companies desires to acquire the line. That commission advises that the State highway commissioner of Michigan is interested in the right of way and grade of the line for a State trunk-line highway if the road is abandoned.

Construction of the line was commenced in 1905 by the Kalamazoo, Lake Shore & Chicago Traction Company. That company was incorporated on June 15, 1905, under the laws of Michigan, for the purpose of constructing and operating a street and interurban railway for the carriage of passengers and freight by electric or other modern tractive power. Construction was completed in 1906, and thereupon the line was placed in operation from Kalamazoo through Lawton to Paw Paw, Mich., with steam for motive power. On October 12, 1906, the corporate title of that company was changed to that of the Kalamazoo.

On March 23, 1907, the Kalamazoo leased from the Pere Marquette Railroad Company and the receiver thereof, for a period of 25 years, the branch line of that company extending from Lawton through Paw Paw to South Haven, Mich., a distance of about 34 miles. Thereupon the Kalamazoo abandoned its own line between Lawton and Paw Paw. On April 10, 1911, the Kalamazoo leased its railway and equipment to the Michigan United Railways Company, for a period of five years from June 1, 1911, with option to purchase. Due to the inability of the property to earn operating expenses, the Michigan United Railways Company surrendered the line upon the expiration of the lease. Thereupon the Kalamazoo resumed the operation of its properties.

On June 1, 1923, the Pere Marquette Railway Company, successor of the Pere Marquette Railroad Company, notified the Kalamazoo that it had elected to terminate the lease dated March 23, 1907, mentioned above, because of nonpayment of rental. On July 1, 1923, the Pere Marquette Railway Company resumed operation of its branch line. The Kalamazoo continued to operate over its own line between Kalamazoo and Lawton. On August 8, 1923, the receiver was appointed by the circuit court for Van Buren County after a showing had been made that the Kalamazoo was insolvent. The receiver has operated the property since that date.

The city of Kalamazoo and the villages of Lawton, Oshtemo, and Mattawan are served by the line proposed to be abandoned. Based on the census of 1920, Kalamazoo has a population of 48,487, and Lawton, 1,073. Oshtemo and Mattawan have an aggregate population of about 500. Kalamazoo is also served by the Chicago, Kalamazoo & Saginaw, the Grand Trunk Western, the Michigan Central, the New York Central, and the Pennsylvania Railroads; Lawton by the Michigan Central and the Pere Marquette Railroads; and

Mattawan by the Michigan Central. Oshtemo is about 2 miles southeast of Miller on the Michigan Central. The line is closely paralleled by the Michigan Central at a distance of about 2 miles. The State trunk-line highway between Kalamazoo and Paw Paw has caused the diverting of local passenger and freight traffic from the Kalamazoo to the highway.

As of August 7, 1923, investment in road and equipment was $435,724.51; funded debt, $390,000; capital stock, $37,400; and profit and loss, debit balance, $513,591.06. The Kalamazoo has suffered a net deficit each year since 1916; the stockholders have never received any dividends on their investment; and no interest has ever been paid on the bonded indebtedness. Due to railroad and highway competition there is not sufficient traffic carried to warrant further operation of the line.

Upon the facts presented we find that the present and future public convenience and necessity permit the abandonment by the Kalamazoo and the receiver, as to interstate and foreign commerce, of the line of railroad described in the application. A certificate to that effect will be issued.

CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY

Issued June 5, 1924

Investigation of the matters and things involved in this proceeding having been had, and said division having, on the date hereof, made and filed a report containing its findings of fact and conclusions thereon, which said report is hereby referred to and made a part hereof:

It is hereby certified, That the present and future public convenience and necessity permit the abandonment by the Kalamazoo, Lake Shore & Chicago Railway Company and H. D. Swayze, temporary receiver of said company, as to interstate and foreign commerce, of the line of railroad described in the application and report aforesaid.

It is ordered, That the said Kalamazoo, Lake Shore & Chicago Railway Company and H. D. Swayze, temporary receiver of said company, when filing schedules canceling tariffs applicable on said line of railroad, shall in such schedules refer to this certificate by title, date, and docket number.

90 L. C. C

FINANCE DOCKET No. 35011

ACQUISITION OF LINE BY SALINA & SANTA FE RY.

Submitted May 12, 1924. Decided June 4, 1924

1. Certificate issued authorizing the Salina & Santa Fe Railway Company to acquire, by purchase, a line of railroad in Saline, Lincoln, Mitchell, and Osborne Counties, Kans.

2. Authority granted to the Salina & Santa Fe Railway Company to issue $300,000 of common capital stock, consisting of 3,000 shares of the par value of $100 per share; said stock to be sold at par and the proceeds used in connection with the purchase of certain railroad property.

3. Acquisition by the Atchison, Topeka & Santa Fe Railway Company of control of the Salina & Santa Fe Railway Company by purchase of capital stock and by lease of its railroad approved and authorized.

Lee F. English and Gardiner Lathrop for applicants.

