[PRCo] Economics of West Penn Railways

[Edward H. Lybarger]

Let me begin with some comments about a handful of the statements that have
gone back and forth this afternoon.

On converting the cars to one-man operation:  this was not seen by the
company as modernization, this was a survival issue most basic.  When you
lose about half of your revenue ($882,438 in 1933 vs. $1,785,835 in 1930)
you must cut expenses if you are to stay in business.  This depression was
not specific to Fayette County, as we all recognize.

On recessions in Fayette County:  The only economic downturns indigenous to
the Coke Region were those brought about by miners' strikes, the most
notable of which occurred in 1922.  In that year, West Penn saw slightly
reduced revenue from the previous year, but nonetheless the total
represented a dollar level that was exceeded again only in 1923.  I don't
consider it to be significant.  The depressions of 1907 and 1929-1940 were.

On length of beehive coke oven batteries being equal to miles of West Penn
track:  there's quite a bit of hyperbole here.  West Penn had 237 miles of
track in Pennsylvania, or 1,251,360 feet (in round numbers).  100 coke ovens
at Shoaf (a plant not served by the company, but for which measured drawings
exist since the plant is extant) require approximately 813.75 lineal feet.
So at 8.14 feet per beehive oven, the 38,031 ovens in the Connellsville and
Lower Connellsville Region in May of 1914 (close to the peak) would require
only about 309,572 lineal feet, or a mere 58.63 miles...less than one fourth
of the total trackage.  The Coke Region mileage alone was 158, so the
comparison simply doesn't work.  Nice try, though!

On Clairton:  there were more than "some economies" involved here.  It
opened in 1918, by the way.  Not only did you capture for resale the
chemicals given off in the coking process, you fired your blast furnaces
with them, too!  And you could use water transportation (cheap) to move coal
(non-fragile) instead of railcars (expensive and seemingly always in short
supply) to move coke (highly fragile).  The system was so economical that U.
S. Steel's subsidiary H. C. Frick Coke built two major underground conveyors
that hauled coal from as far away as the Leisenrings to the Monongahela
River for transport.

On the playing out of coal mines:  It is easy to overlook the age of the
mines.  Some examples of opening dates...Dunbar-1860, Fairchance-1860,
Wheeler-1865, Mt. Braddock-1871, Lemont-1871, Standard-1872, Buckeye-1872,
Moyer-1875, Morewood-1879, Trotter-1880, Leinenring #1-1880, Hecla-1882,
Oliver 1&2-1890;Juniata-1890, Baggaley-1897.  Allison was the last plant
built in West Penn territory, between 1907 and 1911.  About half of the
mines were done before 1920 and another 25% of them by 1930.

On the virtual exhaustion of the Pittsburgh Seam coal in Western
Pennsylvania:  'Tain't so.  That's what's coming out of Washington and
Greene Counties today in big numbers.  It is largely gone, though, in the
Coke Region, except for strip mining operations.  I have several times
visited the USX Resources office that is the successor to the Frick Company,
and they do a big business leasing land to strip miners.  The land used to
be part of the big mines.  But any economy based on extraction is ultimately
doomed.

On West Penn's parent:  Contrary to what the New Dealers and their
successors will tell you, there were utility concerns who placed "public
service" in their mission statement right along with earning a return on
their investment.  Such a company was West Penn's parent, at least after
about 1914.  Railways, being senior in age to Power, owned 866,000 shares of
Power's common stock (Electric, of course, owned it all - or most of it -
and the public shareholders owned Electric). [I've simplified this, but
that's essentially how it was structured.]  Power paid dividends on this
stock; Railways got a million or two annually and Electric got the rest.
This is how Railways got enough cash to pay down its bonds and stay in
business.  We'll talk about income in a little while, but this arrangement
worked well until after World War II and Power needed to expand on a big
scale.  New York (and other) financiers by this time didn't want to give
Power new money to spend on Railways' operating deficits, so an agreement
was struck:  Railways, having known since the early 1930s that it would be
getting out of the trolley business (but not knowing just when), agreed to
give up its Power stock - in return for Electric's accepting the obligation
to pay off the Railway bonds due in 1960 - and wrote its value down to $1
million - estimated scrap value.  And Power got the needed funds.  So it
wasn't willingness on the part of the parent that really mattered...it was
willingness on the part of the moneylenders.

