The New York herald., 1922-05-19
$3S,OOO,OOOLOPPED.
FROM |. R. I. VALUE.
Shearn Shows Valuation
OH Contract 3 Ignored
Recapture Right.
EXPECT MORE LOADING
Company Auditors Figure
on 2O0,OO0,0O0 Passenger
Increase in 1926.
3 CENT EXPERT is CALLED
Kellogg, Who Predicted Huge
Deficit, Indorses $780,
100000 Figure.
3 CENT EXPERT is CALLED

Clarence j. Shearn. chief counsel
for the Transit Commission, in yester-
days investigation of the valuations
placed upon its properties by the In
terborough Rapid Transit Company
did some effective chopping. Within
an hour or so he Topped off about $685.
100000 from the company's full
moon appraisal of its lease of city
owned subway lines under Contract
No. 3.
This asking price" set up by the
]. r. T. was predicated upon the as
sumption that the lease had forty nine
years to run. Mr.. Shearn contended
$40, 100000 for TIE reason that the
city may terminate the lease within
three years. He rointed out that the
city possessed the right to recapture
the lines within ten years after the
first of them had begun actual opera
tions. This would make the group of
lines constructed under Contract No. 3
eligible to recapture in 1925, which
practically would wipe out the equity
which the Interborough claimed on
control until 1854.
Addressing Henry IT. Berry, assistant
auditor of the ]. r. T., who occupied
the witness chair. Mr.. Shearn said
II call your attention 10 the fact that
II that lease were terminated and had
to be acquired by the city all you could
get under any possible theory would be
your preferential for three years
amounting to $9.524. 900 the deficit in
the preferential which has accumulated.
amounting to s6,000,000, and s15,0O0.000
additional representing the 10 per cent
payment to which you have testified"
The Is per cent. referred to repre-
sents the profits the city obligated it.
self under it's contract to pay to the
Interborough on the latter's investment
in the event the city should elect to
take over the subways.
Predicts Huge Traffic.
j. G. Edwards, counsel for the l. r.
IT, argued that the routes left to the
transit company under Contracts Nos.
and 2. even though the city should
exercise its right to recapture the lines
built under Contract No. g. insured to
the company profits which would have
Mr. Shearn replied that any such equity
would be deprecated as the company
would have to meet deficit OF more
than $4,000. 900 year on the lease of
the Manhattan elevated lines.
Mr.. Berry had declared that whereas
the companys operating expenses in
1922 were estimated at s20,762.00 they
would be reduced in 1928 to an esti-
mated figure of s19.600.000. He be-
Ia Z,,I1 ~ 11 ~,
various economies. such as cheaper coal,
time and labor saving devices. such as
the multiple car doors and station turn
stiles. and probably by changed wages.
He figured that by 1926 traffic on the
lines will have increased by 200, 600, 900
passengers in excess of present numbers
Asked to explain how the company
proposed TO handle this traffic the wit
ness said that its hope lay IN the dis
tribution of rush hours Of travel over
longer periods as a matter of necessity,
IN possible somewhat heavier car load
ing and in the probable shifting OF
centers OF population.
Mr.. Shearn held that net earnings
would be materially cut down by opera
tive costs forced by the commission's
service orders. For that item Mr.. Berry
had allowed 100000 year. The ex-
aminer cited Frank Hedley's testimony
10 prove tnat the DetlernlentS ueCreeI
would cost $2.1s0.000 a year.
An Expert in Prophecies.
Charles wetmore Kellogg, an engineer
and consultant for Stone G. Webster, wa.
called as a witness to substantiate thu
Interborough figures He said he hat
reviewed the methods and figures EN-
pioyed by William S. Gorsuch. the com
pany engineer who had drawn up tn,
Jnterborough's $400.00O.000 valuation
sheets. He thought them conservative
and logical.
Mr. Shearn ELECTED the admission tina
Mr. Kellogg had been the author OF tn,
1919 Stone & Webster report which wa
used as a basis for the agitation for al
eight cent fare. In that report the wit
ress's prophecies were about $9,000.00
out Of the way.
when you are prognosticating for al
eight cent fare apparently you get
huge deficit" said Mr.. Shearn. "Whel
YOU are progonsticating for valuatio.
bearing you get handsome surplus
An expert dealing with these figures ar,
price indices can prove nearly anythini
he sets out TO prove II he enters tn
realm Of prediction"
This was denied by the witness. Tn
inquiry on interborough valuations 4
now virtually closed.