The evening world., 1921-01-26
WHICH IS RIGHT


= OV MILLER in his traction message said:
~ The water has already been squeezed
out Of the securities and the companies are
not earning fixed charges"
Transit Construction Commissioner Delaney said
yesterday in reply 10 the Governor:
80 far ss records show. no water has
been squeezed out OF the privately owned
transit lines. The water is all there, but
dividends and interest are not being paid on
much of It."
Here is an issue clearly joined. Commissioner
Delaney has put his finger squarely on the one
most important fundamental question in the transit
situation
II must be admitted that in this direction at least,
Commissioner Delaney in his Official capacity has
had greater opportunity for forming reasoned
opinion based on fact than has Gov. Miller.
Let us have an answer to this question.
Either Gov. Miller Is right or he Is wrong
Either there IS water in the transit securities or
there IS not.
Here the first and most important point 10 be
determined in the investigation which Gov. Miller
recommends. 1t is the starting point from which
any reasonable consideration Of a change in the rate
Of fare must proceed.
Has the water been squeezed out1
The United States Steel Corporation is the best
known example of the dehydration Of stock. Com
nor stock in that corporation was virtually all
water when issued. But the dividend policy Of the
company has been conservative. Earnings in ex-
cess of or 7 per cent were reinvested in plant
and equipment.
Have New York transit companies followed this
example?
What has been the dividend policy Of New York
transit corporations whose financial present is mex
tricably rooted in scandalously speculative past?
tI4s anybody yet got to the bottom Of the fixed
charge obligations inherited from the old era when
New York transit manipulation was VIGOROUSLY a
super-gold-brick gamer
No one knows with certainty whether transit
So:ks on which dividends are now demanded repre-
sent the dry facts Of actual present physical value
or stagnant waters accumulated years ago.
In any modification Of transit contracts "in the
interest Of the city" and looking 10 unified munich
pal ownership" the capitalization Of the properties
on which interest and dividends must be paid is
of paramount importance. On this capitalization
will depend the surplus over operating expenses
which must be collected in fares
Under a flexible fare agreement operating ex-
pense plus the fixed charges divided by the number
Of riders would establish the fare which must be
paid, whether this be S cents, 8 cents or 3 cents.
If Gov. Miller has the facts to justify his state
ment that "the water has been squeezed out" he
should make them public.
Ii not-ahd it is hard to conceive how he can
have gained such information which has been hidden
from other students of the transit situaton-then
the question OF capitalization and fixed charges
should be answered preparatory to discussion Of
the larger problem.
No mere change in the system Of supervision or
regulation can command public confidence and sup
port unless it is based on a knowledge that valua-
tionS Of the transit properties are not inflated and
that the rate Of return on these valuations is NOD
excessive.