James M. Herbert, first vice-president, was elected to the office of president on September 4, 1917, to take over the duties assumed by Edwin Gould after the death of Frank Britton. Herbert, like Britton, chose railroading as his occupation, and started in the same branch of service as telegraph operator.
He was born in Westmoreland County, Pennsylvania, on January 15, 1863, and was educated at the Delmont Academy. He began his career as a telegraph operator on the Wabash Railroad in 1881, and was later promoted to trainmaster. He served on the Grand Trunk, the Missouri Pacific, the Iron Mountain, the Southern Pacific, the Denver and Rio Grande, the Colorado Southern, and was president of the Colorado, Wyoming and Eastern when he became connected with the Cotton Belt in 1916.
Herbert had been in office only a few months when the Federal Government took control of the railroads during World War I, through an act of Congress on December 28, 1917, in the form of the United States Railroad Administration, under the direction of W. G. McAdoo. The act contemplated that during government control each railroad would receive as guaranteed compensation an amount equivalent to the average annual railway operating income for the three-year period ended June 30, 1917. Although the company asked for an amount in excess of that provided for in the act, the government rejected this claim and consented to pay the company $4,054,379.72 annually. It was also agreed that the same rate of depreciation would be maintained by the government; however, the company was to pay for all new equipment purchased during this period.
The officials of the company charged that while under the United States Railroad Administration, the physical condition of the road had been allowed to deteriorate beyond a safe condition for operation. This controversy came to a head when the Regional Manager informed the Federal Manager in April, 1919, that expenditures for maintenance of way and structures would be limited to $2,000 per mile, and that this allowance would be retroactive to January, 1919. The expenditures for the first three months of 1919 had been $2,857.48 per mile. As the budget had already been approved for the year, this would limit the actual expenditures for the rest of the year to $1,714 per operated mile, or a forty per cent reduction.
Shortly after the inception of Federal control, the Cotton Belt was divided at the Texas state line. The Texas portion was placed under the direction of J. L. Lnncaster, former vice-president of the Texas and Pacific, and the Arkansas and Missouri section was in the group headed by A. Robertson, who had been vice-president of the Missouri Pacific Railroad. Thus the two sections of the Cotton Belt were linked up with and operated as units of its two strongest competitors, and in a manner that seriously affected the physical property of the road, according to its corporate management.
In June, 1919, the Railroad Administration sent two inspectors, whose report recommended that an additional sum of $415,527 be expended on the property for the remainder of the yeat. President Herbert asked the Texas Railroad Commission to inspect the road, which it did, and their report showed that in some sections there were ten defective ties to a rail, joints churning on account of defective drainage, and the track center bound in most places, and that some ties protruded a foot above the sand ballast. Reluctantly, Herbert accepted the additional expenditures offered by the Administration, but left the question open for future discussion.
Under the terms of the Transportation Act of 1920, the law returned the railroads to their owners and provided a guaranty of net operating income for a period of six months. Acceptance of this guaranty would require the company to return to the government any excess amount earned. The company asked for information in regard to the purpose of this policy, but they did not receive a reply. So the company did not accept this guaranty, and as a result saved $1,900,038.99. During this period a greater volume of traffic was handled by the railroad than at any time in its previous history.
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