directed to the total cost of canal transportation. The term "total 
 cost" is here used to cover not only the immediate cost of conveying 
 goods, but also the cost of maintenance of the canal, cost of ordinary 
 repairs, and fixed charges, dividends, and depreciation charges, if any. 
 
 Freight rates via the Erie Canal are frequently contrasted with 
 freight rates via railway, but as they comprise only the immediate 
 transportation cost, that is, the direct charge for conveyance alone, 
 they are hardly comparable with railway rates, which provide the 
 revenue from which must be met not only the cost of conveyance, but 
 also fixed charges upon the capital invested in the plant and the 
 expense of maintenance of plant and equipment. All tolls on New 
 York State canals were abolished in 1882, and the canals since that 
 date have been maintained and operated at the expense of the state 
 for the free passage of boats. Thus the only charges made against 
 a shipper of goods by canal are those of the boatman who handles 
 the goods, and these charges do not help to pay for the maintenance 
 of the canal or for repairs. From the shipper's point of view a canal 
 rate of two mills a ton mile is unquestionably preferable to a railway 
 rate of six mills, if speed and convenience of handling are not as 
 important to him as a low rate. It will be shown, however, that 
 from the broader point of view of the community the railway rate, 
 although apparently higher, may not actually be so. The maintenance 
 and fixed charges on the canal, which are borne by the community, 
 may amount to more than the difference of four mills per ton mile, 
 which is the immediate saving to the shipper. This raises the ques- 
 tion whether the burdening of the entire community for the benefit 
 of the shippers, who constitute only a portion of it, is justified. But 
 leaving this question aside, a fair comparison of the cost of trans- 
 portation by canal and by rail should certainly be of aggregates that 
 include every element in those respective costs. 
 
 This study is an effort to estimate the total cost of transporting 
 a, ton of freight one mile on the Erie Canal at the present time, and 
 to compare that cost with typical or average railway ton-mile freight 
 
receipts. To reach an estimate of transportation cost on the Erie 
 Canal, it has been necessary to ascertain three items in that cost: 
 first, fixed charges on the canal, or cost of capital; second, cost of 
 maintenance ; third, immediate cost of transportation. The sum of 
 these three items will give, fourth, the total cost of transportation. 
 
 The Erie Canal is a product of state enterprise, paid for from 
 funds obtained for the most part through loans made by the State of 
 New York. These loans have to a large extent been repaid, partly 
 out of the revenue from the canal, and partly from sinking funds 
 established and built up through taxation. Because of this liquida- 
 tion of the canal debt, interest charges paid by the state on behalf 
 of the canal have till recently been comparatively small. The canal 
 represents, however, the investment of the people of the State of New 
 York in a transportation plant, just as a railway represents an 
 investment on the part of its stockholders and bondholders. In 
 ascertaining canal transportation costs that shall be strictly com- 
 parable with railway transportation costs, it will therefore be neces- 
 sary to arrive by some method at the physical value of the Erie 
 Canal today and on that value compute fixed charges, representing 
 interest on the investment and depreciation. 
 
 But how estimate the value of the canal? There are two ways: 
 first, to take the total cost of construction and permanent improve- 
 ments to date or, second, to make a physical valuation of the whole 
 canal property. Clearly, it is impossible to value the property with- 
 out a careful appraisal. The statement so frequently made during 
 the New York State canal campaign of 1903 that the Erie Canal, as 
 it stood, was worth more than the total amount expended on it since 
 its inception, cannot be accepted without proof, especially as value 
 depends so definitely on performance. The canal is not of value 
 except as a canal, and as a canal is valuable only in proportion to 
 the service rendered by it. It is feasible, however, to ascertain the 
 total cost of construction and improvement of the Erie Canal as a 
 measure of its present value. 
 
 Complete official data showing the cost of the Erie Canal to 1905, 
 the year when work on the new barge canal was commenced, are not 
 available. The canal auditor of the State of New York, in his annual 
 report for 1882, stated the total cost to that year as $49,592,000. 
 From 1882 to 1905 a number of special appropriations were made by 
 the New York legislature for the purpose of improving the state 
 
