New-York tribune., 1920-03-08
Hedley Figures
Subway Price
Is 224 Million
Even Then City Would Not
Own Entire System, and
IL" Lines Would Add at
Least 40 Million to Cost
Bonds Secured by Rights
ssTurn Back" Suggested by
Mayor Leaves Purchasers
Without Chief Security

To carry out Mayor Hylan's sugges
tion that the city take back the sub
ways would not be as easy as it sounds
Frank Hedley, president Of the Inter
borough Company, states in lette
to The Tribune. Mr.. Hedley assert
that the purchase of the subway line,
would involve a transaction in which
the city would have to pay the Inter
borough $224,740, 900 in cash, and the,
it would not own the entire system
nor the elevated lines.
Mr.. Hedley's letter makes plain tn,
company's position as opposed to tn,
stand taken by the Hylan administra
tion, and answers questions which ar.
being asked by the general public. bu-
which, according to Mr.. Hedley, tn,
company has been denied the privilege
of introducing at the Interborough in
vestigation.
Mr.. Hedley's Statement
Mr.. Hedley's letter follows:
ITO the Editor of The Tribune.
II was much interested to read ir
this mornings Tribune the editoria
entitled 'Recapturing the Subways,' ex
pressing the thought that the com
panles had not made clear what re.
capture means.
"It is apparent that the public has
not come to understand, from the hear
ings before the Board Of Estimate. the
conditions under which the City of New
York, according to the terms of its
contract with the Interborough Rapid
Transit Company, can take over the
subways: Nor is it generally under
stood what that would require in 8
financial way.
This, however, is only natural, fol
the proceeding before the Board Of Es.
innate is not one in which the Inter.
borough may put in, as it wishes, tes-
tlmony to make its own case clear, no1
can 1t rebut testimony of other wit.
nesses, no matter how i'll founded il
may be. In this proceeding the Inter
borough can do nothing except an
s"er such questions as the city cares
to ask. Nor can the company 20 be-
yond the question asked even though
this were necessary to make the testi-
mony complete and show the whole
truth instead of half truth.
Sl0,000,000 Surplus Not in Cash
For example, it is true, as testified,
that the 1nterborough has a bcokkeep-
ing surplus of around $1O,O00,000.
But that is only half Of the truth; the
other half is that this surplus is not in
cash, but consists of reserve materials
and supplies to assure safe operation
and is IN other forms which make it as
useless for meeting current obligations
as though it did not exist. Testimony
TO that fact could not be introduced by
the marlborough except by courtesy OF
the board, not as right.
NOW, as to the process and financial
requirements of turning back the sub
ways for municipal operation.
"In letter dated August 2, 1919, e l.
dressed to the Interborough Rapid
Transit Company, Mayor Hylan asked ::
let the city administration worry about
the credit and finances available?'
This is fair question.
If by the words turn back is meant
sale by the company and purchase by
the city, it is highly proper to point out
the magnitude Of the financial propo-
sitions involved.
"On January 1, 1929, but not before
that is, after ten years. operation
under the contract-the city can end
the Contract No. 3 lease and purchase
the lnterborough investment in the
now subway lines and equipment at q
Tor the original subways runs to 1868,
with no right of prior termination. but
with an obligation on the city to buy
the equipment.
Cannot Recapture Old Lines
"This important fact should be made
clear. The city's right Of recapture
covers only the new subways, not the
old. The city has, however, the right
to an exchange of legs; that is, it
could pick it's line so az to operate n
complete East Side line or a complete
West Side line, but the Interboroueh
would have the one the city did not
want, and the city could not take it
away until the end of the forty-nine-
year term. This would mean that each
line Gone operated by the city and the
other by the company would charge its
own fare, but riders could not change
from one to the other through Forty
second Street without paying another
fare. A similar privilege at South
Ferry would also be lost
The company's interest and invest
ment in both the old and new subways
and the operating contracts are the
principal security for the Interborouph
bonds, which thousands of private in
vestors all over the country have pur-
chased and now hold. If full municipal
ownership were present possibility
their representatives might we'll con-
sent to an advancement Of the date on
which the company investment in the
new lines could be disposed of at the
price per contract formula of s1l9.-
oOO,0OO, but at tho same time they
would naturally expect that the city
"ould pay adequate compensation not
only for the tangible property in the old
subway, which it is obligated to pur-
chase at the end Of the term. but also
for tho valuable forty-nine-year lease
holds which thus would be extinguished
by contract the parties have fixed
the measure Of the value Of those lease-
holds at the yearly sum of $3,178.000.
Furthermore, the agreed value of tha
company's investment in the original
subway equipment Is S48.0OO. 900. Thus
there would be required:
10 purchase the lnterborourh
..- sestment under Contract No. 3$119 O00. 900
purchase tho forty-nine-year
leaseholds under Contracts Nos.
and 2. at $3.17S.00O per
annum ...........,, 67 7AN nm
ITO purchase the Interboroush '''"'VO0
Investment In equipment under
contracts Nos. l and 2. AZ 600 O0O
Making Maxi total Of. 1924. FAC. 900
1T is apparent that if the Inter
borough subway lines were turned
back' on this basis the city would have
to float its obligations in amounts to
produce nearly S225,00O,000 in cash.
Under existing financial conditions. to
say nothing of constitutional limita-
tlons as to debt limit. that certainly