New-York tribune., 1919-07-26
Receivership Would Bring
Municipal Ownership No
Nearer, Would Cost New
York Millions, Moran Told
Fare Increase Only Hope
And That Would Be Neces.
sary if Subways Could Be
Confiscated, Letter. Says

The Interborough Rapid Transit
Company. in a letter to Robert L.
Moran, President of the Board of AL
dermen, who favors a receivership for
all the local traction lines if they can
not carry passengers for fve-cent
fare. says the city cannot conhscate
the franchises of the Interborough
and take over the operation of the
system until January (, 1929; also,
that even a receivership would not
prevent the receiver operating the
subways, as receipts in a fve-cent fare
Are sufficient tol pay operating ex-
penses, taxes and maintenance. The
letter to Mr.. Moran was prompted by
his statement yesterday that "the city
has but one alternative, and that is
and their operation"
"As President of the Board Of AL
dermen," says the company, "you
would also be a member of the Board
of Estimate, which has certain duties
in relation to the city's transit and
financial policies. The meaning of
your statement is, therefore, mat
ter of great public Importance.
Based Upon Assumptions
Your statement seems to be based
upon the following assumptions:
81. That receivership of the Inter
borough will cause that company to
drop into the lap of the city for mu
nicipa operation.
20. That receivership of the COM
pany would advantage the city finan-
cialiy and give it profits from the sub
ways which it does not receive under
the present operating contract with
the Interborough Rapid Transit Com
pany.
Both the above assumptions are
absolutely incorrect, and both are full
Of peril TO the public's financial inter
est and to the city's good name.
The merits of municipal operation
OF the subways need not be debated,
for three reasons:
a. The city has neither the credit
TOR the cash to take over the sub
ways.
%. Under the dual subway contract
the city cannot take over the subways
until January /, 1929, provided the
c.erating companies live up to the
operating contract.
"3. Even receivership would not
prevent the receiver operating the
subways, for receipts even in a five
cent fare are sufficient to pay operat-
ing expenses, taxes and maintenance.
Not Earning Dividends
True, under a fve-cent fare the IN
terborough is not earning dividends
for its shareholders nor full inter
est on its mortgages and receivership,
therefore, is threatened
"The general attorney of this COM
pany, appearing yesterday before the
Federal commission which is sitting
in Washington to inquire into the con-
dition of the electric railways of the
United States, stated correctly that
the Interborough faces receivership
next January unless the subway fares
be increased meantime.
"On June 80 last it had fallen short
OF earning the interest on it's first
mortgage 5 per cent bonds by $780,
340
Such receivership, however. would
neither advance the time of municipal
operation nor give the city any profit
from the subway except as provided
by the existing contracts. Under E
5-cent fare there are no profits fol
the CRY on its great investment now
nor can there be for many years un
less the fare is increased
"If, because the city kept the com
pany down to scent fare, receiver
ship should come it would give ths
ton might be worse, because re
ceiver's certificates might be neces
sary, which would be paramount
lien, thus setting the city's investmen
still further to the rear.
City's Investment Subordinate
so long as the operator, whethe
it be the Interborough or a receiver
performs the contract the city's in
vcstment remains subordinate to tn
lnterborough investment. Even if ther
were default which entitled the cit,
70 take possession, the interest an,
sinking fund on Interborough bond
would be payable prior to the city in
terest and sinking fund.
The city can gain nothing, there
fore, by starving the 1nterborough in
to bankruptcy. On the contrary. /
can indirectly do itself great financia
own investment of about $3.50 900 90
in the combined dual system. I
would reap the inevitable result o
reputation of it's good faith, for i
could never again induce private cap
ital TO invest in subway deyelopment
Even if by continued refusal to in
crease fares the city precipitated bank
Iaptcy OF its partner, it would still
have to face the problem of increas
ing fares TO escape ruinous taxation
IF the city were in possession q
the railroads a continuation Of a I
cent fare would be contrary to th
spirit Of the rapid transit act. whic
contemplatcs such a utility being saI,
supporting from rates received ~
aervice without recourse to taratio
to support it.
Would Cost City Millions
TO summarize, tho policy ar
hoonced as your platform could no
advance the day Of municipal opera
uon- but 1T would cost the city man
millions year and damage its cred
beyond measure.
But TO recognize that the nicke
has shrunk to half its old value ar
MAKE good tina. shrinkage bv alterin
thc 1are 70 meet conditions over whic
me operating companies had no powe
ana could not foresee would produc
tnese benefits to the city:
!. Its subway investment IN line
assigned for operation by this corn
pany (about 10000 000j vould be
come self-supporting.
z. This would release an amount =
borrowing capacity. for rapid trans,
purposes, equal to tho subway invex,
ment, and establish such margin h.
tween the debt limit and the citv'
actual commitments as to strcngthe e
the cisy's financial position, and no
only attract capital but attract It a
lover Yates.
's. Relief 70 New York property 0