Evening journal., 1919-01-02

that the Interborough should contrib-
ute S5s,0O0,0o0, estimated at that time
as one-half the cost. The agreement
called upon the company to supply an
additional 22000.OOO, for equipment
The marlborough, he says, raised siCO.-
W0,OoO by the sale of 3 per cent, first
and refunding bonds for both subway
and elevated improvements. Then the
letter says:
From time TO time as the construc-
ton work progressed the lnterborough
lpunctually paid every dollar required
or 1t by the city. It's management de-
voted their best endeavors to the ut
most OF their ability TO make the new
enterprise a financial, economic and
civic success.
Matters were progressing finely and
Just prior to the entry of this country
INTO the war re-eXamination OF the
earlier estimates Of the probable earn
ing power OF the new venture warrant
ed the conclusion that the deficits dur
ing the lean period Immediately follow
ms the opening OF the completed new
system would be about one-third OF
the amount originally anticipated.
Tells OF Increased Costs.
Then came the war. The costs OF
everything mounted higher and higher.
IL became necessary. in order TO COM
plete the lnterborough's part OF tho
contracts, TO raise about si0,O00OO0, ia
addition to the Si60,O00OO0 originally
borrowed. This was done in 1918 by
a short term note issue secured by
S6l,WU,OOO OF the first and refundng
mortgage bonds as collateral
This, OF course. increased greatly the
liked charges payable for interest and
sinking funds. But in addition operat-
ing costs scared. Wages and materials
were on a war basis, in competition
with governments having the taxing
power OF the world, and ready, In order
TO win the war TO pay extravagant
prices for labor and material. These
high costs continue to this day. and it
is under such circumstances that we
commence the term Of the lease on
January 4, 1919
Calls the Outlook 'Much Worse"
For the fiscal year ending June 80
1919, the outlook is much worse BASED
on the actual figures for the four
months ended October 81, 1918, the trend
indicates that on June so, 1919 the de-
tlcit under the subway contract will be
S3,sS7 600. and under the elevated con-
tracts, Si,952,O00, or a total accrual for
the year Of $685., 600 ahead Of the citys
right TO o return for the year ended
June 30, 1919 To this must be added
the accruals OF last year. so that the
aggregate subway accruals as Of June
30. 1919, without interest will be ST.
507i3S, and the elevated accruals, also
xrffharrf In
Of sii.766,256."
Mr.. Shonts then says that n Is prob-
able that the years 1920 and 1921, with
a tlve-cent fare continued, will accumu-
late arrears as large if not larger than
OF 1919, and that It is apparent that
by June 80, 1921, the accruals ahead
Of the right Of the city will aggregate
s30,0O0000. He says ne does not know
how long this accumulation OF arrears
will defer the receipt by the city Of any
interest on its enormous investment
but that 10 would not be surprising i
the period Of postponement was al
least ten or a dozen years. But for the
next three years, he says, the city will
have to raise by taxation on accoun,
Of interest and sinking fund on its in
yestment in the Interborough subways
an amount aggregating Si2,OO0O00 ire
5pective Of the interest on the other
,ity bonds.
Wants an Scent Fare.
II the fare be increased to 8 cents,A
,Ir. Shonls continues, recourse 70 tax
ltion viii not only be prevented but
.he city Will receive from the Inter
borough lines over 100000 in cash
nto its treasury.
THE Interborough Company Is en- =
titled to borrow cash against the ac-
,ruals and thus continue in possession
II the property under the leases. But
7 for any reason il should not be able
o raise the money because the city
,ept it down TO q flve-cent fare, and
should follow, the situs-
ion would not be changed so far as
he city is concerned-indeed, il might
)e worse, because receivership certih-
ates might be necessary, which would
,e a paramount lien, thus setting the
itys investment further TO the rear.
so long as the operator whether it
10 the Interborough or q receiver, per
orms the contract the citys invest
lent remains subordinate TO the Inter-
orough investment Even II there be
default which entities the city TO take
ossession the interest and sinking
nnd on Interborough bonds are pay
BILE prior to the city interest and sink
ng fund.