The foundation of any system of railroad rates is the distance which commodities are carried. Generally speaking, the Southern and Central Pacific railroads, like other companies in the United States and Europe, varied their local charges with the distance between point of origin and point of destination. To illustrate this point briefly, two charts are here presented. [Illustration: Chart showing rates on second-class freight and on grain in the Sacramento Valley, 1876.] The first chart depicts the rates on second-class freight and those on grain in January, 1876, between Sacramento and points in the Sacramento Valley north of that city. Second-class freight at this time on the Southern Pacific included articles such as coal oil, agricultural implements, machinery, furniture, crated glassware, and wines and liquors. Freight of the description mentioned ordinarily moved north from the city of Sacramento. Grain, on the contrary, moved south. It will be observed that rates on the lines of the Southern Pacific increased with considerable regularity as point of origin or destination proceeded north into the non-competitive territory around Tehama and Redding. [Illustration: Chart showing rates on miscellaneous commodities in the San Joaquin Valley, 1892.] The second chart displays rates between San Francisco and stations in the San Joaquin Valley as far south as Fowler, 205 miles distant from point of origin. These rates are for the year 1892. Non-competitive rates in the San Joaquin Valley in 1892 increased as distance grew greater, much as they had increased in the northern territory sixteen years before. The rates given are for a few commodities only, namely, agricultural implements, barbed wire, boots and shoes, coal, and grain; but these are typical of the construction of schedules on a much larger number of articles. The extent of the increase was relatively greater to points beyond Lathrop because of the effect of water competition on San Francisco Bay. Grades and Traffic Density These two schedules illustrate a fact which could be readily proved by repeated examples, namely, that local rates in California were and are first based on the element of distance. Possibly such a fact might be assumed; yet in California, as elsewhere, the statement that railroad rates have varied with the distance traversed needs promptly to be qualified in order to be true. For, first of all, it was evident at the beginning that costs of transportation were not solely determined by distance, and that other considerations had to enter in. One of these other considerations was the matter of grades. Because of the conditions under which the Central Pacific was constructed, to say nothing of the extremely mountainous character of certain portions of the Central Pacific lines, differences in the rates per ton per mile between the valley and the mountain sections were introduced by the company at the commencement of its history.