Evening star., 1928-12-05

Continued from First Page)
power and one dealing with capitaliza-
ton Of the merged company.
The bureau points out that substi-
tuition of the $50,000,000 valuation in
lieu of the original cost of the proper
ties as basis for handling deprecia-
ton would result in increasing the
annual depreciation charge of $780,
600. This could be avoided, the report
suggests, by including in the merger
legislation proviso for a continuity
of accounting for depreciation on the
present basis of the money cost Of
property to the existing companies, and
the transfer to the new company of
their accumulated depreciation reserves.
On this basis, the bureau declares. the
new company will probably be able to
earn a reasonable return on the $50,-
100000 without an increase in fare.
Power Clause Held Vague.
The bureau calls the electric power
clause vague, and recommends that a
definite unit of measurement be estab-
lished for the power furnished the
new company and that the merged
railway company receive its just propor-
ton of future decreases In power pro-
duction costs.
On the subject of capitalization. the
bureau says it finds that the balance
sheet Of the Capital Traction Co. for
June 80 last shows its net current
assets had increased nearly 100000
over the estimate on which the merger
Is to be based. The bureau recommends
that instead of issuing additional capi-
tai stock to cover these assets, the ex-
cess of current assets be used by the
merged company to set up a funded re-
serve.
The report states that Washington
compares favorably with other cities
in street car facilities, and that fur
ther Improvements would result from
consolidation.
The savings resulting from unified
operation are estimated in the report
at approximately $1,000,0O0 annually.
The bureau tells Congress it has
learned the Amalgamated Association of
Street and Electric Railway Employees
has withdrawn opposition, upon assur-
ances that company officials will recog-
nize the union and contract with it.
The bureau outlines in its report the
results of study of the accounting
methods of the local companies, made
by the Interstate Commerce Commis-
sion. The report stated that the Cap
ital Traction Co. has been keeping its
books in accord with standard practice,
except in the accrual of depreciation,
which 1t keeps on a sinking fund in
stead of a straight line basis. Several
exceptions to accounting methods of the
Washington Railway & Electric Co. are
discussed.
Summary PREPARED,
Following is a summary prepared by
the Bureau Of Efficiency to accompany
its voluminous report on the local street
railway situation:
Briefly, the general conclusions of the
bureau are.
That in order to give the public a
tain definite Improvements and econo-
mics must be effected in the operation
of the system;
That such Improvements and econo-
mics are only possible by merging Of
the several street railway properties;
That a merging of the properties
would result in large savings In operat-
ing expenses;
That in order to effect such a merger
valuation Of the properties must be
agreed upon;
That the valuation of $4,000. 900 pro-
posed as a rate base by the street car
companies would probably be legally
sustained at the present time in view
of the recent decisions of the District
courts and the United States Supreme
Court;
That, therefore, the sum of $50,000000
be accepted tentatively as the basis of
the proposed merger in order that the
i'm fn1I ~
the merging of the properties may be-
come Immediately available to the
public; ,..a. r. biz. .,.
Urges 10-Year Limit.
That this basis be accepted with the
proviso and understanding, however,
that this valuation shall stand for 10
years only or such shorter period as
Congress shall determine;
That the property shall be subject
to revaluation in accordance with the
rules OF law prevailing at that time:
That three notifications to the
unitication agreement be made: First,
in regard to continuity Of depreciation
accounting; second, in regard to the
power contract of the new transit
capitalization of the new company;
That on the basis of the figures of
contemplated net increase of revenue
there appears to be no justification
for any increase in fares as a result
OF this merger or as q result of the
rate base recommended IN connection
with it;
That, in view of the uncertainty
with respect to the time that would
be required to bring about the econo-
mics of unified operation, Congress
may wish to extend beyond one year
the period during which no increase in
fare shall be granted;
Decline Is Cited.
That, in connection with the general
problem, the declining tendency of the
business of the street railways, as
shown by the number Of passengers
carried annually, should not be over
looked. To the students of the prob
lem in the Bureau Of Efficiency this
decline is an indication that, in the
future, a valuation may not be so much
a factor in the determination of fares
and charges as has been the case dur
ing the past 10 years. It may be that
street railways will have to consider,
in determining their fares and charges,
not what the traffic will bear" but
what will so increase business as to
enable them to continue in profitable
operation.
In discussing the proposed rate base
Of $50,000,000 the Bureau of Efficiency
points out that this is compromise
figure which falls midway between the
reproduction cost now as computed
by the companies on the basis of the
court decisions in the Capital Trac-
ton Co. case and the original valu-
AtinnS IF fho piIhlia Utilities Commits
sion at 1914 prices brought up to date
by adding net additions at cost. There
is good reason to doubt that revalu-
alton at this time would result in a
lower figure, in view of recent decisions
of the District Courts and the United
States Supreme Court which favor the
cost of reproduction as the measure
of fair value
On the other hand, the Interstate