As with any business, the lower the costs of operating an electric railway the greater the likelihood that it would be profitable. Thus, debt load lowered profitability. As we noted last week, sometimes a line was “overcapitalized,” that is it had taken on more debt than its income could cover.

Overcapitalization could occur for a number of reasons. Sometimes, enthusiasm over this new, efficient means of transport led investors to overestimate, sometimes grossly, the earning potential of a line. Thus, they might build an unnecessarily expensive line or build it into territory where there was insufficient traffic to support it.

But, while some overcapitalization resulted from honest misjudgment, sometimes the cause appears to have been less honest. Whereas it was in the interest of the operator of a line to keep capitalization as low as possible, such was not necessarily the case with the promotor or the builder. There was money to be made from promoting and building a line, without concern for the finances of that line in the longer term. Construction costs could be inflated by means such as creating separate but wholly owned companies which then could be sub-contracted for construction or for purchasing materials, allowing profits to be made at both levels. And these profits could be made even when extending into unprofitable areas. Similarly, promotors or builders might pay themselves for questionable “professional” or “consultation” services. Thus, some electric railways had hopelessly heavy debt loads and/or unprofitable routes from the day they began operation.

Pictures of construction: 1) Interurban nr Columbus, OH 2) suburban, W. Broad St, Columbus OH and 3) High & Broad Sts, Columbus. all Columbus Metropolitan Library. 4) Cleveland Rapid Transit. Library of Congress. Excess construction costs unlikely on this line because promoters intended to operate it!

A much fuller discussion of this topic can be found in Hambley, S.D. (2025). “The Pioneer Route & Electric Railways of Northeast Ohio,” obtainable through the NORM store.

Incidentally, Dr Hambley will be speaking about his book next Sat, 2 Aug, at 10:00 AM at the Hinkley Town Hall, jct of rt 3 & 94. Public welcome, free admission.