On passengers waiting by the edge of the woods being picked up by their
neighbors with autos:  Like the TV story, this sounds great but is way
overstated.  The people who were still employed bought their own cars after
the war; it took about four years to fill the pent-up demand.  Other riders
moved away to find work.  Others didn't have jobs and consequently didn't
ride OR drive.  So while some passengers were lost to the jitney next door,
the numbers as a percentage of riders over any significant period of time
are small.

On McKeesport profits:  there weren't any after about 1920, and maybe
before.  It wasn't "the most profitable part" of the system in the 1920s and
'30s.  As stated a paragraph down, it had the highest revenue per car mile,
but that's a lot different from turning a profit.  The operating costs were
higher, too.  West Penn didn't make money on the city routes...Greensburg is
another example, and they pulled out there before they did in McKeesport.
Wilmerding doesn't count...a competitor opened a better line in 1903 and the
company quietly sold out to them and quit operating!

On abandonment of the New Stanton-Hunker-Tarr-Scottdale route:  I disagree
that it was torn up because the Borough of Youngwood was audacious...it was
torn up because patronage on the line was insufficient to justify the costs
of rail maintenance, let alone replacement and paving...which wasn't done
for another ten years in any event!  The proposal to repave was just the
kind of opportunity West Penn was looking for to rid itself of a money
loser.  They were ever so quick - even to the point of giving the boro some
cash - so as not to miss the opportunity to go away!  They used no fewer
cars after that abandonment, but got rid of a lot of miles of track to
maintain.  This was a profitable move for the company.

On when West Penn would have disappeared without World War II and the
Depression:  whenever a major paving project came up!  This is purely
speculative, because World War II ended the Depression and none of us knows
what would have happened otherwise.  I maintain that had not the company and
Connellsville reached agreement on how to renew the track in that city in
the mid-1920s, the trolley line would have been abandoned whenever the
highway got so bad that it had to be rebuilt.  That would likely have
occurred in the 1930s, when the company did not have funds for renewals.

Now as to why West Penn lasted and why it quit:  there are some basic facts
that have to be understood.
1) The company actually wanted to be in the transportation business.
2) The company issued 50-year bonds in 1910.
3) The company last made money in 1920.
4) The company readily understood the OPM (Other People's Money) Principle.
5) The company had those Power dividends.

The operating deficits that began in the '20s were seen as temporary, as
something that would be corrected with time.  New terminals were built and
tracks rerouted out of the way of those automobiles; more cars were built
and one was plushed up to be fancier than any auto.  It didn't work; then
the Depression hit.  West Penn knew in 1931 that it would be leaving the
trolley business but it didn't know when.

But there were all those bonds to pay off!  This is an honorable company,
one that believes in helping the public as it is supposed to do.  It wants
to stay in the business as long as it can.  And it has income from its Power
stock that more than meets the operating deficits of the Depression AND the
bond interest.  If it tries to shut down because of the operating losses,
the PUC is not going to look favorably because the cash is there to continue
the public service aspect of it all.  Furthermore, if it shuts down, the
bonds will still have to be paid.  "We're not using THAT much of the
dividend to subsidize things; the rest of it comes from the farebox."  Let
the farebox pay for as much as it can.  What a concept!  Use the public's
money to benefit the public (and us).  So they endured twelve years of
operating deficits (nobody figured it would last that long), and then
produced decent operating profits during the war.  It probably cost a couple
million less to stay in business than to have quit during the Depression
(remember, this was a time when a million was worth something), and was
viewed as a good business decision in its time.  And this doesn't count
investment writedown (loss), only cash.

Come 1948, everyone knew the party was over.  Still attuned to the concept
of public service, the company hung on as long as it could out of the
farebox (and with minimal maintenance).  The later bus experiment didn't
work, but through no fault of the companies involved.  The distances were
long and the passengers were few.  It was time to quit, and the man who
built a lot of the track mileage was now assigned to dismantling it.

I guess I don't see what is so hard to understand about why West Penn a)
lasted so long or b) quit.

Ed

P.S.  Don't forget to order that Warren book if you want to know anything
about the history of the regional industry.