REPORT OF THE COMMISSION

DIVISION 4, COMMISSIONERS MEYER, EASTMAN, AND POTTER

By DIVISION 4:

The Salina & Santa Fe Railway Company, a corporation organized for the purpose of engaging in interstate commerce by railroad, hereinafter called the Salina Company, on March 10, 1924, filed an application under paragraph (18) of section 1 of the interstate commerce act for a certificate that the present and future public convenience and necessity require the acquisition by it of a line of railroad formerly owned and operated by the Salina Northern Railroad Company, extending from a connection with a branch line of the Atchison, Topeka & Santa Fe Railway at Salina, in a general northwesterly direction to Osborne, approximately 81 miles, in Saline, Lincoln, Mitchell, and Osborne Counties, Kans.; and on March 29, 1924, duly applied for authority under section 20a of the act to issue $300,000 of its common capital stock in connection with the proposed acquisition. The Atchison, Topeka & Santa Fe Railway Company, hereinafter called the Atchison Company, on March 27, 1924, filed an application under paragraph (2) of section 5 of the act for authority to acquire control of the Salina Company by purchase of its capital stock, and to lease the line of that company. A

This report also embraces Finance Dockets No. 3538, Stock of Salina & Santa Fe Ry.; and No. 3534, Control of Salina & Santa Fe Ry. by Atchison, Topeka & Santa Fe Ry.

joint hearing was held upon these applications, which will be disposed of in one report. Similar applications were filed with the Public Utilities Commission for the State of Kansas. That commission has issued certificates authorizing the Salina Company to transact the business of a common carrier from Salina to Osborne, and to issue $300,000 of capital stock; and has entered an order approving the lease to the Atchison Company. No objection to the granting of any of the applications has been presented to us.

The Salina Northern Railroad was completed and placed in operation in November, 1916. In June, 1917, the property was placed in the hands of a receiver by the United States District Court for the District of Kansas. On February 7, 1924, the railroad was sold under foreclosure to two individuals acting in the interest of the bondholders, pursuant to a decree entered December 31, 1923. The sale was confirmed by the court on March 5, 1924.

The Salina Company was organized February 23, 1924, under the laws of Kansas, with an authorized capital stock of $300,000, consisting of 3,000 shares of the par value of $100 each, and with authority to operate a railroad from Salina to Osborne. It plans to purchase the line in question and its equipment from the representatives of the bondholders for $900,000. To obtain a part of the purchase price it now proposes to issue and sell its entire authorized capital stock. The Atchison Company has agreed to purchase 2,993 shares at par and the remaining shares will be purchased by individuals who will serve as directors. The rest of the purchase price of the railroad will be advanced by the Atchison Company on open account, and no additional securities will be issued. The estimated cost of constructing the railroad was $1,247,303.58. This estimate does not include any allowance for interest during construction or for general expenses. We have not completed our tentative valuation of the property.

Upon acquiring the line the Salina Company proposes to lease it to the Atchison Company for 10 years, and thereafter from year to year, subject to the right of either party to terminate the lease by giving to the other party 90 days' written notice of its election so to do. The lease recites a consideration of $1 and further provides that the lessee shall pay all interest which shall accrue during the term upon any indebtedness incurred by the lessor with the written consent of the lessee, owned by parties other than the lessee; all taxes, assessments, and governmental charges which shall accrue during the term upon the demised premises or any part thereof; all rentals and other sums which the lessor shall become liable to pay during the term under any lease or agreement existing on the date the railroad shall be turned over to the lessee for operation relating to the

use of any facility or appurtenance of the demised railroad, or under any lease or agreement which, during the term, may be made by the lessor with the written consent of the lessee; and all expenses necessarily incurred by the lessor in maintaining its organization. The lessee further agrees to waive, during the term, all interest which accrues during the term upon evidences of indebtedness of the lessor which it owns, except interest properly chargeable to capital account on the books of the lessor for moneys advanced by the lessee. The lessee may make additions and betterments to the demised railroad, and the lessor agrees, upon termination of the lease, to reimburse the lessee, without interest, other than interest chargeable to capital account, for all moneys expended for such purposes. The lessee undertakes to maintain and operate the railroad and to save the lessor harmless from any damages and liabilities therefrom.

The approximate area served by the railroad is 650,000 acres, of which 500,000 acres are under cultivation and 150,000 acres in pasture. The estimated population of the territory is 30,000. Agriculture is the principal industry, the chief crops. being wheat, corn, alfalfa, and other forage crops. The traffic in 1923 totaled 104,359 tons. Operating revenues of the line for the first year after its acquisition by the Salina Company are estimated at $150,000, increasing to $180,000 the fifth year; operating expenses are estimated at $252,045 the first year, decreasing to $166,952 the fifth year. Net revenue accruing to the Atchison Company system is estimated at $180,000 the first year and $220,000 the fifth year. The total net income accruing to the Atchison Company system, including the railroad of the Salina Company, is estimated at $77,955 the first year, and $233,048 the fifth year.

The Atchison Company represents that its acquisition of control of the Salina Company, by purchase of its capital stock, and its lease of the railroad of that company will enable it to operate the line more advantageously to the public than could be done by a separate company; that it will remove the uncertainty as to the future of the railroad, which has been in the hands of a receiver almost from the time it was opened for operation; that it will result in a larger development in the tributary territory, will tend to increase farm values, and will assure shippers an adequate car supply. It is expected that substantial economies will be effected in operating and administration expenses.

Upon the facts presented we find

1. That the present and future public convenience and necessity require the acquisition by the Salina Company of the line of railroad in Saline, Lincoln, Mitchell, and Osborne Counties, Kans., described in the application.