Evening star., 1955-09-04

BRIG. GEN. T. A. LANE
Engineer Commissioner
which would furnish the same
service and carry the same num-
Der of passengers as Capital
Transit, would have represented
an investment approximately
equal to that on the books of
Capital Transit but would have
earned in 1854 an income before
taxes $2,900,000 greater than
that earned by Capital Transit,
He further estimated that this
disparity would increase in each
succeeding year. It is noted that
the exhibits submitted by the
company themselves show that
the operating expense per street.
car mile is approximately SO
cents as compared to bus-mile
expense of approximately SO
cents.
In short, the difference in the
cost of furnishing tranSporta-
ton through the use of the eco
nomically obsolescent streetcar
system operated by Capital
Transit as compared to the as
sumed all-bus operation is, ac-
cording to this estimate, ap-
proximately two and one-half
times the estimated increased
cost of the final labor settle
ment. The capitalized value of
the difference in the costs of
operating the present system
and the assumed all-bus system
is indicative of the loss which
has already accrued as a result
of the economic obsolence of
streetcars as a method Of furn-
ishing a mass-transportation
service in this city under pres
ent-day conditions.
Wanted RecOupment
1t should be noted that more
than one-half of the rate base
on which a return was de-
consists of the prop
erty whose use was costing the
public the amount noted above.
In addition more than ST.
100000 of the annual depreci-
alton accrual which is included
In the compRny's operating ex-
penses represents not an out-of-
pocket cost but rather a return
to the company of its investment
on this ,obsolescent half of its
system.
When confronted with these
considerations in the past, Cap
ital Transit has consistently
taken the position that the sub
stitution Of buses for streetcaNS
would have cost the consumer
even more money at least in the
immediate conversion period.
This has been based on the con-
tention that it was entitled to
charge the public not only for
the cost of furnishing service
with the new equipment. includ-
ing depreciation thereon, but
also was entitled to recoup from
the public its investment in the
property required to be retired
because of its economic obsoles-
cenSe. In short, it's position has
been that the entire loss due to
the economic obsolescence of the
streetcar system should be borne
by the consuming public. Other
companies in similar positions
have suggested and other regu-
latory bodies have adopted plans
for a sharing of the loss between
the consuming public and the
investors.
The loss in investment due to
the economic obsolescence of the
Capital Transit system Is moth
ing new. It was evident as far
back as 1949 when the present
management acquired its con-
trolling interest in the company
1t was indeed the apparent rea-
son why that group was able to
acquire the stock at a small frac-
ton of it's book value. Thus in
seeking a recovery based on the
book value they were in effect
asking the consuming public to
compensate them for a loss
which had already been taken
by others and which they had
never incurred. At the same time
recognition would have to be af-
forded to the fact that not all of
the stockholders were in the
same position, although 1t would
appear that only a very small
fraction Of the present stock
holders had paid anything ap-
preaching the book value of the
stock.
Surplus Exceeded Price
Possibly an even more i'm
portant consideration. in weigh
ing the equities, is found in the
fact that the present manage
ment acquired control not only
over a functioning transporta-
ton system but over a book
earned surplus and cash in a
per share amount greater than
the price they paid for the stock.
This cash and surplus had been
derived from the high wartime
earnings, and, in part. from the
freeze on wages during the war