New-York tribune., 1921-11-23
Subway Power
Expense Added
To IL Burdens
impoverished System Forced
to Foot Bills fort Overhead.
According to Check-Up of
marlborough Transactions
Hedley on Stand To-day
Auditor Admits Campaign TO
Raise Fare Was Charged
TO /. II. T. Operating Cost

w - ANe pa
Pending the examination of directors
of the Intcrborough Rapid Transit
Company as to their reasons for vot-
ing dividends in non-earning years, the
into an exhaustive scrutiny of the ex-
penditures of the company for the
month of June, 1921. The principal
revelation of this survey was that
power used by the subway division
was furnished by the elevated division
at cost of manufacture, the overhead
being borne by the latter impoverished
system.
Clarence J. Shearn, special counsel
OF the commission, brought out this
point during the resumed examination
OF Edward +. j. Gaynor, auditor of the
marlborough.
''It would seeAn," he asked the wit
ness, that the subway got rather the
best of it when it comes to the cost of
operation, doesn't it"
ut certainly does" replied Mr.. Gay
nor.
THAT is. there is a good deal more
really charged up against the elevated
than against the subway, because there
is no credit to the elevated for the
cost of equipment or overhead?" ?"
"Yes."
MIR. Shearn, carrying out his inten-
tlon to check up accounts to the "last
dollar" to ascertain if they contained
any "jokers," devoted almost the en-
tire day to the monotonous task of
comparing ledger and journal figures
with the vouchers. In this manner
about SO per cent of the cost of op-
GRAFTON and maintenance for the test
month in question was proved up
to the satisfaction of the commission.
The remaining expenditures will be
audited to-day at a sub-hearing in
charge of Charles MEG. Roberts, of
counsel Of the commission, SO as not to
obstruct the main investigation, which
will be resumed this morning with the
calling of Frank Hedley, president of
the Interborough; Job Hedges, re-
ceiver of the New York Railways Com
pany, which is closely allied with the
Irterborough and Fred K. Wood, Sec
letary of the receiver.
One of the reasons for calling Mr..
Hedley is to get his views as a transit
authority on features of the commits
sion's plan of consolidation. For the
purpose of forming a basis for the
questioning of the directors the min
utes ot the board for 1918-19, which
declared the huge dividends that Mr..
Shearn has inferred came out of i'm
paired capital, will be read into the
record to-day. The commission will be-
gin the examination of the directors at
the first session next week, it was an
nounced.
Having established yesterday that
the manufacturing cost to the Inter
borough of alternating current was
about nine mills per kilowatt hour,
counsel of the commission, it is under
stood, will endeavor to show to-day
that power was sold TO the New York
Railways Company at considerable
profit and that this concern, in turn,
sold power to other financially bereft
companies at profit Of approximately
I8 per cent
Prior to taking up the auditing of
the June accounts, Mr.. Shearn brought
out from Mr. Gaynor the fact that the
Interborough had charged to operating
expenses the cost of it's advertising
campaign to secure an increased fare.
The bonuses voted for services to the
men who negotiated the dual subway
contract, the witness testified, were
charged to a temporary account known
as the suspense account" pending a
decision as to whether this outlay of
$21O000 was part of the cost of con-
tract No. 3 or elevated extension work.
Explaining his reason for charging
the cost of increased fare propaganda
to operating expenses, Mr.. Gaynor said
he did so on the theory that it had for
its purpose the betterment of the in
come of the company in keeping trains
in operation.
"But the main purpose would be to
put the company back on a dividend
paying basis, would it not ?" asked Mr.
Shearn.
Before that, to wipe out the deficit
replied the witness.
"Well, certainly your publicity cam
pagn was not actual cost in operating
The subway"
at was an outgrowth of the condi-
tions developed by operating the sub
way on insufficient income"
The vouchers checked with the books
presented by Mr.. Gaynor showed that
the pay rolls, amounting to $2,232, ,773
formed IA per cent of the June ex-
penditures for operation and main
tenance. The cost of coal was given
at $4l268S, and it was brought out
that $14o,518 of this amount went te
the Berwind- White Coal Mining Com
pany, with which is connected E. ]
Berwind, chairman of the executive
committee of the marlborough, who
probably will be the first of the di-
rectors to be called to the witness
stand.
Harry A. Kidder was the only other
witness of the day. He was called to
corroborate Mr.. Gaynor's figures on
the cost of producing power. Mr.. Kid
der said that the subway and elevated
power plants were not as efficient as
modern plants in other cities. The
generating equipment, he said was up
to date, but the boiler room operation
was less efficient than in plants built
within the last year.