New-York tribune., 1920-03-15
ER.T. Big Loser
In Subway Deal,
Hedley Claims
Gives Decalogue of Sacri-
fees Made by Company
in Contracts With City
for Extension of Lines
Abandoned Long Leases
Asserts Present Situation
Fully Establishes Reality
of Risks That We're Taken

the lnterborough Rapid Transit Com
pany to the city in entering upon the
oual subway contracts, under which
tie present Interborough subway is
operated, is set forth in a statement
issued by Frank Hedley, president of
the Interborough Mr.. Hedley also
says that the company has made other
sacrifices" since the contract was ex-
ecuted
ITO understand the reality and ex-
cent of these sacrifices" he says, at
IS first necessary to recall the business
situation of the Interborough company
when. in order that the new rapid
transit lines might be built. the city
asked the Interborough to lend it aid.
The city had neithey the necessary
funds nor available credit under the
constitutional debt limit to undertake
the project. The cooperation of private
capital was absolutely necessary to get
the new subways built and equipped.
Company Took Risks
The lntcrborough company was
operating under two very long leases.
renewal for twenty-five years 0Con-
tract No. u. and the other tor thirty
five years. with the privilege of re-
newal for twenty five years Contract
No. %.
"The leases made no provision for
acquisition Of the lines by the city.
Its lines tapped the most profitable
traffic territory. In short, the COM
pany was in an established and COM
Portable business position. 1t entered
into partnership with the city, but in so
doing made many sacrifices and took
risks the reality Of which the present
situation fully demonstrates"
Mr.. Hedley's list of the "more not
able sacrifices" made by the INTERIOR
ough company follows:
"First-lt gave up the certainty OF
growing profits in its established bust
ness for preferential which, while
satisfactory to the city, and accepted
by the company, was in fact inadequate
and inequitable: for the preferential
was limited to the average profit re-
ceived by the company in 1910 and 1911
in operating it's existing lines only.
the city's future growth.
Second The company was to re-
ceive upon all its subsequent invest
meats (including the cost of building
extensions and the excess cost of ini-
tlal equipmentl not sum proper
-ionatc to any increased earning power
which the citys growth might ring.
but sum equal only to the actual
amount of interest. and sinking fund
ii was required to pay upon its new
obligations.
THE company can receive 10 re-
turn above the pre- efcrential Of S3,178,-
0c0 year until the city shall have
received a full return upon its own in
vestment. after which there is Prov
sion for an equal division Of surplus
profits.
Shortened Its Leases
"Third-The companys original
leases provided no right to the city
for rccapturc. The new lease, how
ever, provides for recapture by. the
city o. the rev lines tbut not of the
oldl after ten years OF operation
under the contract.
4. THE company agreed 20 shorten
It's two existing longtcrm leases
which had different methods Of re-
newal and expired at different tines
so that they would terminate at the
expiration Of The new lease. Thus,
after forty-ninc years, all this lines
would simultaneously revert to the
eity upon payment by-sit (as provided
). ~ agreed &c pool the revenues
Of the old and profitable lines with the
new lines as socn as the system was
subs.a sally cowpieteti.
6. THE coalpaAy- subsequently ad-
vanced the date of pooling to January
:. The company had contract right
20 charge . scent fare over it's OLD
zines. 1t agreed 20 have the single fare
cover the extensions as well, thus Civ
lng more service for the same fare.
8. "ls the city had decided to build a
system competing with the original sub
way it would have lad 10 right to take
over any pary Of that subway. 1t could
establish a complete East Side line or
a complete West Side line on desirable
routes. only BY using portions of the
old subway
The company agreed to an 'ex-
change of legs'-i. e., the right for the
city to recapture either the company's
East Side downtown extension built
under old contracts-tnus placing the
city. in event Of termination of the
new lease, under the ten-year recapture
provision, in position to have through,
continuous line on either West or
East Side as it chose.
No Integral Extensions
80. No integral extensions TO the old
subway could be built without the com
pany's consent, but the company agreed
to operate new extensions under the
new lease in conjunction with its own
lines for single fare
40. The company agreed, notwith-
standing its proposed investment of
S80,00O,000 (now increased to approx
mately SlO2, ,ooo,ooO) in the new sub
ways, that the title thereof, both as to
equipment and construction, should be
vested forthwith in the city. the COM
pany receiving in lieu thereof lease
upon the property for which it had
largely paid
Mr.. Hedley pointed out that the city
expressed its satisfaction with the con-
tract through a report of the commit
tee of the Board of Estimate, which ne
gotiated the contract, on May %, 1912.
He declared that the city fully recog-
nized not only the equity but the right
of the company to receive the prefer
entail.
He said that the fundamental con-
sideration with investors was not the
scent fare, but the right to receive the
first payment from the revenues of the
pooled lines, which all were confident
would soon be sufficient to earn the
preferential.