New-York tribune., 1920-05-20
BRIT. Contract
WithCityC Called
Unreasonable
Or. Bauer Tells Board Of
Estimate Five.Cent Fare
Was Too High When Con-
tract Was Entered Into
''Mystery Company Rich
Yearly Dividends from Sub.
sidiary Concern Declared
10 Have Been 40 p. C..

Dr. John Bauer. traction expert in
the Office OF the Corporation Counsel.
tcstifying yesterday before tho Board
OF Estimate declared that lower fare
than five cents on the rapid transit
lines should have been allowed under
contract No. 4, between the Brooklyn
Rapid Transit Company and the city, in
order TO have given the city fair deal.
DR.. Bauer was criticizing some of
the terms of contract No. when Mayor
Hylan interrupted him.
Doctor, We know that the contract
is unreasonable said the Mayor "All
the city got in that contract is the five
cc.r4 fare, and that is what we are
lighting to retain. Everything else
was unreasonable. and they want to
make that unreasonable now
THAT. too. was unreasonable at the
time" said the witness. "At the time
there should have been lower fare
than five cents. 1t is the change in
operating cost that has made the five
cent fare reasonable, but at that time a
lower permanent fare should have been
provided"
Valuation Held Excessive
Dr. Bauer had explained previously
that the S35O0,0o yearly preferential
allowed the New York Consolidated
Company. the holding company for the
e. r. T. under contract No. 4, was eX-
eessivc by at least $1,000 900, and that
n fair valuation of the Brooklyn COM
pany's property was S25.000,000 instead
of the So 100000 claimed in the COM
panys own appraisal.
of oct 70
ness, except for the excessive prefer
entail, the city should have had very
substantial payment as return on this
investment. Instead of that the entire
interest claimed by the city of more
than S12,000,000 is reported as in
arrears
Wood D. Loudoun, Deputy Commits
sIoner of Accounts. who has investi-
gated the financial affairs of the vari-
GUS traction companies, testified in re-
gard to the Transit Development Com
pany, a B. r. 7. business corporation
described by Assistant Corporation
Counsel Carswell, who is conducting
the inquiry. as the mystery company"
MIR. Loudoun said this company had
paid s3,761 600 in dividends. or 1922
per cent, on q capitalization of $4,000,
or more than 40 per cent year dur
ing its corporate existence.
"Why, think Rockefeller was a
plker compared 20 that kind of stuff"
said Borough President Riegelman OF
Brooklyn.
The Transit Development Company
by agreement with the several com
panies Of the B. f. T. system, leased
their powerhouses and plants to sup
ply power to the B. r. T. system. The
company began to furnish power to the
Brooklyn traction lines in 1907 and
continued until July 81. 1918, when it
was merged with the Brooklyn Rapid
Transit Company It's gross operating
revenue during that period, according
to Mr.. Loudoun, was S97 .46l ,545, and
after deducting operating expenses,
come Of SIT, ,767. .207.
Financial Jugglery Charged
But by process of financial Jug
gelry, the witness said, S12,O64, ,73e,
represented by interest on loans and
certificates (held by the B. r. T.). had
been deducted, thus reducing by a
bookkeeping method the net income to
S5,7O2 ,463. The surplus was still fur
ther reduced, Mr.. Loudoun said, to
1857 ,755. after payment of dividends
to the B. Z. T.. and other charges,
among which there is an item of spe-
cial reserve, S50O.000," which no one
knows to what 1t relates.
Mr.. Loudoun also said the earnings
Of the Interborough on its subway
lines had increased for the first three
months of this year on five-cer t
fare, but It was carrying deficits for
It's elevated lines. His statement
showed the March increase over Jan
uary was S1S9,190, and that the sub
way in March showed a surplus after
meeting the deficits Of the Manhat-
tan division the Elevated lines) of
slo3.486. The statment showed the
Manhattan division was improving, the
deficit for March having been less than
that for January by S257,o36, or more
than AZ per cent
"Then,' said Mayor Hylan, "if the
city, operated the %, marlborough it
Yes, undoubtedly replied the wit
Less
Another item brought out by the
.Ii.sfess was that the report made by
Lone G. Webster, accountants, under
erection of Judge Mayer, of the Fed
:-al District Court, had cost S1l6,514
The hearings were adjourned until
aeXt " Wednesday.