Evening star. [volume] (Washington, D.C.) 1854-1972, 1956-02-22
Transit Bill Author
Opposes Any Veto
CIeuve Insists
Autonomy Is
Key Essential
BY HECTOR MCLEAN

BY HECTOR MCLEAN
The proposed Washington
Metropolitan Transit Authority
must be free from any veto in
setting fares and service If its
revenue bonds are to be saleable
to the public. the House Com
merce Committee was warned
today.
Walter C. Cleave, Chicago vice
president of Blyth IL Co., Nation-
wide investment firm, strongly
objected to committee sugges-
tons that the authority be made
subject to review by some other
agency to see that its rates are
reasonable.
Mr.. Cleave led of in the third
day of searching hearings on the
authority bill proposed by the
District Commissioners to set up
a Government agency which
would take over the transit sys-
TEN when Capital Transit Co.
dies by act Of Congress next Au-
gust IA.
Was Author Of Bill
Mr.. Cleave was one of the
authors of the original bill, and
was followed to the witness
stand by another, John N.
Mitchell. a partner in the New
York law firm of Caldwell, Mar
shall, Trimble & Mitchell, bond
counsel.
They testified before the
transportation subcommittee Of
the House Commerce Commit
tee. headed by Representative
Harris. Democrat of Arkansas.
Mr.. Cleaye said their original
proposal to set up the authority
as a Federal agency has been
changed to make it a District
agency. but that he thought the
bonds still would be salable at
Interest rates of approximately
"A to Az per cent. depending
upon market conditions when
they are issued.
Committee members resumed
ia barrage Of questions launched
yesterday against letting the au-
thority act without review by
the courts or some other agency.
but Mr.. Cleave warned that
autonomy for the authority was
the most important factor in SELL
ing revenue bonds.
Receiyership Risk
Representative Hinshaw, Re-
publican. OF California. pointed
out that If the authority's board
lof directors fails to operate in
the black, 1t could be thrown
into receivership. He declared,
this would be the first time in
history that Federal entity
would be put into receivership
and ! think that is some
thing Congress would not be in
clined to do"
Mr.. Cleave agreed with Repre-
sentative Flynt, Democrat Of
Georgia, that the underwriters
who would buy the revenue bonds
and resell them to the public
would want as a must" an
engineering survey to show how
well the system has operated in
the past and might perform in
the future. He agreed that the
quality Of management was a
most important item and that
poor management could run it
(the transit SYSTEM into the red
Iawfully quick"
Reduced Interest
He agreed with Mr.. Hinshaw
that bond interest rates would
be reduced by from ! to liz per
cent II the bonds were backed
by the taxing power of the Dis
trict Government.
Yesterdays all-day hearing
was highlighted by an offer from
Capital Transit to sell out its en-
tire system-including street.
cars-to the proposed authority
in exchange for the authority's
tax-free revenue bonds.
The offer was made by COM
pany president ]. A. B. Broad
water. who said the company's
stockholders and board of direc-
tors would ''look only for a fair
value for their property" They
would take the bonds, he said.
if the authority has the same
aut NOUS. self-sustaining
mandatory provisions of the Chi
cago Transit Authority"
The proposed authority has
been designed to support itself
by sale of bonds to the public
to be paid off out of fare-box
revenues. But. until the new
system has enough experience
to back up an engineering sur
vey of its earning power as a
basis for floating the bonds, it
is planned to finance it with
a $40 million Treasury loan
through the District Commits
sioners.
Loan Unnecessary
His suggestion, Mr.. Broad
water pointed out, would make
the Treasury loan unnecessary,
since the engineering study, to
be completed in go days at the
most" could be based on the
Capital Transit system.
Earlier. however, District Com
missioner Samuel Spencer had
testified. under a barrage of
questions from committee men,
bers, that the city heads plan
to buy or condemn only those
parts of etc they want.
And, he said, the Commission
ers want to set up an all-bus
system. scrapping the street
railway system, unless the legis-
lation is passed so late they have
to take over the whole operation
for lack Of time to get enough
buses to replace streetcarS.
Mr.. Broadwater bitterly as
sailed as unconstitutional the