Railway terminals often give rise to a form of financing a little different from any yet mentioned. Located in the hearts of big cities, they frequently do service for more than one railroad. Companies using them are likely to finance them through a separate corporation, and become in one form or other joint obli gors on any securities issued to the public to raise the funds to pay for land and construc tion.
One example will illustrate the whole situ ation. The Kansas City Terminal Railway Company owns and operates the new joint terminal in the city from which the company takes its name. The property serves to give ten railroads an entrance into this big West ern commercial centre. They are the: Atchi son, Topeka & Santa Fe Railway; Chicago & Alton Railroad; Chicago, Burlington & Quincy Railroad; Chicago, Milwaukee & St. Paul Railway; Missouri, Kansas & Texas Railway; Missouri Pacific Railway; St. Louis & San Francisco Railroad; Union Pacific Railroad; Wabash Railroad.
Each company agrees to pay one tenth of the principal and interest on the bonds issued by the terminal company, one tenth of the taxes, and its share of the operating expenses. Each is also jointly as well as severally liable; that is, if any one or more of the railroad com panies entering into this undertaking should default on the agreement, the others would have to make good the amount defaulted.
The terminal company has authorized $50,000,000 first mortgage 4 per cent bonds, due January 1, 1960, subject to call as a whole on January 1, 1930, or on any interest date thereafter. Some $12,500,000 of these are already outstanding. It is estimated that the property will cost when completed about $30,000,000. The property comprises : 1. A union passenger station and fifty-one acres for trackage.
2. A six-track line of 6.61 miles as an ap proach or throat to the station.
3. A four-track line 2.36 miles long con necting the throat with the main line of the Chicago, Burlington & Quincy Railroad.
4. A four-track line 64 miles in length along the north side of the city and connecting with the throat.
5. Two double-track lines 6.72 miles in
length reaching the stockyards and the rail roads from the west.
Plans for the whole include 188 miles of main and industrial railroad tracks, four lo cal freight stations, passenger, freight, and switching yards, in addition to the big union passenger station.
Terminals like these are to-day one of the most important keys to the railroad situation. We have gone into this description at some length to show the nature of the property financed by these joint undertakings, and to bring out some of the reasons, besides the ob vious one of convenience, for the joint financ ing. Aside from the matter of convenience, they would be too great a burden on the single line.
The Kansas City Terminal is one of many. To cite just another, the Boston Terminal Company owns the property known as the South Station in Boston, which gives an entry into that city to the New York, New Haven & Hartford Railroad and the Boston & Albany Railroad, — now, by lease, part of the New York Central system. These two companies pay a rental in monthly install ments of a sum sufficient to meet operating expenses, 4 per cent on $500,000 of stock which the railroads themselves own, and the interest on the $14,000,000 first mortgage 31 per cent bonds, due 1947, which the terminal company has outstanding.
This situation of a separate terminal cor poration leads to mentioning a tendency to what we may call a corporate division of labor. Organizers of corporate enterprise and their lawyers are multiplying subsidiary corpora tions. They often form a new one for each division of the business. A single enterprise may have a corporation to erect buildings, another corporation to own and operate them, a corporation for the purchase of raw materials, one for its transportation, another for the manufacturing operation, and still another for the selling organization. Only time can tell whether this tendency will spread more widely and extend to still further division, or whether the investing public will insist on a greater simplicity in securities and a massing of the credit of the whole enter prise.