Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1917-05-18
Stotcsbm'y to Quit
p. r. T. if Lease Fails

c.,,lnued from Page One
:, the 1907 lease) to enable the city to pur-
shase stock Of the company at par In 1857.
GAFFNEY's oUIzzING
A. ,oon as the former Director concluded
a. address Chairman Gaffney began grill
@@ @@ hin, with a series of questions aiming
.e.bow that the recapture OF the Philadel-
.bia Rapid Transit system by the city dur
10 or at the expiration of the lease would
~ ~ financially impossible unless the State
- legislature passed the Hecht constitutional
amendment now pending.
Mr TAYLOR answered about a score OF
,hs questions until Mr.. Gaffney got him
10 n position where as a railroad man
IA layman, he could answer no further
Mr. Gaffney began his inquiry by reading
,ror Article IS. Section 6, of the p. II. T.
nroposal the following sentence:
D,rn making said purchase the city shall
.,.urne or pay all due and accruing labili-
~. NJ the lessee, and will be entitled TO
.DaLs use of any and all balances I'm the
Snrds of the lessee or which have been
aocnnulated in the sinking fund ."
.srhere is no doubt, is there" asked Mr.
o.6nev that these obligations and Iia-
Suties Of the company. including the rentals
~ the underlying companies which in 1916
totaled S7,39S,432 would become a debt for
the city,
Taylor replied:
"If the city assumed them as a debt"
raffney-"well. there are lot of the
underlying leases running for ninety-nne
years, and as they surely would become an
cblieation, where, then. would the city have
narrowing capacity for the purpose of re-
capturng the PR. T SYSTEM"
Mr. Taylor in reply to this asserted that
tbe 1918 constitutional amendment increas-
ing the citys borrowing capacity from to
10 per cent for transit and port development
save the city this borrowing capacity mas
much as it provided that money invested
m transit development earning a revenue
sufficient to pay interest and sinking fund
payments should not be charged against
The cty's debt.
Mr. Gaffney promptly produced the con-
stitutional amendment in question and con-
vinced Mr. Taylor that the clause excluding
transit development expenditures from the
citys debt covered only moneys invested
in construction and improvement and could
not be used in connection with the recap
ture Of the transit system.
Then Mr.. Gaffney said Il have pre-
pared a schedule of what the city would
have to pay for stock. bonds and mortgages
and rental of the underlying companies
should the city decide to recapture in 1925"
The statement Mr. Gaffney read showed
that in that year the total needed to re-
capture the system would be sum of S239,-
775,765.
Gaffney then made the following asser-
tion:
Under the present constitutional limita-
tons recapture is a financial impossibility.
Is that not true?'
Mr. Taylor answered 81 must decline to
answer that question. 1t is question for
an attorney, and not for a layman and a
railroad man. | would have the city's Law
Department go into the natter
Gaffney: The Hecht bills would give the
city financial ability to make the recapture.
Are you sufficiently familiar with the Hecht
bills to know that this be true?"
II have only read summary OF the bills
and am not sufficiently familiar with them
to answer your question" said Mr.. Taylor
Charles Seger, chairman of the Street
Railways Committee, said, Il understand
The city would take over all obligations OF
the company
Gaffney-'Exactly. The lease must con-
tinue on forever There Is no possibility
in my mind of the cty's recapturing the
property
Gaffney then questioned former Director
Taylor relative to the depreciation reserve
and damage reserve provided for in the
lease.
In response 20 question as to whether
both these reserves were for the benefit
of the transit company. Mr.. Taylor said
They are for the benefit of both parties
and must he provided for under the public
service act"
Gaffney then insisted that they were for
the benefit of the lessee.
Whatever the z. r. T. has assumed the
city must stand for no matter how much
water exists in subsidiary companies. Our
estimates show that the payment on fixed
charges Of rentals in fifty years would be
tSl,OOO,OO0 and that at per cent the
water would be S6S,t7O,S52.'
Mr.. Taylor, in reply, said THE city gets
the value of investments made on property
during the years when returns were fal
from adequate"
CONCERNING RATES OF FARE
The next series of questions put to Mr.
Taylor were relative to rates of fare. Chair
man Gaffney asked why the company /!
given the power to impose transfer charges
II the income is not sufficient to meet tn,
provisions of the lease. Mr.. Taylor said
That is not likely to be used. In the cas-,
OF some terrible cOnflagration or plague
This would protect the company from loss
There is not likely to be any loss. how
ever"
Gaffney: The old lease made the con
. sent OF both parties necessary to a chang
IN the rate of fare. You want to give tn
company alone that right Why?"
Taylor-"The financial position Of tn
company must be established in order tina
can carry out the provisions of thi
lease, Credit is needed, and this makes tina
credit possible"
=, Gaffney-"I want you to answer directl!
ue question | am about to put to you, II yo,
Will Is it fair tc give the company tn
power TO raise its rate of fare?"
Iaylor-"That will not answer I Vwil
say the clause gives the company no dis
cletionary powers. 1t merely works auto
mSllcally and definitely"
Mr. Gaffney then inquired Of Mr.. Taylo
whether he thought it fair that there shoult
Ie reserved to the company the right 4
mVSNse its fare when such an increas
xoad not be necessary II it were not 70
u'e FoSOOO,OO0 worth of water.
am firm believer" Mr.. Taylor re
yned, in the fact that the capitalization o
ne r. X. T. and it's underlying companie
not excessive when you credit agains
what you call water the amount which tn
soSkholders have had invested for year
nout getting any return. / do not be
neVe there is public service commission
N NJ the country which would refuse the p. r
- iare sufficient to pay per cent on 1t
vapltal stock in addition to the payment t
Nuerlying companies"
uaHney-"Would you be satisfied L
-nehd the paragraph on fares to leave tn