canals, chiefly by deepening the channels and lengthening the locks. 
 Among these appropriations was one of $9,000,000, made in 1895 for 
 the purpose of increasing the lock capacity and depth of the Erie, 
 Champlain and Oswego canals. Of the amounts spent under the 
 latter appropriation up to July 15, 1898, more than five-sixths, or 
 $6,787,000, was expended on the Erie Canal.* What proportion of 
 the other appropriations was applied to the Erie Canal it is not 
 possible to ascertain, but the share of that canal in the total was 
 considerably over one-half. The Greene Committee estimated that 
 the cost of constructing and improving the Erie Canal down to 1896 
 had amounted to $56,165,000.f It is probable, therefore, that Hep- 
 burn's estimate of $57,600,000$ as the total cost to 1905 is well under 
 the truth. On the basis of $57,600,000, the cost of the Erie Canal 1 
 up to 1905 was $163,600 a mile, which may be compared with the 
 cost of road per mile of the four main trunk lines between Buffalo 
 and New York — New York Central, Erie, Lackawanna, and Lehigh 
 Valley. The cost of road per mile of these railways, according to the 
 reports made to the Interstate Commerce Commission for 1905, was 
 as follows: 
 
 New York Central $181,250 
 
 Erie 292,970 
 
 Lackawanna 90,240 
 
 Lehigh Valley 60,490 
 
 Average $212,716 
 
 Canal construction is far more expensive than is ordinarily appre- 
 ciated, as is seen from the foregoing comparison. 
 
 It will now be possible to estimate the total cost of transportation 
 on the Erie Canal, made up of the three items already enumerated : 
 cost of capital, cost of maintenance, and immediate cost of transpor- 
 tation. 
 
 First. Cost of Capital: Taking four per cent as the rate of upkeep 
 on the Erie Canal — an item intended to provide for interest charges 
 and for extraordinary repairs and depreciation — and using a con- 
 
 * Report of Committee on Canals of New York State, 1899, p. 168. This com- 
 mittee is commonly known as the Greene Committee. 
 
 fReport, p. 153. 
 
 JA. Barton Hepburn: Artificial Waterways and Commercial Development, 
 p. 100. 
 
8 
 
 servative estimated value of but $55,000,000 for the canal at the 
 present time, instead of the $57,600,000 cited above, we have a total 
 annual fixed charge of $2,200,000. This amount will be apportioned 
 per ton mile of canal traffic in 1909 in a later paragraph. 
 
 Second. Cost of Maintenance: The cost to the state of New York 
 of maintaining the Erie Canal in 1909, according to data contained 
 in the annual report of the Superintendent of Public Works of that 
 state,* amounted to $672,105. This amount is ascertained by adding 
 to the $500,551 of operating expenditures and ordinary repairs a 
 proportion, obtained by pro-rating on the basis of comparative expense, 
 of the total general and division expenses of the canals of the state. 
 This added charge covers administrative and supervisory expenses. 
 The reduction of this item of maintenance to a ton-mile basis will be 
 made shortly. 
 
 Third. Immediate Cost of Transportation: This is composed of 
 the boatmen's charges for conveyance. Canal boat rates vary con- 
 siderably with the season, the condition of traffic, and the attitude 
 of the boatmen. There are so few owners of boats on the Erie Canal 
 at present that they can regulate boat rates practically at will. The 
 actual cost incurred by the boatmen in conveying wheat on the Erie 
 Canal was estimated by the Greene Committee of 1899f at 1.75 mills 
 per ton mile. This estimate covers interest at five per cent on invest- 
 ment in boatp> all expenses for wages of boathands, and repairs, 
 deterioration and insurance on boats, without allowance, however, 
 for profit to the boatmen. The average rate on wheat from Buffalo 
 to New York during the season of 1909 varied from 2.07 mills per 
 ton mile$ in July to 3.33 mills in October and November; and on 
 corn from 1.87 mills to 3.07 mills. The average for the season was 
 2.60 mills per ton mile on wheat and 2.35 mills on corn. These rates 
 differ by less than one-half of one per cent from the average of the 
 rates reported by the Superintendent of Public Works for the years 
 1900 to 1909, and may therefore be considered as representative. 
 The foregoing rates and estimates apply to grain only. For 
 all commodities moved on the canals of New York State, the 
 average ton-mile rate between 1903 and 1907 was 2.00 mills.§ An 
 
 ♦Report for 1909, pp. 31-39. 
 
 tReport of Committee on Canals of New York State, 1899, p. 57. 
 ^Ascertained by reducing the through rate per bushel to a ton-mile basis. 
 SHepburn, p. 104. 
 
estimate of 2.00 mills for the average ton-mile rate on the Erie 
 Canal today would therefore seem to be a reasonable one. This 
 represents the immediate charge for conveyance. 
 
