REPORT. To his Excellency GEORGE C. PERKINS, Governor : SIR: On the fourth day of February last we had the honor of submitting our first report to your Excellency. In that report we showed that the labors of the Board had, during the first nine months of its organization, been directed to the acquisition of information regarding the subjects upon which it has to deal, but that owing to the illness of one of the Commissioners it had not been possible to make an exhibit of the conclusions reached by us. Since that report was presented we have been engaged in careful consideration of the existing freight and passenger rates on the railroads of California, with a view to their reduction wherever practicable. We now present you with a list of tables, showing a series of reductions in freight rates, which have been adopted at a regular meeting of the Board, and from which we have the best reason to believe the public will derive signal benefits. The reductions made in freight rates affect a large class of articles, viz.: grain, wool, wood, hay, cattle, hogs, sheep, and other low priced but largely raised produce, depending upon cheap transportation for successful production. The tendency of railroad development has thus far been toward the diminution of charges in proportion to the growth of business. In this way three considerable and general reductions in freight tariffs have succeeded one another on the Central Pacific and leased lines within the past few years. For the present we have adopted the existing rates on general merchandise as the maximum rate, nor have we thought it advisable for the present to make any changes in the passenger tariff now in operation. The reasons for our course in this respect are such as must commend themselves to candid judg ments. On entering upon the duties of our office we found a popular demand for sweeping reductions in freights and fares, and vested with powers so comprehensive that the most arbitrary changes were possible to us. But the moment we began to investigate the subject before us, with a view to the carrying out of the popular desire, we were compelled to realize that arbitrary and blind action could not be taken without putting at risk the interest of the public equally with those of the railroads. We discovered that the mutuality of interest between the producers and the transportation agents was, in fact, so much more intimate than had been generally recognized, that it would be absolutely impossible for us, lacking the necessary knowledge, to strike at one without endangering the other; and when, in our search for information, we examined the labors of our predecessors, in this and other States, we learned that they had, one and all, the same experience, and that one and all had, however slowly or reluctantly, been forced to the same conclusion, viz.: that arbitrary regulation of railroad charges is not only unjust to the railroads, but full of danger and injury to the public. It may be interesting to quote in this connection a pertinent paragraph from the report of our predecessors in office, Messrs. Stoneman, Doyle, and Smith. These gentlemen say (page 14): A proposition to fix by law the rates of freight on each commodity transported, is a proposal to determine the proportion in which the difference in terminal values shall be divided between the producer and the carrier, and to value the share allotted to the latter in advance. But difference of terminal values is so utterly different in the case of the innumerable variety of different commodities carried; so various even in the case of the same commodity, with season, place, and circumstance; is so dependent, in many instances, on the course of market values abroad, which fluctuates even from day to day, that it is simply impossible to frame a tariff based on such division which will not prove either ineffectual on the one hand or unjust on the other. These and similar conclusions we found to be fortified by every step of our own researches. The complexity of the situation, the instability of its factors, the necessity of taking into account considerations which could not be dealt with save on the spur of the moment, the relation of particular interests to the general interests, the equities of the case on both sides, the main elements of the cost of transportation and of the remuneration of service on all and each, convinced us that to undertake to compile a classified tariff from a standpoint which practically ignored some of the most vital factors of railroad management, would be simply to involve the whole situation in confusion, and to give to the "opponents of regulation a plausable argument against any further experiment in that direction." We were satisfied, in fact, as all who have seriously studied this subject have become satisfied, that it could not be approached with any hope of a satisfactory solution unless it was approached with a determination to hold the balance evenly between the interests concerned, and to seek equitable and not arbitrary sentiments of all issues in dispute. To the end that these objects might be secured, we therefore adopted resolutions to the following effect, in full Board and by a unanimous vote: WHEREAS, The Constitution has vested in this Board powers of a legislative, judicial, and executive character in reference to transportation within this State, viz.: the power to establish rates of charges for transportation of passengers and freight by railroad and other transportation companies, and to that end the power of serving subpoenas and all other necessary processes; the power of hearing and determining complaints against the railroads and other transportation companies, and to that end to send for persons and papers, to administer oaths, to take testimony, and to punish for contempt of orders and processes in the same manner and to the same extent as Courts of record, and to enforce decisions and correct abuses through the medium of Courts, and to order a prescribed and uniform system of accounts to be kept by all such corporations and companies; and whereas, the Constitution declares that every railroad or other transportation company which shall fail or refuse to conform to such rates as shall be established by this Board, or shall charge rates in excess thereof, or shall fail to keep their accounts in accordance with such system as this Board shall prescribe, shall be fined not exceeding $20,000 for such offense; that any officer, agent, or employé of any such corporation or company, who shall demand or receive rates in excess of the rates established by this Board, shall be fined not exceeding $5,000, or be imprisoned not exceeding one year; and whereas, the Constitution declares further that the rates of fares and freights established by this Board shall be deemed conclusively just and reasonable in all controversies, civil and criminal, to which corporations and companies may become parties; and whereas, the course of procedure established in the creation of this Board differs from methods heretofore in use for the adjustment of individual and property rights, viz., intervention of juries and review by other tribunals; therefore, be it Resolved, That in determining rates of charges for transportation of freights and fares on the various lines, or portions of lines, of transportation within this State, the Board will have regard to the equities between shippers and carriers, and the protection of private property invested in transportation enterprises, and determining what is a just and reasonable rate; will consider the value of the services performed, distance of carriage, volume and direction of traffic, the general |