The sun. [volume] (New York [N.Y.]) 1833-1916, 1916-02-17
Duncan Machines. Chief
Accountant for Prender-
CAST. a Witness.
OPERATING EXPENSE
X IN CONTRACT
ShOnts. Served Anew, to
Take Stand Under COun-
sells Eye To-day.

Duncan Machines, chief accountant OF
the Department Of Finance. came to the
witness stand before the Thompson legis-
Iat,ve committee yesterday with . wealth
OF facts concerning the financing OF the
new rapid transit system. a nne flavor
81 Celtic utterance and as quick a sense
Of humor AS any man nay reasonably be
expected to have who has spent eighteen
years in the service Of the city. When
he got through he had made the follow
ing disclosures for the future contem-
plation of the committee
Tha, IT will be 1883 before New
York city begins to share profits with
the ~Interborouxn II il 10 assumed that
the new transit system II ready Tor
operation on January !. 1917. and no
account il taken Of the interest that
will have to be paid on the operating
,ompany's deficits during the irst few
years.
That in 1913 the city will still be
behind ST., 600. 900 or more because OF
the contrsct provision that after clean
ing up it's interest and sinking fund
charges the city shall then begin to
wilma out an amount equal TO S.26 per
cent. on it's investment.
tina. Il will b 1854 before the city
Las wiped out this $4,000 900 and
brought itself to an even keel will the
marlborough company.
May Get Some ProSts.
That II anything like adequate pub
lc supervision IL provided the city may
liza - yattA In thu nTOntA or
the new system within the life OF the
bonds issued to finance II.
That a better arrangement for tho
city might have been obtained had II
not been for he city's inancia DIS
tresses at that time the urgent
reed OF getting new subways and get
ting them quickly.
Tina: the financial arrangements will
not appear so bad after all once the
contract with the Brooklyn RAPID
Transit Company is examined in the
same fashion as has been that Of the
In~terborough. an examination into
which the cumittee did not 20 yeSter-
day for lack Of time.
I%rterborough has been subpoenaed to ap-
pear this morning at II o'clock. His
counsel asked that "A new subpoena Dc
issued for him. a request that was In
terpreted by Senator Thompson to mean
that MI. Shonts has been advised to pre-
serve all his legal rights. He viii be
asked this morning to sign a waiver OF
immunity. what his reply TO that
,euuest will be his counsel refuses to dis
russ.
Mr.. Machines testified that the hnan-
ria, results of the rapid transit system
contracts had been considered by MN
from time to time and that ne mad re-
ported his findings to Comptroller fren-
,ergast or To the transit M OF the
BOARD of Estimate. lie said there was
little difference between the suggested
contract Of 1911 and that finally adopted
on March 10. 1913. except that the Tor
mer agreement contemplated a return OF
. per cent. To- the Peterborough on all
,apital invested, while the final scheme
proyid,d for a preferential of S6.33J,ooO
10 the company on its old capital ana
for "A = per cent. return on It's ne" capi
,al. a difference. In favor OF the present
contract If one-fourth of ! per cent.
One Of the reports made by Mr. Mac
lines during the progress Of the sub
wav system negotiations vas a lette'
sent TO the Comptroller under date o'
Tecemler "A. 1911. In this letter Mr.
Machines stated his belief that - pei
cent. of passenger revenues was toe
great a sum TO be taken as An operating
cNpense constant on which 10 base ON
mutations OF the financial results OF Inc
subway extension system contemplate
At that time. lie made the folloWine
statement also At that time:
The conditions of the present oper-
a,ins lease required from the begin
ming a payment by the lessee OF al
thc interest charges on the bonds
issued by the city for construction ana
I per rent. for sinking fund to amor
tive said bond.. II would seem that
this il a provision which should enter
into any agreement for operating new
subway aud that IN addition thereto
he CITY should receive a percentum OF
the gross receiptS-at any rate from
"A pcr'od where Il, could approximately
ho assumed that there would be n re-
sul,art reasonable proNt TO the lessee
on his actual Investment.
.Pcnrcd Operating Clause.
ANY agreement for the "onjoint
building of new sideways n their
nperatlnu by \ lessee Which Would D6
predicstcd upon Il return 10 tho citH
from ne, revenue wiz. only after the
lessee had received his profits n
CARRYING chargesD would be fraught
With ali the dangers VI delay and
~nostponc,ncnt of result consequent
mon A management and expense opcr-
alton, the cost of which would he en-
,,rely under the control and In the
hands Of the lessee. and which the
city would apparently b. po~cr!ess to
influence.
'.The4e views were laid before the con
forces In t"1I"
Yves. sir
.I-nder the present contracts has IN
cit, II control over operation eA
p.nses""
The Pubic Service Commission !
vested with Whatever " there Is
Whenever operation begins til" conn
troIler has the right 10 examine the a.
counts 10 determine their accuracy, bl
he has no control over operating az
penditures,'
'.The city's participation in the reve
nles Of tho new system IL confined I
the net revenues"
That Is correct"
'IIoN long do you ultimate " %l1 h
before the city begins TO participate
those net revenues
81 made "A computation in January g
1913. These computations were base
on slightly different conditions, but o
the same principles
Let me interrupt you there sal
Mr.. colby. ''The conditions were late
-. Ia. ps