In some places it will be physically impossible to secure the land area for proper terminals. The space that must be used is generally in or near the business heart of the city; often along the waterways, where enterprise has been busy and land values have reached their highest point. Therefore the space for such terminals is either not available on any terms or will cost sums that sound fabulous. The financing of new terminals presents a far more serious problem than the financing of a new railroad. Large sums of money must be raised. The owners of capital will not supply them unless they are satisfied with the security and with the prospect for a sure and adequate return on their money. What security can the railroads offer for such a loan? Already, merely for constructing and operating their existing machine, many of them have not only pledged their credit to the limit but have absorbed a large share of their surplus earnings that in other countries would have been paid out in dividends. The ability of the Pennsylvania system to handle its big business is due in no small degree to its past policy of diverting profits legally the property of the stockholders to the construction of betterments. There is not a well-managed railway of any size in the country of which the same is not true to some extent. And, with the increase of their expenses and the limitation of their income by public authority, there is coming to be little or no surplus revenue that may be so employed. Net income, not gross, is the index of prosperity and the foundation of credit. Gross revenues grow, but expense grows faster. Returns to the Bureau of Railway Economics, covering 90 per cent of all the steam railway mileage in the United States, show that during the first seven months of 1912 operating revenues increased 3.3 per cent per mile as compared with the same period in 1911, operating expenses increased 4.9 per cent, and net operating revenue decreased .5 per cent. The additions to taxes and other incidental expenses will raise this figure. The progressive decline of net earnings per mile under the existing method of rate regulation is assured.