Evening star., 1954-04-14
Ex-Transit Aide
Hits Plan 10
FreezeSurp|us
Company Witness
Challenges Expert
For Utilities Bourd
By John w. Stepp

W SAUbNbSS 0O0b0
By John W. Stepp
The recent recommendation
that nearly $2.5 million of the
Capital Transit Co. surplus
should be frozen to cover an
indicated" deficiency in the COM
panys property depreciation re-
serves today was strongly chal-
lenged by j. E. Heberle, retired
company official.
Mr.. Heberle was the first wit
ness as the investigative public
hearing of transit financial af-
fairs was resumed by the Dis
trict Public Utilities Commission
Vice president and controller
of Capital Transit from 1898
when it was formed, until his
retirement in 1851, the official
spoke also from his 25 years
experience with the earlier Cap
ital Traction Co. He has been
a member of the present organi-
zation's Board of Directors for
the last three years.
He directed his criticism al
much of the testimony given
last week by j. William Falk
executive accountant and auditor
of the commission. Mr.. Falk
urged at that time that the
regulatory body restrict the COM
pany's remaining $3.1 million
surplus until such time as the
paper deficiency in depreciation
reserves is wiped off the books
Commission staff members refer
to this deficiency as indicated" "
The company calls it an alleged
deficiency.
Completely Disagrees.
Mr.. Heberle today asserted
that he completely disagrees'
with Mr.. Falk's conclusion that
"any evidence of a deficiency in
depreciation reserves exists"
He pointed out that over the
years estimates and assump-
tions" used to compute these de-
probation figures have been
shown to be widely in error
usually by 10 to 20 per cent. and
once, in the case of the old Cap
ital Traction Co.. as high as A
per cent.
ITO use such estimates to re-
strict earned surplus attaches to
them a degree of sanctity to
which they are not entitled"
Mr.. Heberle declared. "The re-
striction," he added, would Sin
wade the equity and rights of
stockholders to an unconscion-
able degree
Never before" he said. "have
I heard an accountant seriously
make such a suggestion"
Sees Harmful Result.
The effects of adopting Mr..
Falk's suggestion would be that
the utilities commission could
de incalculable harm to the
stockholders of Capital Transit
Co. or any other public utility
under its jurisdiction" This
would be so, he explained, in
that by preventing payment of
dividends from a restricted sur
plus, the commission could re-
duce the market values Of the
securities, causing actual losses
to stockholders.
Under questioning by Edmund
L. Jones, transit attorney, Mr..
Heberle explained the reason
ing of the board of directors
when they decided to declare a
$2.4 million special dividend
from the surplus in January,
1852. This was one of a series of
dividends that has been declared
since 1949 when the Louis E.
WolfSon interests took over man.
agement of the utility.
The witness said the directors
considered four factors: the
equities of the public, employees,
bondholders and stockholders.
BY spending more than $40
million to replace and buy ad-
ditional rolling stock since 1888,
the public equities had been
fully satisfied" he said. The
interests of the employees had
been fully taken care Of" he
went on, by progressive wage in
creaseS from the prevailing 81
cents per hour for vehicle oper-
ators in 1888 to $1.70 per hour
in 1852. This increase, he said,
represented not only a complete
reimbursement" for higher liv-
ing costs, but also substantially
improved the operators relative
standing" He added that the
present wage rate is $1.85 and
will increase by 5 cents an hour
on July /.
Bonds Reduced.
Speaking of the bondholders,
who had loaned the company
capital over the years, Mr..
Heberle testified that these obli-
cations had been reduced from
a high of $19.4 million in 1912
to 81 million in 1852.
What about the stockhold-
ers?" Mr.. Heberle asked. lover
the entire history of the COM
pany since it's organization in
1888, the needs of every other
party had been provided for" J"
He pointed out that in 1894, divi-
dends of only 81 per share were
paid, and that between 1885 and
1898, no dividends were declared
Na,u Ynrk prins% Named