 Fourth. Total Cost of Transportation: Of the three components 
 of transportation cost so far discussed, two have been gross amounts 
 for the Erie Canal as a whole, while only the last is expressed in 
 terms of ton-mile traffic. To reach a figure of total cost per ton per 
 mile it will be necessary to ascertain the total ton mileage of the 
 traffic on the Erie Canal in 1909, and reduce the first two amounts to 
 a ton-mile basis. 
 
 Unfortunately, no ton-mileage figures are reported for the canal 
 traffic in New York State at the present time. It will be necessary 
 to make an estimate for the Erie Canal based upon the reports 
 of tonnage carried. The total number of tons of freight carried 
 on the Erie Canal in 1909 was 2,031,307. What proportion of this 
 was through freight was not reported, but if the proportion was 
 the same as in 1908, then 436,731 tons consisted of through freight, 
 and 1,594,576 tons of way freight. If we assume that way freight 
 was carried an average of half the length of the canal, or 176 miles — 
 which is a liberal assumption — and that all the through freight was 
 carried the whole length of the canal, or 352 miles, we have a total 
 ton mileage of 435,000,000 for 1909. 
 
 On the basis of 435,000,000 ton miles of traffic in 1909, the fixed 
 charges or cost of capital, |2,200,000, were equivalent to 5.06 mills 
 per ton mile; and the cost of maintenance, $672,105, to 1.55 mills 
 per ton mile. The total cost of transporting one ton of freight one 
 mile on the Erie Canal in 1909 was made up, then, of the following 
 items : 
 
 Cost of capital 5.06 mills 
 
 Cost of maintenance 1.55 " 
 
 Immediate cost of transportation 2.00 " 
 
 Total 8.61 mills 
 
 Thus there is obtained a total charge for canal transportation of 
 8.61 mills per ton mile, directly comparable with a railway freight 
 rate. What railway freight rate or receipt shall be quoted in com- 
 parison with this 8.61 mills of canal cost? By the four principal 
 railways running between Buffalo and New York freight receipts 
 
10 
 
 per ton mile in 1909 were reported to the New York State Public 
 Service Commission as follows : 
 
 New York Central 6.2 mills 
 
 Erie 6.1 " 
 
 Lackawanna 7.4 
 
 Lehigh Valley 6.4 " 
 
 Whichever one of these various railway average receipts per ton 
 mile be taken, the cost of transportation on the Erie Canal will be 
 found to exceed it by from sixteen to more than forty per cent. Even 
 when compared with average railway receipts for the whole United 
 States, the Erie Canal cost of transportation is considerably the 
 higher. Thus average freight receipts per ton mile in 1909, for all 
 the railways of the United States, amounted to 7.63 mills, as com- 
 pared with 8.61 mills of cost on the Erie Canal. For specific com- 
 modities the result is similar. The Interstate Commerce Commis- 
 sion reports that average railway freight receipts in 1909, for four 
 of the commodities which make up a large part of the Erie Canal 
 traffic, were as follows: 
 
 Grain 6.11 mills 
 
 Lumber 7.70 " 
 
 Anthracite coal 6.03 " 
 
 Bituminous coal 5.12 " 
 
 None of these averages, it will be observed, is as high as the aver- 
 age cost of transportation via the Erie Canal. 
 
 All this is true despite the very conservative estimates in making 
 up the figures for the Erie Canal — and this conservatism is worthy 
 of special emphasis. Thus the ton mileage estimate used is probably 
 too large, and the ton-mile canal rates based on that estimate are 
 correspondingly low. In the opinion of the statistician to the New 
 York Superintendent of Public Works, the average length of haul 
 of way freight over the Erie Canal is not over 100 miles, yet the 
 estimate here adopted is 176 miles. Again, four percent is a con- 
 servative rate for depreciation and interest. The stock and bonds 
 of all the railways in the United States in 1909 had an average divi- 
 dend and interest rate alone that exceeded four per cent, and an 
 allowance of four percent for both interest and depreciation charges 
 
11 
 
 in connection with the Erie Canal, is, in comparison, clearly a 
 minimum. Finally, the estimate of value of the Erie Canal property 
 used in the computation is considerably lower than the estimates of 
 the Greene Committee and of other careful students of canal history. 
 
