Evening star., 1956-12-27
Transit Fights Order
Leading to Tax Rise
Book VuIue Cut
Would Boost
Gasoline Levy
BY HECTOR MCLEAN

huAlOLCu IllUuSdIlO uulldIS year
in gasoline taxes from D. C.
Transit System by ordering the
company to revise its account-
ing system.
The company. fighting the
order, has asked the commission
to reconsider. If the agency will
not change its position, the COM
pany has asked for an oppor-
tunity to hold informal discus
sions on the issue.
In its request for reconsidera-
ton, the company contended the
commissions order was invali-
dated by deal between the Dis.
trict Commissioners and o. Roy
Chalk, owner of D. c. Transit,
when he was negotiating for his
congressionally granted fran
chise last summer.
Such a deal was denied by the
Commissioners in a private meet
ing with the Utilities Commission
last Friday, as reported exclu-
sively in the Sunday Star.
$40 Million Spread
The utilities commission order
would require the company to
break down the value of its
property from $18 million to $7.8
million. The difference Of &c.
339.04l is the spread between
the book value of the Old Capt.
tai Transit Co.'S properties and
the. amount paid for them by
Mr.. Chalk when he bought out
the firm last August.
This difference has been car
ried on D. c. Transit'S books as
a liability" j. William Falk,
commission accountant, insisted
1T should be listed as a credit"
and written off the books.
At his suggestion, the commits
sion proposed that D c. Transit
amortize this acquisition ad-
justment" over a 10-year Pc
rod at a rate of about 81 mil.
lion a year, deducting each 81
million installment from the
company's annual 50 million
expense for depreciation.
This, Mr.. Falk conceded.
would have the effect of making
the company's expenses appear
to be lower than they have been
and the company's profits ap-
pear to be higher. The change,
he insisted. was requested only
because he believed it to be
sound bookkeeping practice.
Would Affect Gas Tax
Mr.. Falk conceded, however,
that making the company's
profits appear to be larger could
force 1t into the position OF pay
ing the city's Scent a gallon
gasoline tax.
The D. c. Transit franchise
exempts the company from pay
ment of this tax to the extent
the company fails to make a
return of 6.5 per cent, either on
its week base" or on gross op-
Grating revenues. The company
has not been laying aside any
money to pay the tax.
( Whether it will have to make
such a payment will depend
partly on whether the commits
sion calculates its profit in reia-
ton to gross operating revenues
Cabout $25 million a year, or
some other method.
II the commission relates
profits to gross operating reve-
Inues, and the congressional
franchise directs the agency to
encourage such a change II the
company starts TO carry out
seven-year program OF conver-
sion to an all-bus operation.
ID. c. Transit would have to
make $l.6 million in profits be-
fore paying such a tax.
Figure Could Vary
However. II the commission
continues to calculate profits in
relation to the company's "ori-
ginal cost" investment In pro-
lperty used for public service.
minus depreciation, the starting
point for gasoline taxes could
vary.
Adoption of the book value"
approved in 1853 for the old
. Capital Transit Co.. would pro-
. duce a figure OF about $lS mil
lion. On this. the taxing point
would be Si.l70.0O0.
II. however. the commission
should adopt the valuation re-
sulting from Mr. Chalk's pur-
! chase Of a company ordered out
! Of business by Congress. the
T. figure would come down 70 s7.6
; million and the starting point
for gasoline taxes would be s494,-
, 900.
Observers commented that this
: write-down Of company yalua-
ton was reminiscent Of the
theories by which Robert NJ.
/ Weston. former commission
! member. attempted TO persuade
r the commission 10 write down
7 the Capital Transit value from
5 about $40 million TO $40 million
at one time, IS million at an
other.
PIanagan's Viewpoint
! Responding TO the commission
: order. D. c. Transit vice presi-
; dent James n. Flanagan argued
that the commission position -
4 also totally unreslistie In that
Il fails 70 recognize that tho
company Is nov the owner Of the
plant. property and equipment
Involved herein. which have an
r inherent value which must ulti-
> mstely be recovered IN total
o ANY action ON your part 70
: deprive the company Of ~ rlahi
q 20 recover said value would oe,
E a. noted above. clearly eonhsea-