Evening star., 1936-01-11
TRANS|TF|NANC|NG
NEED IS FORESEEN
Millions Will Be Required for
New Equipment, Booker
Predicts.
BY EDWARD C. STONE.

BY EDWARD C. STONE.
Y e. Booker, head of the invest
ment firm bearing his name and
president of the Washington Stock
Exchange, predicted today that the
Capital Transit Co. will need millions
of additional capital in the future for
new euuipment, track changes and
other purposes if Washington is to
have adequate mass transportation.
Mr.. Booker wonders from what
source this capital will come, adding
that it is apparent that the company
cannot 60 on indefinitely spending
money for improvement in the service
until it has sufficient earnings to en-
able it to borrow this money. His
views would indicate that the present
chances for dividends for stockholders
are none too bright.
Virtually all public utility COM
panies. Mr.. Booker said, have to bor-
row the capital to provide for addi-
tionS to plant and equipment, since
even those so fortunate as to earn a
fair return on capital invested have
not sufficient earnings to pay for
necessary expansion. Since public
utility companies are limited by law
to fair return on valuation, it is i'm
possible to provide new capital out
of excess earnings during periods of
prosperity. This new capital, there
fore, must be borrowed. The rate of
pay for capital is part of its operat-
ing expenses, and is passed on to the
consumers who use the service. 1t is
obviously in the interest of the con-
sumer that the public utility company
be sufficiently prosperous to enable it
to borrow new capital at reasonable
rates of interest.
Funds Drawn From Surplus.
According to President Hanna, the
Capital Transit Co. has spent s5,000.-
600 during the past two years on new
equipment and construction. OF this
amount approximately 100000 came
out of earnings and the remaining
S4,000,000 was provided out of the
company's surplus This S5,000,000
spent in two years is tangible evidence
of the desire of the company to i'm
prove its service Mr.. Booker said.
During these same two years the COM
pany has granted its employees two
substantial wage increases which have
added approximately $1,000,000 year
to its pay roll.
Viewed purely from the stand
point of increase in gross volume OF
business, this large outlay Of new capi-
tai and increase in opei ating expenses
appears to have been fully justified,
since the number of passengers car
ried has about doubled. and the trend
still is sharply upward.
The increase in business, however,
has not been sufficient to Offset the
heavy additions to expenses, with the
result that net earnings have shrunk
almost to the vanishing point.
Recent Earnings Cited.
$50 far as the cost tc the public is
concerned, the difference between a
Capital Transit Co. and no return at
all, is relatively small-not more than
10 per cent. This is indicated by the
actual operating figures for the month
of November, 1885, Mr.. Booker added.
During this month the company's
total income from all sources
amounted to $806,867. Of this
amount, S432,34622 represented wages
and salaries, while taxes. depreciation.
interest and other items aggregated
$3.50, ,23O So, leaving net earnings avail
able for the stockholders of only Sl1,
290.10.
"A 10 per cent increase in the gross
receipts would have resulted in in
creasing the net by approximately
$4,000. This latter figure would mean
the difference between poverty and
relative prosperity for the stock
holders. 1t would mean the differ
ence between the company being able
to reap the benefit of having a high
credit rating when it goes to borrow
money for new equipment, or a very
poor credit rating.
During the recent hearings before
the Public Utilities Commission, Presi-
dent Hanna of the Capital Transit Co.
named three groups which he said
should be given primary consideration
in the conduct of his company. These
are: The public, which should be
given adequate service; the employees,
who should be given adequate compen-
sation, and the owners, who should be
given fair return on the money in
vested in the property.
THE last point, a fair return to
those who own the property, appears
to be regarded as Of very little impor-
tance by those who are most insistent
for Improvement in the service"
Bank Clearings Advance.
Bank clearings in Washington in
the first week of 1886 were 325 per
cent above the corresponding week a
year ago. The gain for the rest of
the country was Is per cent. Rich
nlond clearings we're up 10 per cent
and Baltimore's go per cent.
A jump of 29 per cent in theater
attendance, together with accelerated
gains in six out of seven lines of
prosperity goods" sold by 236 depart
nent stores, are recorded in a study
Of mass buying for November, COM
piled by Northwestern National Life
Insurance Co. of Minneapolis.
A syndicate composed of Lehman
Bros, Estabrock g. Co., Stone g. Web
ster and Blodget. Bacon, Stevenson g.
Co. and Field, Richards & Sheppard
was high bidder for 81 100000 road
bonds offered by the State of West
Virginia, on bid of 10o18 for 21as,
an interest cost basis of 2.486 per cent
The road bonds, dated September 1,
1885, due 1936-60, were reoffered to
yield OBS per cent to $50 per cent
James H. Perkins, chairman of the
National City Bank of New York, has
been reappointed to the Federal Ad-
visory Council for 1886 to represent
member banks in the New York Fed
eral Reserve district.