Evening star., 1955-07-08
How to Turn the Wheels

Some eight years ago (No-
vember IS. 1947) I wrote you
about the Capital Transit Co..
since I could not remain silent
when the company was seek
ing one fare increase after
another. This time I am i'm
PEELED to write in protest
against CTC'S challenge to
the governments Of both the
United States and the District
of Columbia, saying in effect:
"You grant us an increase in
fares, exempt us from taxa
ton, relieve us of our obliga-
ton to carry children at the
present school fares - or
else. -.
Recently. when Mr.. Wolfson
sought to obtain control of
Montgomery Ward. his oppo-
nents charged that his object
was to denude the company
Of its huge surplus, just as he
did with CTC. He denied that
such was his intention, ex-
planning that he did so with
CTC surplus because it was a
regulated company"
This was indeed strange
doctrine, and completely at
variance with the duties and
obligations of one who under
takes to operate a public util-
ity. In the case of a private
mpany like Montgomery
Ward, there is no legal limit
to earnings or dividends.
Therefore, the distribution of
a great surplus which has be-
come absorbed in the business
is only a question Of sound
business judgment. AS a pub
lie utility. however, CTC was
legally entitled to only rea-
sonable earnings, and the in
vestors were entitled to only
reasonable dividends. If Wolf
son conceded. as he must
have. that it would be wrong
to rob Montgomery Ward of
its surplus, he certainly must
have known that 1t was wrong
to rob CTC Of its surplus. Any
excess over and above rea-
sonable earnings and div
idends should have been kept
in the company for the per-
formance of its public service.
CTC has enjoyed more than
reasonable earnings and has
distributed more than reason
able dividends. AS pointed
out in my letter Of November
rs, 1947, when CTC was au-
thorized in 1888 to issue $24
million Of common stock. the
amount Of property represent
ing this stock did not exceed
81 million. However, taking
the commissions findings as of
December 81, 1885, the COM
mon stock equity in 1884 could
nos have exceeded SO million.
This was the most that the
common stockholders contrib
uted to the company in 1893,
and not a penny since then.
During the 81 years from 1894
through 1854, CTC distributed
$l2,14O,000 in dividends, or on
the average Of To per cent
per year on the amount of
common stock issued for cash
or its equivalent. If a distinc-
ton is made between the
periods before and after Wolf
sons control, it appears that
for the first Is years Capital
Transit Co. distributed $4,-
100000; that is about $257 900
per year or about 3.4 per cent
per year During the second
period Of S years, CTC dis
tributed 1880, 900, an average
OF about 20 per cent per year.
Still greater were the earn
ings. They were definitely
more than the proverbial
6 per cent. After allowance of
all costs Of operation, main
terance, depreciation and in
terest, CTC earned the follow
ing: "a The $12.140,000 which
it distributed as dividends;
(2) $14,360,000, which was the
Sompany's debt in 1884, and
which was retired from the
company's earnings. and (3)
the increase in the common
stock equity from So million
in 1884 to $22 million in 1854,
an increase in excess Of $14
million. These three elements,
totaling $40.5 million, reflect
the company's earnings in 81
years. The average is about
20 miiiion per year. The earn
ings on the common stock is
sued for cash or its equivalent
amounted to about Is per cent
per year
In these circumstances there
is no occasion for Congress or
for the District Commissioners
to bow TO the demands Of CTC;