 Another fact that must be recognized in a comparison of railway 
 and canal transportation costs is that the grade of goods shipped 
 via canal is far inferior to that shipped via railway. The goods sent 
 by canal are heavier, coarser, of less value, and naturally are car- 
 ried at a lower average rate. Of the tonnage carried over the New 
 York canals in 1909, for example, nearly a third (31.8%) consisted 
 of stone, rock, lime and clay; another third (36.6%) consisted of 
 coal, iron ore, pig iron, boards, timber, pulp wood and wood pulp; 
 while a fifth (21.2%) was made up of grain, ice and salt. It is clear 
 that an average railway freight rate based only on such articles as 
 were carried by the Erie Canal in 1909 would be lower than the 
 average freight rate on all articles carried by railways. The compu- 
 tations made above, therefore, result in an average canal rate lower 
 than if the grade of articles carried by the canal averaged as high 
 as on the railways. Notwithstanding this, the average canal rate, as 
 has been shown, is actually higher than the highest average railway 
 freight receipt quoted. 
 
 One cause of the high cost of transportation on the Erie Canal is 
 the fact that the canal remains idle so large a part of each year. 
 The average length of the canal season is 223 days, or about 7V 2 
 months. During the remainder of the year the plant and the boats 
 lie practically idle, although all of the general and many of the 
 maintenance expenses continue without change. In the estimate of 
 the Greene Committee regarding the actual cost of transportation, 
 allowance was made for this period of idleness by computing all 
 expenses on the basis of only seven round trips a year — a full load 
 on the down trip and a third of a full load on the return. But in 
 estimating depreciation and interest charges no such allowance can 
 be made — the plant is in existence and must be maintained, whether 
 in operation or not. Whether or not this long period of idleness each 
 year on the part of the canal is responsible for a large or a small 
 part of the greater cost of canal as compared with railway trans- 
 portation, it is an inherent feature of canal business in the state of 
 New York and must be taken into account when comparing the 
 canals and railways of that state. 
 
12 
 
 This study has been limited to the Erie Canal of today, all the 
 statistics being based on past performances of record. The people 
 of the state of New York are now engaged in spending more than 
 $100,000,000 in the enlargement and improvement of the canal sys- 
 tem of their state. What the total cost of transportation on the 
 new barge canal now emerging from the old Erie will be, no one is 
 in a position to know definitely. The Greene Committee of 1899 
 estimated the cost of the barge canal at about $60,000,000. Already 
 more than $100,000,000 has been voted for this purpose, with the 
 possibility that another $19,000,000 will be required for terminals. 
 The Greene Committee also made an estimate of the cost to the boat- 
 men of conveying goods through the barge canal, corresponding to 
 their estimate of 1.75 mills on the old Erie referred to in an earlier 
 paragraph. The estimate on the barge canal was 0.52 mill. Whether 
 this estimate will prove to be approximately accurate, or whether 
 time will show it to have been too low, no one at the present time can 
 tell, as no facts exist on which even an approximation may rest. It 
 is clear, however, that having added so greatly to the cost of the 
 canal, rates must be much lower, or volume of traffic far greater, or 
 cost of maintenance and repair lower in proportion to volume of 
 traffic — one or all of these must result before the total cost of trans- 
 portation on the new Erie will fall to or below the level of the 
 average railway freight rate. 
 
 It seems clear, then, from the data presented in the foregoing 
 pages, that the transportation of goods on the Erie Canal at the 
 present time is a more expensive process, considered from the broad- 
 est point of view, than on the typical or average American railway, 
 whether or not that railway be one that competes directly with the 
 canal. 
 
BULLETINS OF THE 
 BUREAU OF RAILWAY ECONOMICS 
 
 {Continued.) 
 
 14. Summary of Revenues and Expenses of Steam Roads in the 
 
 United States for April, 191 1. 
 
 1 5. The Conflict Between Federal and State Regulation of the 
 
 Railways. 
 
 16. Summary of Revenues and Expenses of Steam Roads in the 
 
 United States for May, 1911. 
 
 17. Railway Wage Increases for the year ending June 30, 1911. 
 Retrenchment in the Railway Labor Force in 1911. 
 
 18. Capitalization and Dividends of the Railways of Texas, Year 
 
 Ending June 30, 1909. 
 
 19. Summary of Revenues and Expenses of Steam Roads in the 
 
 United States for June, 1911. 
 
 20. Summary of Revenues and Expenses of Steam Roads in the 
 
 United States for July, 1911. 
 
 21. The Cost of Transportation on the Erie Canal and by Rail. 
 
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